Multiple Offers/Bidding Wars – Fact and Fantasy

shutterstock_135232376I came across a draft blog post from nine months ago. I was planning to discuss the “new” 801 form because some people were under the impression that the new form would open up the process by providing the terms of all competing offers.

But holy! How things have changed.  Last year, we were worried about the ghost offer.  This year, it’s all about price!

Homes are listing at a price that was market value last week and then selling with multiple offers for 10% more or higher. Even a pre-emptive or bully offer will still draw other offers.  We saw a townhouse in River Oaks at 1 pm which was the first showing allowed at that listing.  Two others showed at the same time. Registered a pre-emptive offer offer at 3:00 pm. There was already an offer and another soon joined.  Our offer, which was way over list and firm, didn’t win.

What’s going on?  There are a lot of factors driving this market. In the news, we hear a lot about foreign investors, but that’s not who I see at showings and waiting outside of listings at offer presentations. These are Canadians who have sold their home and now need another place to live, or they are millennials just trying to get into the market.  It’s a simple supply and demand problem. Every listing that comes onto the market in the starter home price range has loads of interest … immediately. This last week of June has historically been a really slow week but not this year.

Why is supply so low?  The greenbelt has contributed to this.  Back when the greenbelt was a brand new concept, Pat and I attended a BILD meeting to learn about it. Experts in the land development and building field warned that the greenbelt would eventually drive prices up inside the greenbelt as we ran out of land to build on.  And prices are up. A 40 foot building lot is selling for about $600,000 now.  At $200 a square foot, the cost to build a 2,000 square foot home on that lot is $400,000.  We’re at $1,000,000 for a brand new home and still haven’t added the HST.  Net HST on that home would be $106,000.  So we’re actually at $1,106,000 for a brand new 2,000 square foot home.  And when new home prices rise, re-sale homes follow shortly thereafter.

So here’s what I was going to say about the multiple offer process:

Many people have  misconceptions when it comes to multiple offers.  Here is some Fantasy:

  1. All of the buyers will know what the other buyers are offering.
  2. We will always be given a chance to improve our offer price.
  3. As soon as we’ve looked at the house, the listing brokerage is bound by law to let us know when an offer is registered.

Here are the Facts:

  1. The terms of any offer will not be divulged to any party other than the Seller and the Seller’s representatives.
  2. The Seller’s representative is not required to notify agents who are showing the house that there is (already?) a registered offer.  The rep may notify others but it’s strictly a marketing decision between the rep and her clients.
  3. The new form 801 does not make the multiple offer process into an open bidding process.  The form simply deals with ghost offers, or what I call premature offers where a rep states that there is an offer but it hasn’t been signed and therefore doesn’t exist.

If you have any questions about this process, send me an email at heather@patbelsito.com.

 

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Custom built and custom finished

We’re really excited about this listing that should be coming to the market within the next few weeks.  It’s a custom built by Fernbrook home on a ravine in a great neighbourhood. What’s custom about it? Well, the main floor has 10 foot ceilings which was NOT part of the standard Schedule for that subdivision. Oil rubbed bronze long plate levers are on the three panel solid doors with steeple tipped hinges. 9″ baseboards and 4″ casing and backband are made of solid poplar and not pine or MDF.   The windows have sills and aprons. The doors to the den are pocket french doors.

The kitchen was a custom design from Downsview and includes a panelled Sub-Zero Refrigerator, Wolf Dual Oven/Stove, Miele dishwasher, Sharp drawer style microwave, wine fridge, Travertine floor and marble backsplash, and Blanco sinks including an island sink.

The stairs are made of maple with open risers and Victorian pickets. The hardwood is Cherry. The tiles in the hallway and bathrooms are travertine and there’s Cornice moulding throughout the home.

The master bedroom has a balcony, a fireplace and ceiling speakers and the ensuite cabinetry is from Downsview with fixtures from Grohe.

Outside is  fully landscaped and includes a gazebo and a putting green in the extra long backyard. This is the longest lot on the street.  The garage has new flooring and a hot/cold sink with finished walls and ceiling.  Security cameras, pot lights and floodlights are also included. The shingles were upgraded and some of the roof is copper.

