Adam and Matt explain how to beat the competition when buying in a hot housing market.
VREP #8 | How to Win in Multiple Offers
Transcript
Intro: Get ready for Vancouver’s premium real estate podcast. Your source for buying, selling and investing in Vancouver’s real estate market, with your hosts, two guys with faces for radio, Adam and Matt Scalena.
Adam: And welcome back to Vancouver Real Estate Podcast. I’m your host Adam Scalena.
Matt: And I’m your other host, Matt Scalena.
Adam: And we have an incredible episode today.
Matt: Oh, it’s going to be a good one.
Adam: It’s just Matt and I.
Matt: So buckle up.
Adam: Buckle up. I feel like the air just left the room.
Matt: And there’s a lot of pauses on iPhones.
Adam: Yeah. For sure.
Matt: Or Android devices.
Adam: So feel free to skip this one. But it’s going to be – it’s going to be…
Matt: But we’ve got a ton of useful information here.
Adam: This is going to be a useful one because what we’re hearing out there right now is that buyers are really frustrated losing in multiple offers. Obviously there’s a lot of buyers out there, there’s not a ton of inventory.
Matt: That’s right.
Adam: So this is an opportunity for Matt and I to kind of go through our process for how buyers can set themselves up to make sure that you’re actually successful in a multiple offer situation.
Matt: Yeah. Exactly. This is our notes on how to actually secure property. And the reason this came up is Adam was contacted a couple of days ago by local publication Vancity Buzz.
Adam: Right. Right. Excellent publication. They actually caught me on my drive to work and I rambled on for about 6 minutes and she said “Yeah, I think we’ve got enough.”
Matt: We got it.
Adam: We got it. And then it turned into about I think one sentence in a piece, so…
Matt: Yeah. And about the one thing I would like to point out is they cited the podcast which was great and they cited you as the host which I found kind of misleading.
Adam: Yeah, exactly. You know what, though it’s…
Matt: There’s two hosts. We’re two hosts. Sorry, I’m not yelling.
Adam: We’re excited to be a part of Vancity Buzz and…
Matt: For sure.
Adam: …and we really appreciate the shout-out and it’s one of our favorite publications so we’re very excited.
Matt: Yeah. So that was your big – that was a big thing…
Adam: Yeah. And it was an article talking about there is a Kitsilano home that sold for $735,000 over asking which is – the article said it sets a new record but in Greater Vancouver we’ve seen houses sell well over $1,000,000. I think I mention one in West Vancouver in the article that sold for I think 1.3 or 1.2 million over asking. So it’s not completely unheard of but what was unique about this house was it was a nice house.
Matt: Yeah. It was – it had been renovated down to the studs.
Adam: It’d been renovated down to the studs. Not like they renovated it with gold or anything but it was still a very nice renovation. But it wasn’t a view property, it wasn’t a view lot and it went astronomically high for what it was and…
Matt: Yeah, for the area.
Adam: And this is something that we’re actually seeing. We’re seeing where there’s a lot of sales and basically the core of the article is saying what’s driving this but also there’s nothing really to support this.
Matt: Yeah. Yeah. And that’s what I think they – I just read the article and you’re quoted as saying the comps don’t support the prices. And we’ll get to that today because that’s one of the challenges right now is trying to sort out where to land when comps…
Adam: When writing an offer.
Matt: Yeah when comps aren’t support it but that’s essentially the definition of a rising market, right? That we’re rising at a very quick rate right now and a month ago the sale is not going to tell you what the property is necessarily worth today. So it’s a bit of a challenge that way.
Adam: And actually in a future episode we’ve spoken to, we had a great interview with Lee Walker who is an appraiser. Actually he owns an appraisal company and that’s one of the questions I asked him, how do you deal with this? Like how do you deal with the comp supporting one price but everybody feeling like they drastically need to overshoot to secure the property?
Matt: Right. Or not overshoot. ….
