February is here in full force.
I'm starting to notice some weird trends on the buy side, one of which I want to chat about today.
Most buyers know that the current market is slanted in their favour. Some buyers, it would appear, are even more eager to score themselves a great deal in this market.
I've seen the re-emergence of a "strategy" that some buyers use as an attempt to score a deal. Little do they know they are only forfeiting their own rights and protection in.
Here's how it plays out.
Instead of working with a buyer's agent who will represent and protect their interests, these buyers decide to go it alone. They keep their eyes peeled online. When they see a property they like, they contact the listing agent.
I get these calls on every listing but this year I've seen an uptick in them.
At some point during or after our showing, if the house appeals to them, they bring up their "pitch."
It goes something like this: "As you know I don't have an agent, so if I use you to submit the offer, we can come to some sort of deal." Some even go so far as to say "and I would have to also sell my house, and since I don't have an agent I would use you on that sale too."
FULL STOP.
Let's think about this for a second. There are so many issues with this situation. Let's break them down:
1.) Conflict of Interest
Listing agents have a contract with their sellers. They are obligated to represent their best interests. It makes it hard to do that when you also agree to also act on behalf of the buyer. The listing agent will often stand to gain more in commission by getting that buyer's offer accepted. It's easy to imagine how that conflict can become a problem.
2.) Agents have to disclose details about multiple representations
Let's say a listing agent agrees to represent a buyer. If there are multiple offers the listing agent must disclose certain things. They have to disclose that they have an offer of their own from a buyer they are representing. They also have to disclose if they are reducing commissions in any way. This can muddy the waters of an already complex negotiation.
3.) There's often no "deal" to be had
Buyers assume that because they don't have an agent the seller won't have to pay a second agent. In this case, they'll save money on commissions. This will increase the likelihood of getting their offer accepted...or so they think. In reality, all agents handle this situation differently with their seller clients. Many of them come to an agreement with their sellers that if they find the buyer they'll get paid both sides of the commission. In this case, there is no savings for the seller and no incentive for them to accept that buyer's offer over someone else's. The "deal", in that case, is to be had by the listing agent! Not the unrepresented buyer!
4.) What are you giving up?
At the end of the day, you're buying a home. It's a big deal. A lot of money. There are also big risks associated with it if you don't do it properly. If a listing agent agrees to represent you it'll likely be in the capacity of a "customer" rather than a "client." There are rights you'll forfeit and a different agreement you'll sign. As a "customer", an agent will not owe you the same fiduciary duty that they owe their client. They still need to treat you with fairness, honesty and integrity. However, they don't owe you anything more than that. That includes professional guidance around the value of the home, things to think about with the property or neighbourhood and on and on.
So when you add it all up, is the conflict of interest, the required disclosure, and the rights you're about to give up really worth chasing a deal that won't even materialize in your favour?
Yet, I see it all the time. It's a big real estate myth and one that's making a strong comeback this year apparently.
Don't fall for it. Get yourself your own representation when selling AND buying. Your own agent will protect your best interests. You are also more likely to get a deal when you have the right guidance.
Bottom line for sellers: We may have entered the trap zone in the market. Market sentiment seems to be more positive after the announcement of the conditional rate hike pause. I keep calling it conditional because that's exactly what it is. There's no guarantee rates won't rise again. Right now is a good window to hit because of that. I've seen great activity on the listing I have now and other agents across the GTA have echoed that. If it continues remains to be seen. It could happen that sentiment drops through the year if inflation doesn't fall and rate hikes have to restart.
Bottom line for buyers: I keep saying it, 2023 will be a buying year. I don't see prices rising. There's the potential they fall, but I certainly can't predict or time that. Right now you're locking in a solid discount on all types of homes. You're also doing it at a time when demand is not high. I have to remind buyers who want to wait longer how important that second point is. They forget how hard it was to buy a year ago when demand was at an all-time high. When rates fall, that's the scenario they'll face again and trust me, you'll want to avoid that.
That's it for this week.
Onto week 19 next week.
Subscribe to the blog if you haven't already.
Have a great day!
Comments