The finished basement has a walkout to the backyard and includes a wet bar, wine room, exercise room, home entertainment area, hardwood floors, potlights and Cornice moulding.

We can’t wait to show you the home in person.

 

Nightmare Tenant Strikes Again

Her real name is Nina Willis but she used the name Nay Lancelot to apply to rent from two seniors in Toronto who are owed over $9,000.  The seniors checked her references and say that everything looked fine.  The references were probably provided by Nina.

I did a Google search for Nay Lancelot and all that came up were quotes from King Arthur.  When I added tenant, three hits to stories in the Star and Metro News came up but this would have been too late for the seniors.

If I was screening this tenant this would have been a huge red flag.  It is very rare that anyone is anonymous on social media these days.

I’m guessing there was no credit check.  Please, please do NOT rent to anyone without running them through some kind of a credit check. All kinds of alias names show up on these checks. If someone tries to provide their own credit report, just say no!

This is the 8th rental that Nina has been involved with.  She was convicted of fraud and was sentenced to 6 months in jail.  But she’s still at it.  Here’s the story:

Click here for Metro News Story

Click here to read my blog about being a Landlord Detective

 

 

Waterfalls are not far!

If you’re looking for an outdoor activity for March break, check out some of the local parks and hiking trails.  Pat and I wanted to hike somewhere different today.  We looked up the Waterfall hike in Ancaster and thought it would be fun. This is the link to the page:

http://www.waterfalls.hamilton.ca/default.asp?walk=2

We parked at the Inn and followed the trail as described on the site.  The first turn was a little bit confusing because there was a T intersection, but the “you are here” map at the site didn’t show a T.  But we met a nice couple who told us that the waterfalls were “that way”.  So we turned right and found Canterbury falls.  They’re not huge, but they’re quite nice.

We kept going and about 3.5 kms in we missed a turn and ended up going up some stairs. We were still on the Bruce trail – but we weren’t on the waterfall trail that we had planned.  At the top of the stairs there was a valley and deer!  There were probably 10 of them when we first discovered them and some left immediately and then some came back.  They were pretty curious about us.

We decided to check the GPS and see where we were.  The white blazes from the Bruce trail were nowhere to be found.  We could see roads and houses, so we weren’t lost, but we were no longer on the trail.

We backtracked and made it back to the car easily.  The missed turn was well worth it!

If you do this trail, be prepared for hills and some rugged terrain. It’s not as challenging as Yellow and Orange at Crawford and Nemo, but it was a lot of work.

Landlord or Detective

You’ve really got to be a bit of both to make sure you get a great tenant.  A great tenant is easy to approve.

  • DetectiveCredit score is over 720
  • No aliases.
  • Employment letter with a name that’s easy to  confirm on LinkedIn.
  • Better yet, the tenant is on LinkedIn and actually works at the company shown on the employment letter.
  • Current Landlord actually owns the building where the tenant says she lives.

The easiest check for me to do is to verify that the Landlord name as listed on the rental application actually owns the building that the tenant says they are renting.  This isn’t as easy to verify when the tenant is currently renting through a large corporation, but it is easy enough to verify over the phone.  Rather than phone the number on the application, I look up the person who signed the letter on-line and phone the number that’s listed for the company.  But if the tenant is renting a house from a private owner, I look up the owner’s name. It’s easy for me to do this because my membership with several real estate boards gives me access to the Land Registry system.  I can easily find out who owns the house.

Last week, while checking a tenant’s application, I found that the name on the application did not match the owner of the home.  I found the owner’s number and left a message.  I also phoned the “landlord” that was listed on the application. She phoned me back the next day.  I asked her if she owned the house.  She said yes.  I told her that her name wasn’t on land registry.  Her story changed then. She said that she was sub-leasing to the applicant that I was phoning about.  We didn’t rent to this couple.

