Episode 28: The Eight Ways to Bulletproof Your Transactions in a Shifting Market
Where I talk to Zahra Marani about The 8 Ways To Bulletproof Your Transaction in A Shifting Market!
Glenn: Hi! It’s Glenn McQueenie, and welcome to my 25-Minute Success Podcast. Today is going to be an interesting call, because we have Zahra Marani from Marani Law on the line. How are you doing, Zahra?
Zahra: I’m great, Glenn! Thank you. How are you?
Glenn: I’m doing awesome, and I’m really very interested and excited about this call, because what we’re going to be talking about is the 10 ways to bulletproof your transaction in a shifting market. What I’ve found is that in an upmarket (which we’ve been really going through for sure in Toronto for the last 19 years), a lot of the mistakes that get made by agents get almost covered up or forgotten about, because from the time somebody actually buys the house to when they close it, the house has gone up sometimes 5, 10, or 15% in value. But I really wanted to have Zahra on the line today to help you focus on making sure that if you’re going to write a transaction and do all the work, that we can talk about the 8 different ways to bulletproof the transaction so when you write the transaction, it actually closes – but more importantly, that you get paid. As we’ve entered into a shifting market and more prices are lower on closing than when they were bought, there are some issues with appraisals and stuff going on. What can we do as agents just to really bulletproof these transactions to make sure that they don’t fall apart? So I had to pick up the phone and call my expert, Zahra, who’s on the line. So Zahra, what kind of opening words would you give to the agents listening here right now? What have you been experiencing, just even recently, with trying to hold transactions together?
Zahra: Yeah, absolutely. Thanks, Glenn! I would definitely say that over the past couple of months, particularly since the announcement in April (and even a little bit previous to that when the market was just getting too fiery hot), there have been some transactions that we’ve had different issues with that we weren’t experiencing prior to that. Definitely one thing that I would suggest for agents is to push for larger deposits now. I would probably suggest looking for at least 10%. And also to have quick closings – we don’t want to have 90-day closings because the market could dramatically change in 90 days at this point. So the 30-day closes, the 10% down – those deals are much more secure than, say, 5% and 90-day closing.
Glenn: You know, Zahra, that’s a great point, because so many people are caught in this trap, where they bought in March, now it’s closing in June, and the prices have dropped maybe 30% because they went up almost 30% from January. We’re really having a hard time sometimes (depending on the lender), if they did the appraisal when the deal was written or as it’s coming up to closing. So I think that’s great advice that you gave them, because if it’s a 5% deposit, it may be a little bit easier in the customer’s mind to go, “Oh, I’m going to try to walk away from it.” We know they can’t really walk away from it, but I think having that extra chunk of money and also having that shorter closing, to your point, is really amazing advice, because now we know that the appraisal’s not going to move that much, and they’ve got a lot more deposit that’s going to compel them to close.
Zahra: Absolutely, yeah. I think the more there is invested in the transaction, the better. And the 30 days, or the quicker closings, just make sure that there’s not as big a change in the market, certainly.
Glenn: Sure. So number one is: get a 10% deposit and a quick closing. And what would you say number two would be to help these agents bulletproof their transactions in a shifting market?
Zahra: I think coming out of the market that we have just come out of, people are used to and anchored onto the idea of not putting conditions on their offers, and that’s something that needs to change, if it hasn’t already. We need to look at even putting something like a review from the lawyers: “the buyer solicitor to review the agreement within two business days,” (or one business day). And if you have a great relationship with a lawyer, then you can pick up the phone and say, “Hey, I really need you to take a quick look at this just so that we can make sure that this goes through.” But certainly, no conditions in the offer and buying as is without anything in there is not necessary anymore. We’re not in that sellers’ market like we were before, and in the type of market that we’re in, they’re required, I think.
