Zoocasa ... doesn't that mean Animal House?

OK that was nasty. Sorry, I just couldn't resist the wordplay.

Zoocasa just announced a rebate program for people who get an agent via their service.  Herewith my take on the deal, given the currently available information.

Sorry for the lack of graphics ... I wanted to get this one out quickly.

My usual plea: yes, I'm an agent and occasionally a bit of a cynic; but I try to be objective and open-minded and I try to keep up with changes that have, do, or will influence our industry.

This Zoocasa deal strikes me as less than ready for prime time.  These guys, in my opinion, actually have a bit of a track record for getting ahead of themselves.  When they first started up, we actually signed on.  The deal was that we would get exclusive advertising space when you searched a certain geographic area.  Their job was to get all or most brokers to sign on to share their listings so that Zoocasa would become the go-to site for listing searches, with all kinds of extra features.  Didn't really happen.

So now they are becoming a licensed brokerage so they can possibly get at more of the listings.  That may work. If all brokers and reps agree to share all their listings with this type of data scraper.  There is a trend this way, but it's not there yet.

And finally, the new exciting rebate program which promises, among other things, 15% rebate on your commission fees and a slate of "hand-picked" top tier agents that you can screen for local expertise language and more.

Oy.

Hand-picked.  I'm not sure how these initial bodies were selected, but I'll bet the farm that once this thing is fully launched, the first and primary criteria will be the agent's willingness to pay the Zoocasa fees for being listed in their roster.  The stated standards around experience, feedback, performance, etc will quickly default to something like "I don't see anything really awful here".  Prove me wrong, Zoocasa, but as an experienced rep I have seen many many organizations whose business is "providing leads".

One news article suggested they were starting with 200 agents with more to come.  I don't doubt there are more to come, but the site currently lists about 40 agents in total.

Their system for helping you choose screens for geography, language and type of home.  Other than a few new-construction specialists and maybe a few downtown condo specialists the "type" screen is meaningless.
Other sites, such as royallepage.ca will allow you to sort and screen agents on these and more criteria.

I tried entering a few streets in the Beach in Toronto (just east of downtown).  Of the 7 recommended agents that popped up for my Beach street, 3 didn't appear to be based even in the actual City of Toronto (2 were in Brampton!), one included the Beach in her areas of expertise -- along with Aurora and Newmarket, and only one of these top-tier agents had I actually heard of.

Personally, I think you would be way better off getting a few names from trusted local sources and interviewing for the agent that will work best with and for you.

Now, about the rebate.  Again personally, I think you should select the right agent and pay them market value to do a great job for you.  But if you want to negotiate a 7.5% discount, have at it.  Honestly, your odds are pretty good that you can get at least your second choice for that.

I know, the articles and Zoocasa say 15%.  But that is 15% of the listing broker's end, which is typically only half of the total commission. (The other half goes to the Broker who brings in the offer and represents the buyer).  Even the 7.5% is a little exaggerated since it isn't all cash. A chunk is coupons/giftcard things.

So on a $575,000 listing, if you go through Zoocasa's limited set of agent's you can reduce a typical commission from $28,750 (yes, I know it's a lot of money, but that's a story for another day), to $26,594 in cash and giftcards.  I know that's real money, but it doesn't seem like that huge a saving unless you can be sure it is also getting you the best advice, service, marketing, negotiation, follow-up, etc.

Since these agents don't work for Zoocasa (they are agents for the Brokers you've actually heard of), you might wisely wonder how they come up with the money to give back to you.  According to one article, they take it out of the 1/3 of the listing commission that they charge the agent for handing over your name!  That is presumably in addition to fees for signing on to the service.

Yup.  We start with a normal 5% listing agreement wherein you pay the Broker $14,375 for his efforts (remember, the other half goes to the buyer's brokerage), that agent forks over nearly $5,000 of that to Zoocasa, who then give you about $1876 and some cards.

My questions: Why did you need Zoocasa to find an agent, and why did the agent need to give away a third of their commission to find you?