In our 25 years experience in renting out homes, we’ve made some mistakes.  The one that has cost the most was renting to people who would eventually stop paying rent or who would pay later and later each month. Each situation can be traced back to when I was reviewing an application and found red flags.  An inaccuracy on an application is one of the best reasons for turning away a prospective tenant.  So now, rather than call and ask the tenant about the false information, I do my own detective work and then sometimes I just say no.  An extra month vacant is less expensive than missing a few months rent and then having to go to the tribunal for an eviction order.  I like to start with great tenants.  Some may run into difficulties at some point, but they all start out as great tenants!

 

Electronic Signatures

Yes they are legal. As of July 1, 2015, we can electronically sign agreements of purchase and sale in Ontario. Pat and I use Docusign. We load the document onto the site and add the people who will sign and add the markers where signatures and initials are required.

Docusign initial.jpg
Lovely, legible document.

We end up with a clear PDF file that has signature tracking. But then we forward this file to another party and that’s where we’re back to scanning or pictures with a phone and illegible agreements.  I wish using something like Docusign was mandatory but I don’t think that will happen.

Scanned paperclip
Signback using Scan genius – the clip is a nice touch.

Sometimes we get offers back where each page is its own JPG file or each of the twelve pages has such a dark background that you can’t make out any of the pre-printed text.  After all of the negotiation and finally coming to an agreement, we’ll end up not being able to see what we’ve agreed to. Wouldn’t it be better if the original offer was clear enough for everyone to read?

Really dark.jpg
We can barely read this clause.

 

The other benefit to using electronic signature software is accessibility for those who have any type of challenge with signing their name. There is a hosted signature option where I can bring my tablet to a client who feels self conscious because it takes so long for her to sign her signature on each page and give her the option of tapping the screen where she needs to sign.

Electronic signatures save trees!   People (young and old) don’t have printers and don’t want to print. Electronic signature software eliminates the need to print anything. There is a print button, but you don’t have to use it.

Some people are worried that electronic signatures mean that people won’t meet in person any more.  I sincerely hope that nobody is buying a home without seeing it (in person) with their Real Estate Broker or Sales Representative!

I don’t know that we will stop global warming with this option, but it is a step in the right direction.  We’ve got something that is accessible, convenient, environmentally friendly and it doesn’t cost our clients one cent!  There is a cost to the software and there is a hardware requirement if I’m going to bring a tablet to a client for signature, but I think my clients are worth the extra cost.

 

 

Shadow Flipping is not always a Bad thing.

Shadow flipping has been in the news recently with Agreements of Purchase and Sale being assigned to a new buyer two or even three times before closing.

This does happen in the GTA with some new home or condo purchases, but only if the builder’s original Agreement allows for it and several do not.  There’s a potential incremental HST cost to each purchaser and the rebate may be forfeited because the original purchaser who signed the builder’s Agreement and agreed that the home would be a principal residence will not be moving into the home.  It’s very confusing for buyers and sellers and their Realtors.  Pat and I took a course about this topic that was taught by a local Real Estate lawyer and the consensus at the end of the course was that the tax calculations were too complicated and we should all stay away from assignments of new builds.

But, an assignment isn’t always bad. It can be used when something happens and the original buyer cannot close the transaction.

We had a case where the buyers had two dogs.  The condo they purchased only allowed one dog.  We all missed it.  We asked about the pets policy at the concierge desk but not at the management office.  The lawyer was the buyer’s lawyer who did their wills and did not have real estate experience so he missed this vital part of the status certificate.  So when the buyers asked, afterJase Belsito waiving the status certificate review condition and firming up the purchase, how they should register their dogs, they were told they could only move one dog in.  They were heartbroken.  We suggested that we help them get someone to take over their agreement of purchase and sale.

Rather than list the unit for sale on MLS, which would cost the buyers commission, we helped them write an ad on one of the free sites.  We showed the condo during a revisit (with the Seller’s blessing because he knew what had happened), and helped the non-real estate lawyer with the assignment agreement.  I actually sent the sample agreement that we used in class.  The original purchase didn’t register on title, but the assignment did.  This saved the original buyer from having to pay land transfer tax.  The purchase price was the same so capital gains tax was not an issue.

The takeaway from this story is that assignments are sometimes necessary and more importantly, be wary of pet restrictions in condos.  Disclaimer:  The dog in the photo is Jase Belsito and is not the dog from the story.