Adam: Not overshoot. Yeah. But go higher than what the comps are supporting essentially. Yeah. So Matt, what was – what’s new with you?
Matt: Well yeah, you know, this week was another busy week. Vancity Buzz contacted you. The big story of my life was I got a haircut at Lisa’s Chop Shop. That’s only part of the story.
Adam: That was a big story for me two weeks ago.
Matt: Yeah, yeah, yeah. It was over at Lisa’s Chop Shop and no I was going to just say that I sat down in the chair, we started talking. Actually we were talking about the podcast when a guy came in that she knew – I can’t remember his name – African-Canadian wearing ray bans – what are those ray bans…
Adam: Ray ban. Yeah, the, not the aviator – the Tom Cruise…
Matt: Yeah. The ray bans everybody thinks of the black ray bans that Jay-Z wears those sunglasses a lot.
Adam: Yeah.
Matt: So he walks in and..
Adam: Jay-Z the famous rapper.
Matt: That’s right. Does he need an introduction?
Adam: Allow me to introduce.
Matt: Allow me to introduce myself, right? So this is – so anyway, he walks in and I just catch a glimpse of him in the mirror because I’m looking towards the mirror and he’s in the mirror behind me. And I just causally said “Man, that guy looks like Jay-Z.”
Adam: Right. Because of the glasses.
Matt: Yeah. Because of the glasses. And anyway, so Lisa who was cutting my hair turns around and gets his attention and of course told him that I said he looked like Jay-Z which was embarrassing. Anyway, so that was the big story of my week.
Adam: So another awkward week.
Matt: So you had a more productive? Is productive the word? Anyway, you had a more…
Adam: We both had productive week in terms of selling real estate. So that’s kind of all that matters. But speaking of that, what we want to do is our whole goal is to make sure that our buyers are successful and to trying help people in this market which sometimes is a very challenging market to operate whether – not so much if you’re a seller right now but definitely if you’re a buyer and you’re trying to find a place. And like we’ve said and I mean we’re saying it over and over again but it is a very frustrating market for local buyers. It’s frustrating for international buyers. It’s frustrating for any buyers right now just with the lack of inventory and the competitive market…
Matt: And one of the things that in working with a lot of people that are just getting into the market, the first thing that we have to set up is that it’s not a standard market even in terms of viewing schedule right now. That it’s not like “Hey, take a look at these listings, tell me which one is you want to view and I’ll set up a viewing schedule, a viewing tour at your convenience”, right? Because the market is so dictated by the sellers and the listing agents that they don’t usually do private showings right now. It’s usually a couple of times a week.
Adam: So let’s walk somebody through. So what is basically the viewing schedule right now and how is it being dictated by seller’s agents but also by sellers.
Matt: Yeah. So there’s a few things. One is that a lot of units especially downtown and the surrounding areas are have tenants. So part of the, at least a logic right now is that we don’t want to disturb the tenants. So we’re going to set up a few viewings over the course of the week, usually Thursday, Saturday, Sunday. And that’s in part and I think that’s reasonable not to disturb the tenants and that’s part of the logic. But at the same time it’s too – and I think this is a common tactic to pressurize the situation. So you don’t have people coming through to take a look at their own pace. They all come in at once. Open houses are exceedingly busy…
Adam: People see each other there. It creates a bit of a frenzy mentality.
Matt: There’s a bit of a buzz. All these places are going to go bananas. That type of feeling when you’re in a crowded elevator going to look at a place. So part of this strategy from the listing agent’s perspective for sure and part of it is I think more the fact that there’s a logic there that says “Hey, this is going to sell almost certainly by next week and we can dictate the times and we’re going to do it.”
Adam: Also the one thing I would add to that, with some of my listings – I can tell you I’ve got a new listing this week that I’ve had probably about 50 calls on in the last couple of days and it’s very tough if you’re setting up private showings as a seller’s agent right now, you’ll just be literally bringing people through…
Matt: …your whole life.