Glenn: Sure. I think this is the time, really. Before, you really couldn’t put in conditions, which caused a lot of hardship for us agents, too, because we wanted to protect our clients by putting a condition on financing, a condition on home inspection, and even putting a condition on a lawyer’s review of it. We used to be able to get those conditions all the time, because being condition-precedent, we could get out of that deal if there was ever a problem. And I just found that when you’re competing against 10 or 15 or 20 offers, you just don’t have that luxury anymore. But what I love about this is, now we’ve kind of entered the “lucky buyer, unlucky seller” market, where there are tons of listings coming onto the market. The buyer has a lot of choice and selection, and they can really push to put in the conditions – but more importantly (I always joke with our agents now): “Guess what? You get to actually negotiate again!”
Glenn: Because before, we kind of had to take the seller’s price, right?
Zahra: Yeah. You know, I can’t tell you how many calls for status certificate reviews that we were doing (and we still do occasionally) prior to the offer being made, because everybody needed to go in firm, even on a condo or a condo townhouse.
Glenn: And that’s crazy, isn’t it? Depending on the management company, some of them will give it to you in a couple of days, but a lot of people will stretch it out to 10 or 14 days, and you just don’t have that time when that house is coming on the market and they’re looking at the offer in four or five days.
Zahra: Absolutely. And the financing of the deal is contingent on the status certificate being clear. So it is a really important condition, and it was sort of being waived by inexperienced agents. Like you say, before, the mistakes could sort of be covered up because the value of the property was increasing anyway. It may not have been such an issue. But now, more than ever, those types of conditions are really important.
Glenn: For sure, because if you did get the status later, and you found out it was bad, you could go back to the seller and say, “Listen. Let me out of this deal.” And the seller would gladly do it, because they knew they could probably go resell it for a higher price, right?
Glenn: It’s amazing how these things change. Talk to me about number three. What’s the third way to bulletproof your transaction in a shifting market?
Zahra: I think that right now, agents should also be looking at adding in soft language to cover themselves with respect to warrantees, in terms of just saying that everything is in working order. The lights are in working order, any chattels and fixtures that are being purchased with the transaction are in good working order. It’s nothing very onerous on the seller, but in the event that something wasn’t working (like the washing machine or the dishwasher or the microwave), and that condition’s not in there, then the seller’s not bound. So it’s important to have these warrantees drafted into the Schedule A so that the buyers are protected.
Glenn: Yeah, and it gives you a leg to stand on – or more importantly, I think it would give your lawyer a leg to stand on, so that they could almost call the other lawyer and say, “Listen. It’s right in the contract.” But I think you’re fighting a battle with one hand tied behind your back when you’re calling the other lawyer saying, “Hey, listen. This isn’t working.” And the other lawyer’s going, “So what? Not in the offer: it doesn’t exist. It’s your problem.”
Zahra: Exactly. I would also suggest with that to put something in about no work orders or deficiency notices or anything with respect to the subject property, because all of those things – if they’re not in the offer, then the lawyers really do have no leg to stand on.
Glenn: That’s right. And it’s really hard to go back to the City, too, with any type of permission to get those work orders, and what they are and how long they would be to comply with. If there’s an unsafe porch or roof and the City has put that work order against it or even just said, “You’ve got this deficiency notice” – you’ve got to rectify it if you don’t just put it in. And honestly, it’s two sentences, and all of a sudden now we have all the protection we need, right?
Zahra: Yeah, and we’re happy to give that language to our agents if they don’t already have it. I know at Keller Williams, you guys really support your agents a lot and give them good education about this, but if people don’t have that sort of support and they feel like they need it and they have a good relationship with their lawyer, they can just pick up the phone and say, “Hey, I really need to know what you think I should add in here.” And that doesn’t take us very long, but it does save everybody, at the end, a lot of hassle.
Glenn: Oh, for sure. And just adding onto what you said, I always think (and I’ve been the Broker of Record for 8 or 9 years, so I was really dealing with these issues a lot), even if agents just looked at the RECO website and saw the convictions and what the other agents did wrong – I mean, it’s pretty interesting reading, just to take a quick look and go, “Oh, okay. Jeeze. I didn’t know about that” or “If they would’ve just had a condition on a home inspection, they could’ve avoided a whole year of going through the RECO process and the fines and having to do all that other stuff, too.”