There is nothing evil here, just another company trying a variation on the business model of getting paid for referrals.  But like almost anything of this nature, there are questions, issues, tradeoffs, and more.  Read past the "rebate" headline and make sure you go the route that will get you the best person, service and price.

Assignment: Rent vs Buy? Agree AND Disagree

I may have to go back to school.  I would love to take on Frank Tristiani's student assignment.

Rob Carrick, the Globe and Mail's personal finance columnist, has been on a bit of a run these days with several columns trying to get people to think more favourably about renting vs. buying.  His latest article (read it here) discusses a McMaster prof who runs his students through a comparison assignment every year.  Frank Tristiani, the prof, says "Over six years, no one has been able to substantiate buying as creating more wealth over the long term”.

His sample analysis involves buying vs. renting in Hamilton and leads to a renter being a half million bucks better off in 25 years.

That is a challenge.  First of all, some disclosure.  If you are reading this, you know I'm an agent.  So you are probably expecting some half-baked biased rant about buying always being better, especially right now ... call me and I'll help.  On the other hand, if you've read a couple of these, you know that isn't how we work.  More significantly, we rent! Wait. A Realtor who rents.  According to a couple of our competing agents when we made this move -- we must be retiring, in financial trouble, and/or have lost confidence in the market.  None of those are true.  The truth is the subject of a whole other discussion about life planning, some of which is covered elsewhere in this blog (starts right about here)

Back to the column.  Rob's article and Tristiani's assignment are great.  Tristiani is a finance guy who wants his students to apply some finance logic to what is a major financial decision.  Good idea.  And Rob himself points out a few of the arguable assumptions in the analysis -- like long term mortgage rates and investment returns.

But ...
I think there are a few huge "arguable assumptions" in Trisiani's sample analysis that Carrick did not mention or didn't give enough space.  If you are using the above link to read the article, be sure to click on the "infographic" mentioned on the left side.  This table was in the original article and you probably need it to follow along.  I've also included it at the bottom of this post.

• Carrick notes that the analysis applies to "renters with steely savings discipline".  I'll say. A bunch of the gain requires the renter to assiduously invest the difference in costs each month. I'd probably bet you the present value of that half million that you couldn't find me 3 people in Hamilton who could, would or have done that. Tristiani notes that owners aren't good savers either -- OK, so's your mother, but it doesn't really answer the issue.  The way I read it, this alone would account for all or most of the wealth difference over 25 years.
• Here's a little one.  I have no idea what research went into coming up with $1500/month (apparently with all utilities included) as the comparable to a $400,000 house.  Based on my Toronto experience, it seems low.
• A much bigger sleeper assumption on the rent is that rent will only go up at 1.5% per year over 25 years, despite the other assumption that inflation is 3% per year.  Since he also assumes that you make zero real capital gain on owning (house prices are also assumed to only rise with inflation) ... Never mind the rent vs. buy debate, whatever you do if you believe this: Don't buy an investment property.  I'm not convinced that landlords are going to eat half of their inflationary costs over 25 years just because they are nice people. 
• Here's another huge one. A quiet little assumption in there is that maintenance on a home comes to 4% of the value of the home per year.  Holy crap.  Either you bought a falling-down dump or you just like to tear your house apart and rebuild it every year or two.  He does include utilities and taxes in "maintenance", but I ran the numbers for our old house for the last 8 years and couldn't get it to 2%.  A quick google surf came up with estimates of 1% (before the utilities).  The Feds have a worksheet for you to do your own calculation  (you can play with it here) . This alone also would account for the wealth difference after 25 years

There could be more but I think that's enough to convince me (and maybe you) that the decision is not nearly this big and probably not even in this direction.

Both Carrick and Tristiani note that there are lifestyle and personal preference/value issues that are not covered by the analysis.  And I absolutely agree that you should do the numbers before you make the decision.

So don't just read the headline, skim the article and glance at the table. FIGURE IT OUT. Then decide, with the financial analysis as one of several major variables.