Adam: …through every 30 minutes, right? So I think a lot of people are saying well, there’s a lot of interest in this property, let’s set certain intervals so we can kind of control the situation and get everybody through. So that might mean one evening showing during the week for people that might be away on the weekend and then Saturday and Sunday open houses between 2 and 4 which you’re looking at probably 6 hours or so of showings there, opportunities for buyers to come through. So it is plenty of time.
Matt: Yeah. It definitely makes sense. It’s just not the…
Adam: Not the typical.
Matt: Not the typical if you’re from out of town or you haven’t been in the market for a while. I mean a year ago this wasn’t – this might have been happening with single family homes, it wasn’t happening with condos. And now it’s basically across the board.
Adam: So if I’m – just to kind of sum up what the schedule is, then basically you’ve got often a sneak peek on Thursday. Then you’ve got Saturday and Sunday open houses. Some people do the sneak peek, some people don’t. And then typically the seller is looking at offers on Monday or Tuesday. And if it’s, unless there’s something kind of – typically if there’s not a multiple offer on the property in this market, it indicates that maybe they haven’t successfully used the pricing strategy or there’s something with the property that is deterring the interest.
Matt: I was just going to point this out because I met with a client last night, a new client, Brian and we were talking about this because he said: “Hey look, I don’t want to be in multiple offers if I don’t have to be.” This is his goal. And I said “Look, here’s the thing. If you’re not in multiple offers, if you’re able to find the property right now that no one else is interested in, there’s two things that that suggests. One, you may be able to grind them on price of it but the price is clearly not an aggressive price that is spurring on interest because no one else is actually buying. And the second thing is that hey, we’re on a very hot market right now. Markets are always cyclical. There’s going to be worse times to sell than now, that’s undoubtedly true. And if there’s not multiples right now, it suggests that potentially there’s not a lot of interest in the property for some other reason. And you know, as an investment you might want to think twice.
So yeah price or property but in my mind if there’s not multiple offers right now, you’ve either locked out and you should do your due diligence to make sure that that’s the case. Or it’s a situation in which you might question why there’s no multiples?”
Adam: And another thing, this kind of raise is another interesting point. A lot of people are asking “Well, why can’t I bring an offer right now?” So it’s – so you see a listing come up on Monday and in the realtor remarks often the seller’s agent will put showing Saturday, Sunday, offer presentation Monday by 6 pm. So maybe they’re either emailed in or your agent gets to present in person. So if you’re a buyer and you’re frustrated saying “Well I want to present an offer right now.” Well there might be an opportunity to pressurize the seller and the seller’s agent into looking at an offer earlier. The only thing is that there’s a document called the Schedule A. And if that seller has put in writing that they’ll only look at offers on the following Monday or Tuesday it’s very hard to put an offer in that needs to be presented by the seller’s agent. Because we do have an obligation to fiduciary duty to the seller to present all offers.
Matt: Right.
Adam: So if they haven’t indicated that they are looking at offers specifically on Monday or Tuesday in the realtor remarks, if that seller’s agent doesn’t have a Schedule A, there may be an opportunity for your agent to pressurize the situation and just draft an offer and encourage them to look at it. Especially if it’s an excellent offer. And you know what? We are seeing occasionally offers kind of slide through. And not everybody is employing the formula that we’re discussing.
Matt: Yeah. Yeah. I mean that’s the one thing that – there’s enough realtors in the Lower Mainland in which you get all kinds and this situation that we’re describing is the norm. But it is funny. It’s almost – it’s still surprising when you talk to an agent where you say “Are you looking at offers now?” “Yeah, I haven’t discussed that with the seller.” And that’s a sign and…
Adam: But that’s an opportunity.
Matt: Exactly. I was going to say the bells are ringing there “Hey, this is…
Adam: Let’s write an offer. Or let’s get in to see this place.
Matt: Yeah.