Glenn: Okay. So what’s number four, Zahra?
Zahra: I think it’s really important to be able to have one last viewing of the property just before closing (within 36 to even 24 hours), so that both the clients and the agents (or the agent alone – whoever’s going), can view the property and make sure that it is in the condition that they anticipate it being in. A lot of contracts don’t allow for that, but if it’s written in the Schedule A, then they’re entitled, so I would highly suggest and advise that that should be added in for sure.
Glenn: Sure. So a buyer revisit within 24 hours of closing. I think what’s really great for you, too, is if we go and find a deficiency – we haven’t given them the money yet, so we have leverage in order to get them to perform on that contract.
Zahra: Right. Or get an abatement, if we have to.
Glenn: That’s right, because it’s a lot easier to get the abatement upfront than to go chase somebody in court afterwards, right?
Zahra: Absolutely. Yeah. And usually these aren’t major things anyways (generally speaking). If the microwave’s not working and you need $250 to go get a new microwave or whatever it is, it’s easier to say, “Well, we noticed yesterday when we were there that the microwave isn’t in working order, and so because it’s in the APS, my clients are going to have to buy a new one, so I’m not going to provide you with that $250.” And really, there’s nothing they can say to say no, unless they fix it. So either they fix it and the buyer’s happy, or the buyer doesn’t give the $250 and they have the money to go buy it themselves, and they’re still happy, as opposed to not going and seeing it, and then the next day, moving in and saying, “Oh, the microwave doesn’t work.” And then the sellers are gone, and for the $250, it’s just not worth it, and it leaves a bad taste in their mouth. So it’s nice to end on a good note and make sure that the buyers are getting what they’re paying for.
Glenn: Yeah, because I think the most stressful time in people’s lives – (definitely divorce) – but I would say moving is right up there. They’re almost like this general in an army, conducting everybody, getting everyone there, moving in, and your minimum expectation is that everything you paid for is in working order, right? So why not just do it the day before? I just bought a cottage, and we came and looked at it the day before, and everything was fine, but at least we knew. It made it just a lot more comfortable than having a whole truck full of people and all of a sudden finding there’s some type of flood or water damage, or the heating doesn’t work. Now what do you do with the movers and all that stuff? So with a little bit of foresight, I think you just solve a lot of problems.
Glenn: Okay, what’s number five?
Zahra: I would say always remember that the conversation between the agent and the client is the relationship. It’s really important to keep a good relationship with your clients. Where an agent has a good relationship with the client, it can mitigate a lot of issues. Having conversations throughout the whole transaction, and not just before the agreement is signed, ensures a smooth transaction. I think you and I had talked about this at one point, Glenn. I don’t know if you want to talk about that at all as well?
Glenn: Yeah. They always say that every relationship is improving, flat lining or declining – gradually, gradually, and then suddenly. Usually it’s one failed or missing conversation at a time. I find that if it’s a small problem and you jump on it and you’re proactive, you can solve it before it becomes a really, really big issue. I just say, “Don’t run away from it. Run towards it.”
Zahra: I agree! That actually brings me to my next point, which was going to be: put out the small fires before they become forest fires. I think it ties right in with what you were saying there – to run to the small problems before they become big ones. And it’s usually as easy as communicating.
Glenn: Right. So for those listening at home, number six is: put out a small fire before it becomes a big fire. It’s a little bit of foresight. I always find that when you’re in communication with somebody, you’re building up equity. You’re helping them; they’re helping you. And then if a big problem occurs, you don’t really lose the relationship. It’s just a little bit of a setback, and then you can go back. But if you start running from it – to your point, Zahra – that small fire just becomes a raging forest fire, and now everyone’s upset. Everyone’s talking about suing everybody, and you’re like, “Oh my God! I can’t put this fire out!”