A final example, more an analogy, from my everyday job.  Imagine yourself looking at two good houses.  One is going to be a maintenance headache, at least for a while, but it has an absolutely gorgeous [fill in your blank].  We don't encourage people to buy the low-maintenance option and we certainly don't promote the one with the gorgeous whatchamacallit.  We do try to help you figure out how much you are paying for pretty or cool or functional or whatever-it-is.  Then decide.

[And finally... One reason that I keep falling off the wagon (the wagon which is this blog) is that I'm pretty sure the number of people who read it rounds to nada.  At least the ones who say so, or follow, or "like".  When I force friends and family to read them, they usually say nice things.  I think they migh not be lying, since there usually follows a decent and related discussion.  So, if this was even vaguely worthwhile, say so, tell someone, share, like, follow, something.  Thanks]

And really finally, as promised, here is the sample analysis that I just kind of dissed:

Great House ... Great New Price

Apologies to those who come here for real estate info without the accompanying flogging of specific homes.  I am about to flog a specific home.

We are just pulling out all the stops to get this property sold.  The bottom line issue is that this is a GREAT house that we can't seem to get anyone to come and look at.

One possible reason is that we (innocently) had the price too high.  Fixed that.

So here's the story.
[Or just ignore the pitch and head for the website with its virtual tour, feature sheet etc: www.LeadingTheWayHome.com/brooklawn ]

The owners moved to this house when their active boys made the previous house a little small.  Not only did they raise a couple of fine young men in this house, they renovated, improved, updated and maintained the thing to the ultimate degree with top-of-the-line everything.

It's a 3 bedroom home with a lovely upper level family room, a fully finished basement.  The features are endless, but I must point out the stunning chef's kitchen and the excellent landscaping that will re-appear with Springtime.

The location is south of Kingston Road at St.Clair.  The Bluffs and other parkland are steps away.  A bus comes to the corner.  A few minutes puts you on the highway to anywhere. Good schools are a walk away.

We underestimated two (or three) things.

"Yes, but ..." : Toronto Life edition, part 1 (of several, I suspect)

I'm back. Again.  Sorry about that.  As of the last post we were preparing to move.  Work busy-ness, the move and a pair of truly nasty summer colds put the blog on the black blurner for a while.

But as I was pondering the next post, along came the September 2012 issue of Toronto Life with the cover story "House Wars".  Under the headline ... "Too many buyers. Not enough houses. Extreme tales from the real estate market"

Weeeeellllll, this ought to be good for a whole string of posts.

Sure enough, here I go.  And I haven't even read the article yet.  The "Editor's Letter" lays out the tale of a couple who bought a house in 1972 and just sold it for over $1.4 million (and yeah, a whole bunch over list price).  Bandits.  Baby boomers cash in. Young'uns can't afford a cardboard box under the Gardiner.

I'm not saying these folks didn't do well.  They did.

But let's come at it a little differently and maybe suggest they did just that ... "well".  Not outrageously, or insanely. Just "well".

In the example, the buyers picked up a dump in a very untrendy neighbourhood.

So, their location means they took a risk.  Risk-takers deserve a little higher return when their risks work out (because they will get creamed when they don't).  Just keep that in mind.

And they have spent piles of cash restoring, renovating to bring the place up to snuff.  Without knowing what they did or when, I have just pretended they paid $50,000 in the first place.

Their annual rate of return on their investment: 8.5%.  That may still sound pretty awesome, but don't forget that this is an average and includes periods where inflation was double-digit (and mortgages were going at 18%).  One source I checked (actually I googled it and only checked one source that looked pretty credible) suggested a representative stock market purchase would have returned over 11% for that 40 year run.

Actually, that's a good idea. Let's take inflation out.  If I've done the math right, their "real" return after inflation now comes out to a little over 4%.

Finally, I note that the editor says the sale discussed will "play a big part in funding their retirement".  Probably true ... IF they rent or downsize or move to a lower-priced market (good deals in Welland these days).