Adam: So let’s talk about…
Matt: It’s not being marketed correctly.
Adam: Right.
Matt: Potentially
Adam: Potentially. So let’s talk about how to prepare yourself for this situation. So as a buyer’s agent, what are you doing to make sure that your buyer is prepared? So rule number one…
Matt: Yeah, well yeah. There’s a few things. One, you should be preapproved. And that means speaking with a mortgage broker. And we’re going to talk Dustan Woodhouse as well, a mortgage broker who goes into this in more detail in a later episode. But one of the things I would suggest is being preapproved and be in fairly constant communication with your mortgage broker.
Adam: Right. So that means actually – so everybody – and Dustan explains pre-approval but there’s more to getting preapproved. You have to get him or her all the documents that they require. And you basically have to be completely set up so if you see the right place, either Matt and I or your agent or yourself can call your mortgage broker and get the green light that financing is in place.
Matt: Yeah. And then you don’t go in subject to financing. You’re able to wave that subject.
Adam: Yeah. And Dustan actually talks about one of the ways that he does or that he actually processes the deal essentially like it’s an accepted offer. So that there should be no issues in terms of getting a lender to finance the property.
Matt: And I’ll give you an example here. We had a listing in Mount Pleasant not long ago where we had 7 offers and we ended up going with the third highest offer that was subject free. And Adam and I were involved in this transaction together and we had a long discussion. And potentially we left some money on the table with the seller. But the real issue there is do you want to go have a couple of thousand dollars more and wait a week on subjects? And potentially the buyer doesn’t remove subjects? Or do you want to go with a sure thing? And it’s though the one in the hand versus two in the bush, right?
Adam: Right.
Matt: Somebody can write down whatever price but if there’s subjects on that, it’s not an offer that is usually attractive in this market to the seller.
Adam: And in a market like this – so it was funny actually, I was just talking to another agent the other day and I said I was writing on a property. And he said “Well, how many offers are there?” And I said it was us and two others. And he goes “Oh, what’s wrong with it?” So what I mean by that is if you accept the offer that has the condition on it – not to say that they’re not going to remove the condition but if they don’t, it can really create a stigma around the property.
Matt: Right. And that goes back to my point about not being in a multiple offer situation. Similar thing. Property has been on the market 3.5 weeks, a month right now. There’s got to be something wrong with it. Or at least that’s a logic that a lot of people are employing. And it stigmatizes potentially a really great property so you don’t want to get burned by a flaky buyer.
Adam: So the question – yeah. So the question then shifts from “Do I like this place to do others like this place?” And that’s a harder question to have a buyer answer I think.
Matt: For sure. For sure. So the number 1 rule here would be we’re closely with a mortgage broker. And one other point I’ll make here; an independent mortgage broker. And the reason why is in this market – I just spoke with a client who’s using one of the big five banks and they told me, hey, 10 days subject removal period, that’s standard. That’s what somebody at the bank told them. That’s not standard. That’s going to kill any ability to get a deal done right now.
Adam: It doesn’t work in this market I think.
Matt: No, it doesn’t.
Adam: … a 10 days subject.
Matt: And that might be across the country standard. I’m not sure where they’re getting this idea of that being a standard but… So what I would say is an independent mortgage broker who’s doing business and understands this market specifically and you’re working fairly closely with them so you can – you know, when you see a property you’re really interested in, you can pull a trigger on it.
Adam: And another thing to do is to ask your – either if you don’t have a mortgage broker, ask your realtor for one because chances are they have somebody that they’re using, who they’re very comfortable with, who they know that can get the deal done in a very timely manner. And honestly, the mortgage brokers that we work with are absolute magicians and they make things happen.
Matt: Yeah. They make things happen and they’re like us, right? It’s not 9 to 5. They literally don’t hold bankers’ hours, right?
Adam: Yeah. Exactly.