Zahra: Yeah, it’s true. And so many times, if we deal with it from the outset, it’s done. It’s not even remembered by the end of the transaction if we’re able to deal with it from the beginning, rather than letting it blow up. At the point of closing, if the client can’t find their agent or they can’t find someone on their team, be it the mortgage broker, the lawyer, the agent – if there’s a lack of communication there, it can create large problems.
Glenn: I’ll just add that the whole point of this is to build a business and build a client base of raving fans who want to refer everyone they know to you. And if you look at all the research, 39% of sellers, when they’re surveyed and asked, “How’d you pick an agent?” 39% of them were referred to the agent or have used them previously. And I think the next 16% used the agent to buy their home that they were moving to. So you have a 50% chance of retaining that customer and client by just serving them at a great level and diving in. And if it’s a small fire, dive in and go and fix it first, instead of trying to repair it later, because another survey came out that said when they polled buyers and sellers, 80% of them said they would use their agent again, yet only 22% of them actually do. And it’s usually because there’s no conversation; therefore there’s no relationship. Or they dropped the ball somewhere, and now they’re like, “Why should I bother using you? Look what you put me through last time.”
Glenn: So what’s number seven, Zahra?
Zahra: Well, number seven builds on what we were just saying there: building an allied team, like a great agent with a great lawyer and a great mortgage broker, can really make the client experience fabulous. Between those three professionals working together, when a small problem comes up, we can call each other and say, “Hey, do you know about this mortgage condition that just came up from the lender? What’s going on with that?” And I can call the mortgage broker, or I can say to the agent, “When you go in for the final inspection, I have this sneaky feeling that there might be something going on with (whatever) in the house. Take a look. Let me know.” These are small things that we don’t need to really bother the client about if they don’t become larger issues, because it’s our job to look after them. They’ve got to move. They’ve got plenty of stuff going on in their lives. They’re hiring this team of three to help them with making the biggest purchase or sale (or one of the biggest purchases or sales) of their lives. And so I love when I work with a good team – a great agent and broker – that I can call quickly to help me, because I don’t want to blow the problems out of proportion by having to go to the clients and then telling the clients, “Can you find your agent?” or “Can you find your broker and let them know that this is the problem?” because it becomes a larger problem to them. They don’t deal with this on a regular basis. It’s a huge transaction that is very personal to them, and it becomes very emotional, whereas we can keep the process going. We can eliminate any problems by having a good relationship with the team.
Glenn: You know what? That’s my favourite so far, Zahra, of your list of what to do, because it’s so true. There’s just this amazing speed of trust, when you have these high-trusting relationships between professionals. They can pick up the phone quickly and solve any little issue, because we understand the context of it, whereas our clients don’t. They do this once every 7 years, once every 30 years, once every 50 years, and if they’re people who are easily stressed or worrywarts, then it’s just going to throw their whole day off. We’re like, “Here are 65 things that could go wrong in your transaction, and I’m going to work really hard to make sure nothing does.” So when that one thing comes up, I can just say to my client, “Oh, that was number 39. Don’t worry about it. We dealt with it. Everything’s fine.”
Zahra: Absolutely. And if it becomes a large problem then of course we talk to the clients, but hopefully it’s not as big as it would have been, because you’ve got a team of people who are on the client’s side and who’ve already done their best to mitigate the issue from the outset.
Glenn: That’s great advice, Zahra. Okay, let’s get to number eight.
Zahra: Number eight is: I would highly recommend that in closing a transaction, as an agent, as a client, I always tell everyone to gather evidence. Take pictures. Take videos. We want to know the condition of the house as you close that door when you’re selling. How does everything look? Did the movers break a piece of the tile at the entrance? If so, then we know that it was like that when you left. Or was everything in perfect condition? When the new buyers moved in, was it their movers that broke that tile? Unless we have some sort of evidence, it’s always “he said, she said,” and the lawyers really have nothing to go on. When my clients are moving in and out, I always, always tell them: take pictures and take a video as you’re locking that door. Or, on the flip side, when you’re moving in and you’re opening the door for the first time, talk it through: “We’re opening the door for the first time! Let’s see what’s inside.” It’s date stamped, and the emotion is there. It’s nothing that can be replicated. And it is irrefutable, most importantly.