I'm not suggesting the market hasn't been nerve-tingly hot.  For quite a few years, many wise folk have been wondering when it will slow, settle, correct, crash, whatever.  It hasn't done it yet. It may. It may not.  But I'll also bet that when I post this and head back to the actual article I'm going to find stories that are a whole lot less dramatic than their headlines (and our resulting emotions and outbursts) initially suggest.

Moving. We are. Are you? About movers...

We have heard an amazing array of mover stories over the years.  Some good.  Many not.  Our own advice has always been to get in-house estimates, never assume the estimate is the gospel with respect to what you will actually end up paying, and try very hard to determine what will REALLY happen if (when) there is a problem.

A caveat:  There are ads in the right hand column of this blog.  Since this post will have "movers" etc as tags/labels as well as other keywords, I'll bet you a buck that google drops an ad or two for "acme movers" et al in there.  We don't know who will be advertised and we have nothing to do with it.  Do not assume the ad is in any way a positive or negative endorsement from us.  Now, back to our post...

There are any number of legitimate reasons for variation from estimate to actual (you decide you will move the piano after all, or find a bunch of "little stuff" you forgot about, etc). However, there are any number of ways to lowball an estimate in order to get the deal, too.  Some classics include simply underestimating weight or the number and type of boxes required (where these are part of an estimate).


A reference is extremely important, but there is rarely a guarantee that you will get the same estimator and crew as the positive-experience referring person. 


A referral that may be even more valuable than "they did a great job" is one about how a company handled a damage claim.  A good mover will almost always do less damage than you would if you did it yourself (be honest!).  The key is how the company handles the problems.


The article below (after the "jump" or "read more" link) came to us from OREA (Ontario Real Estate Association) and we thought it good enough to pass on.  The comment about not taking the lowest estimate may seem self-serving.  Maybe it it, but it is also very true.


Do you have a great mover?  Or a tip?  Or a horror story that you can laugh at now (don't want you to relive the ones that still make you curl up in the corner and cry).

We're Moving! (part 13) SOLD!

So, here we are.  It's Wednesday evening and we have three offers. Enough competition that we should see proper market value, but not one of the feeding frenzies you read about in the papers.  With three, especially since one is being delivered and not presented, we can do it at the house where everyone is likely more comfortable.  One or two more and I probably would have moved it to a meeting room at our office.

As it turns out, a health issue means only one offer is actually being "presented".  This is unusual, even though more and more offers are just faxed or otherwise delivered.  There are special circumstances -- for example, an estate sale with the lawyer as executor -- where just sending in the offers makes sense.  There are also lots of not-so-good reasons for this happening, ranging from lazy to devious.  But most agents in most cases prefer to come to the presentation with their offer.  They can give some insight into their clients, answer questions and get a better sense of the sellers' situation and preferences.

We encourage our sellers to make the "rules" simple and clear and in writing.  By stating up front that we will take the best acceptable offer if it is at least $5,000 (equivalent) better than the next offer, we make it clear that we are not going to "game" anyone.  Our reputation -- and putting it in writing -- means that agents can more often bring their buyers' best offer right away.

The result should be the best chance for the buyer, the best price for the seller and less stress and running around (and theatrics) for all concerned.

In this case, our sellers -- us -- were easy sells for this approach.

So, if you haven't been through it, here's how this goes.

Assuming everybody shows up on time, the first agent comes in ... introductions ... can I get you some water, etc. ... blah, blah ... and hands the offer to the listing agent.

When that listing agent is one of us, we have already explained the process to our clients.  Said process begins by reading through the offer silently, making notes if one wishes.  Most importantly, do not either start whooping and dancing ... or make gagging sounds and insult the parentage of the bidders.

With the first offer, we will go through it pretty thoroughly -- even the standard clauses that will be in every offer.

We then find a little out about the potential buyers, clarify any issues, say thanks and send the agent away -- maybe to their car, maybe to the basement, not usually to eternal damnation.