Matt: They’re 24/7 so…
Adam: So definitely so number 1 is the pre-approval, a relationship with a mortgage broker. I also advise people to introduce me to their mortgage broker if I don’t know them and then at least do an introductory email so that the three of us are have teamed up.
Matt: In constant communication, right?
Adam: Yeah. Absolutely. So what is this? So that would be one subject that you can kind of get out of the way. So that you can present a subject-free offer. So potentially financing if everything seems to line up and your mortgage broker can create that scenario. So what would be a – so if you’re buying a condo or a house, there’s always documents associated with this. So for a house it would be the title, the property conditions, disclosure statement. You might have the land survey. There might be some other documents associated with the property that you want to…
Matt: Tank scan.
Adam: An oil tank scan that you want to be able to review upfront. So for condos it would likely be 2 years of minutes, the form be any engineering reports, any financials…
Matt: Depreciation report.
Adam: A depreciation report. There’s several documents that you have to review at some point of the buying process.
Matt: And that are imperative, right? In the condo process. I mean a lot of – often people talk about inspections and inspecting the unit is important but the real big ticket items that are going to cost you a lot in terms of special assessments are with the building. And the best way to get a sense of the building in my mind is to read, read through those strata documents very closely.
Adam: Read through the strata documents and it also gives you a kind of the culture of the building, right?
Matt: Sure.
Adam: And you get to find out if the strata is making good decisions, if they’re saving successfully. You think about all these different strata buildings in the area, they’re all like – you know, I used to think they were like businesses but I think a better analogy is governments.
Matt: Governments.
Adam: Because they all have their basic elected officials, they have a budget in place. They have a savings reserve and…
Matt: They usually have one strata council member with a God complex.
Adam: Yeah. Yeah. Very true.
Matt: But that comes out in the minutes as well.
Adam: Yeah. Exactly. And there’s – they’re voting and they’re making decisions. So it’s like several different countries operating with different governments.
Matt: Exactly,
Adam: And some are governments that work for your kind of affiliation, others maybe aren’t the right fit.
Matt: Well and I hesitate to use any country as an example but one of the things I open told people is if you look at a building that has by-laws where there’s rental restrictions and the agent says “Don’t worry, they’re not actually following those rules and you’ll be able to do an AirBnB here. No problem. It’s really lax, really relaxed strata.” For some people that might be good. But I don’t know, in terms of governments, I’m thinking Canada versus a country in which the laws aren’t followed; I’d much preferred to be buying into Canada than another country around the world.
Adam: Right. So there’s lots that you can actually learn by reviewing the strata docs. And I think this as a second point is you can get these documents upfront whether it’s a detached house or whether it’s a condo or a town home, any kind of strata, you can get the seller’s agent to provide the documents. Hopefully they’re prepared and hopefully they have the strata documents.
Matt: You can say, in most cases that we’re discussing here they’ll have all those documents because this is part of the strategy in selling.
Adam: Right.
Matt: They want people to be able to review these documents first in order to write subject-free offers.
Adam: Everybody wants a subject-free offer at the end of the day in a market like this. So asking your buyer’s agent to make sure that you can get the strata documents or the documents pertaining to the house or the lot upfront. So that you can review them if you have any questions, if you need independent legal or accounting advice or if you have – maybe there’s something on title that needs more investigation. But we want to make sure that we’re comfortable with all of the documents related to the property. So that would be step number 2 to get yourself prepared for this.
Matt: Yeah, review those strata documents over the weekend.
Adam: So what about – so the one thing we talked to Aaron Borsch a few episodes back and obviously there’s a lot that you can find wrong with a property.
Matt: That’s right
Adam: What would be the third thing? Probably a pre-inspection.
Matt: Pre-inspection is what we usually recommend. And that involves getting an inspector in prior to offers. So that they can flag any potential issues with the unit or the home in order for you to know essentially what you’re buying prior to doing so.