Glenn: That’s brilliant, because I often find that if there’s a big problem, and this ever has to actually go to court to get found out, the judge doesn’t really care about our viewpoints, our opinions, what should have been done, or what shouldn’t have been done. I mean, a judge is really there to basically review the facts, and these are the facts: this is the picture at the time, the video at the time. This is exactly the state at the time. As you said, I love the date stamp. It’s pretty hard to argue against that when you have that kind of evidence. You’ll see it in the press. They’ll get someone that’ll be like, “I didn’t do it,” and then they find out there was video of it, and it’s like, “Yeah, okay.” And I think that’s the thing that most agents don’t understand: if you’re relying on your lawyer and your buyers and sellers, they need a foot to stand on. They need to be able to go back to the other lawyer, because the other lawyer’s job is to defend and deny any allegation against their client, because that’s what they’re paid to do. They’re representing that side of the transaction. But when we can show up there with great evidence, as you said, I think it’s just amazing.
Zahra: Yeah. And it also allows for these types of issues to be resolved a lot faster, because generally they won’t go to court then. If we said to the other lawyer, “Well, yeah, that tile was broken by your clients. Look here. The moment my client moved in, it was already like that” that lawyer is likely going to go to their client and say, “You know what? It’s not worth fighting this, because they have proof.” So we don’t have to. Who wants to go to court when they just moved or just bought or sold a house? It just makes life that much more complicated.
Glenn: Yeah. People want to get on with their life, move into their new house, explore the neighbourhood, and get into their future; not rely on some legacy issue, right? So we’re almost out of time here, Zahra. We’ve just got about a minute left, but are there any other bonus points that you’d like to give to our listeners?
Zahra: Yeah, just really quickly then. I think if there are any post-closing issues, gathering evidence is one thing, but let the lawyer know right away. A day or so after closing, give us an update on what’s going on in that house and any issues there are. Tell your client to flush every toilet, turn all the machines on, and make sure everything’s working. And if they don’t get in touch directly with the lawyer, if they’re in touch with the agent, please let us know right away so that we can deal with any small post-closing matters. The longer the client’s in there, the less likely it is that we can put it back on the other side, especially without evidence.
Glenn: Sure. And I would even just say to agents, if there is a problem (if the toilet’s not working or if there’s some minor issue), just go ahead and get a plumber. Get it over there, fixed. And even if you have to pay for it, it’s no problem. The client will love it. They’ll really appreciate it. I know when I would do my follow-up calls with my clients and say, “How is it? How’s everything?” I was almost hoping that something would go wrong, because it would present to me another opportunity to wow them.
Zahra: Be their hero, right?
Glenn: Right. Be a hero, because I really think that our clients expect us to perform while we’re on the clock, but then after closing, we get paid. You get paid. It’s what happens when you’re off the clock – and when you’re off the clock and still working and helping your client, you earn extra bonus points.
Zahra: I totally agree.
Glenn: Well listen, Zahra. Thank you so much. I think you’ve given nine great ways to bulletproof your transaction in a shifting market, and I just want to really say thank you so much. I really appreciate it. I know a lot of the listeners will get a lot out of it. So this is Zahra Marani, at Marani Law. What’s a number or an email address if someone wanted to reach out to you and contact you, Zahra?
Zahra: Sure. First of all, it was a pleasure, and thank you for asking me to get involved with this. Our number is 647-351-7795, and you can always email me: email@example.com.
Glenn: Awesome. Thank you, Zahra! Have a great day!
Zahra: Thanks, Glenn! You too! Happy Canada Day!