[By the way, sitting in your car on a Sunday evening in mid-winter, waiting for the phone call saying you just "lost" may be the most common setting for agents questioning their career choices.]

With the buyers' agent gone, we can discuss the merits and issues of the offer.

Rinse and repeat.  It gets faster with subsequent offers as the standard stuff need not be reviewed and explained in the same detail.

Then it's done.  All the agents are stashed away and it's time for a decision.  This can be obvious, or obvious with a question (can you move your closing date a week later?).  Or it can be so close that the written rules mean you have to ask those poor agents to go back and see if their clients wish to improve -- everybody's evening gets a lot longer.

Or it can just be tough.  The classic would be one high offer that has a loose condition (say, home inspection) and a firm offer for less money.  How much is "firm" worth? (The answer: "a lot").

In our case, it was pretty straight forward.  All three offers were firm and in the range we expected.  One was higher.  A lovely couple (we met at the open house and a later showing) will be taking over our home and garden on June 14.

An amazing number of little details, signatures, initials and phone calls later, we had that odd feeling that comes with selling your home of 21 years, albeit successfully.  We, and the buyers' agent also had that exhilaration of a successful deal.

Two other agents had that unpleasant, but not uncommon these days, of not getting the deal and not getting the home that their clients wanted enough to bid on.

Saddest, are the two families who probably spent a lot of time stressing over what to offer for a house they must have liked and wanted and didn't get it.  In this market, those couples may "lose" several times before they get their home.  It is tougher than almost anyone can understand until they go through it.  A good trusted, empathetic supportive, agent is very important here.

One more phone call to Florida: "Honey, I sold the house", a celebratory dram, and off to bed.

As I begin to drift off, my eyes pop open as I think:  "Wait a minute.  Where the heck are we going to live?"

We're Moving! (part 12) We're listed...Less work, More stress

This post should close the gap between blog-writing and actual event by quite a bit.

Once the house is listed, the work level can actually drop quite a bit.  After all, the house is so freaking staged you CAN'T do anything in it even if you were allowed to.  To the extent that you are getting good showing, you can't even be IN the house.

This may not apply if you have 3 rugrats, a dog, two cats and a slob for a spouse.  In our case it's a bit hairy because my office is/was at home.  So yes, that was probably me and not some terrorist hacker sitting in a van with a laptop with some weird antenna thing attached to it.

Also, even if the physical work slows down, your mind gets pretty busy... Why isn't the phone ringing? ... What if we priced wrong? ... Please don't let it snow ... Why did the dishwasher just make that noise ... What if nobody comes? ... Why are we doing this? ... What if we can't find a place to live?

By the way, we are holding off offers until Wed. evening.  No doubt, holding off offers is designed to allow for a bidding war.  But in a hot market where things sell quickly, it also allows buyers to find out about the property, see it, and make a decision and plans before somebody jumps in and nabs it.

Friday
Alex from videolistings.ca shows up right on time as Gord is returning from delivering the paperwork to the office and does his usual efficient job.  We will find out tonight that it was also his usual gorgeous job.  He beautifully incorporated our seasonal garden pics and some local scenery into the house video. (I mentioned it before, but the old place really looks good: www.videolistings.ca/video/35anndale)

As he walks out the door, the agents start appearing for the Agent Open House.  While everything else we do helps, the major marketing tool is the tens of thousands of agents of the Toronto Real Estate Board who see the listing.  If you can make it convenient for them to physically see the house, better still.  And that is the Agent Open House.

The feedback is good, though we pick up a niggly little theme: "Great house, you'll do well, a little small for my people".  We believed we had factored this in.  The house is about three times the size that a good friend grew up in with his 5 siblings.  But that was then.  Young families looking for their second home in a perfect location are thinking dream home even if they are a little short of dream budget.  We'll get back to this little issue later.

We have showings Friday afternoon and evening.  Good start.

Saturday and Sunday

Public Open Houses both days.  Not a zoo, but busy and steady.  More than the usual number of clients WITH their agents -- as opposed to agents SENDING clients.  That should be positive.