Adam: And you what? There’s actually this really exciting new service that – I don’t know how new it is but I’ve looked for this in the past and had a really tough time finding it. I’ve always wanted and I’ve had clients request this, they don’t necessarily want the full inspection and the report and have to spend $600 or more to do a pre-inspection but they want to do a walkthrough with somebody who knows their stuff, who’s looking for kind of red flag on the property.
Matt: The big ticket issues.
Adam: So we actually have an inspector who’s now offering a service. For $250 he’ll come out and do a one hour walkthrough consultation with you.
Matt: Yeah. Such a good idea.
Adam: It is a really god idea. So feel free. If you actually want to contact with this individual, feel free to reach out to Matt or I and we can send it on for you, to you.
Matt: For sure. For sure.
Adam: Okay, so we’ve got pre-approval, we’ve got strata doc review. We’ve got pre-inspection. So those are 3 ways you can kind of set yourself up to go subject-free.
Matt: Yeah, that’s essentially – those are the 3 subjects that you’d usually have.
Adam: Typical subjects.
Matt: Yeah. To spend some time after the accepted offer to review. So you wipe the slate clean with those and that allows you to go in subject-free. Now, that’s going to make your offer exceedingly more appealing to the buyer.
Adam: Right. And what we also like to do is – it’s kind of another strategy is we like to present all of our offers as agents if we can, if the seller has specifically said that they want offers emailed in. That’s their prerogative and they’re allowed to do that.
Matt: Yeah.
Adam: But if we can’t present, that’s kind of our best approach. And we also like people to get a draft, a bank draft beforehand for approximately 5% of the property purchase price.
Matt: Purchase price, right.
Adam: And we like to bring that draft with us.
Matt: And that essentially just solidifies the subject free offer. When you can hand in a subject free offer with a bank draft of 5% deposit, it’s a done deal. That’s a hard – that’s something – that’s a hard offer to turn down.
Adam: If you’re a seller. And it’s also – it’s symbolic. The check doesn’t go to the seller when you present that offer if they accept it. It comes back into the buyer’s brokerage trust account. However, when the seller sees that check, it’s a real attribute for your offer.
Matt: This is the real… yeah, yeah. When you see – I mean this offer is a real deal, right?
Adam: When you see an $80,000 bank draft, you start to take the sale very seriously, right? You start salivating, right?
Matt: And the other thing we should point out, when you’re preparing an offer in this situation before we get to sort of the comparative market analysis discussion that we’re going to have is dates.
Adam: Right.
Matt: Yeah. And this is fairly standard practice right now in the industry that the seller dictates the dates for a completion and possession.
Adam: It’s definitely negotiable but if there’s only 3 things that you can really compete on typically…
Matt: Exactly.
Adam: …and it comes down to price, conditions and dates. So we’ve got the conditions wiped so now we’re looking at dates. Okay? So if the seller is asking for a 3 month close…
Matt: …and you can do it, if that still makes us attractive, then you want to meet the seller’s dates for sure.
Adam: You want to accommodate this.
Matt: And so that’s part of what we do as agents is fairly constant communication with the listing agent in order to ensure that we have as much information as possible about what the seller’s needs are. And that allows us to have the best offer possible when we submit.
Adam: Right. Right. So working with their dates. And then now what it comes down to his price. So price is always kind of the most challenging because if there’s a property and it’s priced well and there’s 7 offers. Well, what do I offer is often a question, right?
Matt: Right.
Adam: So Matt, how do you deal with that question?
Matt: Well, I mean first of all, we do a CMA which is a comparative market analysis. And what I do in that situation is I provide some recent real estate board stats on what the market is doing. And then I provide sold and active comparables for the building…
Adam: Or the…
Matt: Or the home. I’m just thinking how to phrase that. So for condos it would be for the building and the surrounding area. And in the case of the home it would be the surrounding area obviously with similar types of properties.
Adam: So trying to find sales and active comparables that are in very close proximity, comparable in terms of things like the exposure, the view, the condition of the unit, the…
Matt: Age of the building.
Adam: The age of the building or a house. And basically trying to get something that is as similar as possible. And when it comes to both the active comparables and the sold comparables and trying to basically put this particular property within a certain context.
Matt: Yeah, into a broader context of what similar types of properties are selling for in this market. And obviously especially in a market that’s moving quite quickly, you want – you know, before it might have been more reasonable to look at sales from say 8 months to a year ago, those are not very useful now. We’re looking at stuff that sold within the last 3 months, potentially in the last 6 months. But for the most part, you’re wanting stuff that’s sold very recently.
Adam: Exactly. And we should state that 3 months is even too far up for this market but it does provide general context. And it sometimes is what you have to work with.
Matt: Yeah, exactly.
Adam: Ideally in a market like this you want to be dealing with stuff within the last few weeks. And you really want to be accounting for market changes which is why we cross reference all these sales with recent stats about what our market is doing and… And the nice thing is we have real time projection stats that are offered by various services that we use in our market analysis.
Matt: Yeah. I mean one example of that is I had a listing in Yaletown where the particular unit, the last sale was April of last year. And it sold for a price that didn’t matched market conditions at all. So what we did was we looked at the last sales over the last months of what’s happening. We priced it according to those and we got our seller a price that was between $250,000 and $300,000 over the last sale based on those recent comps. And that was the last April the last sale. So that gives you a sense of how useful that comp was; not very useful at all.
Adam: And the other thing is what I’ve been doing lately which is – well, I’ve been doing this for a long time but it’s very effective in a market like this is to call every agent that has an active listing that you’re considering and find out as much information. So if they’re getting a lot of activity at that price point. Perhaps it’s sold and it hasn’t registered on MLS. So I would encourage anybody that’s working with an agent or I would encourage any agents out there listening, if you’re not calling on active comparables, that’s one of the most valuable resources.
Matt: Yeah, you’re doing your clients a disservice.
Adam: Okay. So let’s talk a little bit about – so now we’ve kind of reached what we think market value is. So I pay market value and I get the property.
Matt: Yeah, unfortunately. And this goes back to your – the quotes in Vancity Buzz. Unfortunately that’s not the case right now. You can’t look at the last sale and say “that sold for 685. Well, then this property is worth 685 as well.” You know, the market is just moving too quickly. So what we try and do is look at 3 different arenas before we come up with a market price…
Adam: Strategy.
Matt: Strategy. Sorry. One is what the market suggests the price is. That’s one. And you’re looking at the data, we’re looking at the data. The second is what we think it’s going to for. And the third is what the property is worth to you. And then we take all 3 of those are sort of factors moving forward. But in terms of trying to essentially figure out what the winning bid is. I mean Adam, how do you do that?
Adam: Well, in a market like this, I think what we do is we often account – you know, I use projections and you can use some of the past data to kind of to get to a bit of a future value. It’s not always effective in a market like this.
Matt: That’s not an exact science, either.
Adam: Exactly. And I think the biggest thing right now that’s going on is because we have people operating in our market that are getting incredible discounts because of the dollar. Well, they can pay 1.2 for a property or 1.3 or 1.5 for a property because to them they’re actually buying it at 900,000.
Matt: Yeah, exactly.
Adam: So it’s very hard to compete with somebody who’s getting a significant discount on the currency because they’re willing to – they’re essentially willing to overshoot. So the question becomes – a question that we often ask buyers is okay, say we think it’s worth a dollar, the property. And you’re prepared to offer say – you know, we think that maybe it might sell for a $1.15 or in around that range. That seems reasonable based on what the market is doing. Well, are you prepared to lose the property at $1.25? So the question becomes if it sells for $1.25, are you going to be upset?
Matt: Yeah. Would you pay $1.25?
Adam: If you are going to be upset, maybe we should be offering $1.25. If you’re not going to be upset, well, maybe a $1.25 is – maybe we need to say “Are you going to be upset if it sells for $1.20?” And work our way down until we figure out exactly what your comfortable offering on the property given what we’ve – given the leg work and the research that we’ve done to make sure that you’re not overpaying but also finding a price point that you’re comfortable with but also seems to make sense given the circumstances.
Matt: Right. Exactly. Yeah. And in the last point I was just going to say in terms of strategy is – so that discussion – if you go to an open house on Sunday, that discussion doesn’t happen at 5 o’clock of Sunday. First of all, to compile the data and everything else take some time. Second of all, if offers are say Monday at 6 o’clock, you don’t want to be making that $1.25 decision on Sunday and submitting your offer. You want to be making that decision based on the context of the number of offers and that essentially necessitate you to wait till almost the last minute before you submit your offer.
Adam: So it’s kind of a game of early starting and kind of late offering.
Matt: Exactly. Exactly.
Adam: Like early preparation, late offering. You basically – so if the first showing is on Thursday and at a sneak peek, get into that first showing.
Matt: You want to be there.
Adam: Yeah. You want to be there because with your agent – because you want to be able to do all the leg work upfront that we talked about. Talking to the mortgage broker, getting the strata documents, the pre-inspection. All that has to happen immediately. And then come Monday, we want to wait to the very last minute.
Matt: To 5:50 if they’re looking at 6.
Adam: At 6, 5:50. You fire the offer over or I want to be the one to be there and present and we hold our cards as close to our chest as possible.
Matt: And just to be clear, that’s – for instance that listing I was just talking about at Mount Pleasant that we were helping the seller. Somebody sent over the first offer we got on Sunday evening. And that buyer had no context, are they the only offer? Are there 10? Are there 3? That should factor into where – the market is essentially telegraphing you messages on the price at how many offers. Is this price very attractive? There’s a lot you can take from that. And you don’t want to be the person that is just ignoring all those market factors because you’re not going to be successful. Or you’re going to wildly overshoot.
Adam: Well, we’ve all heard stories about the anxious agent or buyer that sends over the above asking price offer a day before offer presentation.
Matt: Without any other offers.
Adam: Without any other offers. Well, it gets accepted and guess what? You might have been able to…
Matt: Congratulations.
Adam: Congratulations. Exactly. So I mean it’s a sensitive thing but there is a strategy, there is a rhyme and reason to all of this. It just has to be played out in a very meticulous, strategic way and we can help you with that.
Matt: Right. Exactly. Yeah. I mean at the end of the day it’s about getting – putting together a team that you’re comfortable working with. And yeah, this might be a good time to
say “and Adam, how can they reach you?”
Adam: Right. You can reach me at 778-866-4574 or at adam@scalenarealestate.com And Matt?
Matt: 778-847…
Adam: 2854
Matt: Yeah.
Adam: Wow.
Matt: I was testing you. Yeah, 778-847-2854 or at matt@scalenarealestate.com
Adam: At matt@scalenarealestate.com
Matt: This is a disaster. And we do have that line that goes to both of us, info…
Adam: The nonpartisan.
Matt: info@scalenarealestate.com
Adam: Perfect. Well, thanks a lot for listening and…
Matt: Yeah. Hopefully that was useful.
Adam: I hope so. And our next one is going to be an interview. So stay tuned for that. It’s a super interesting episode, we’ve got Lee Walker and he’s going to be talking to us about the appraisal process. And you won’t want to miss this episode.
Matt: No, no. There’s a…
Adam: It’s one of my favorite interviews I think. There’s a…
Matt: There’s no spoilers here but..
Adam: There’s a few good stories that come out of it and Lee is an incredible guy to talk to. So we’re very excited. So have a great week and we’ll talk to you soon
Matt: Take care guys.
Outro: This has been the Vancouver real estate podcast with Adam and Matt Scalena. Contact us anytime at 778-866-4574 or 778-847-2854 or online at www.scalenarealestate.com
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