The Real Estate Podcast

What Happens When Deals Go BAD?? | EP293

In today's episode, Adrian Trott and Steve Cecchetto discuss the complex world of real estate transactions and explore what happens when deals go south. From failed negotiations and financing issues to legal disputes and market downturns, we discuss the myriad reasons why real estate deals can fall apart. Join us as they share their insights and experiences, providing valuable advice on how to navigate these challenges and protect your investments. ************************ 0:22 – Intro 0:57 – The unpredictable market 4:43 – Lacking transparency will cost you 10:07 – Agent Conduct and Deal Success 16:54 – Have the tough conversations upfront 17:50 – Outro ************************ Want more real estate podcast discussions? Watch it here: youtu.be/uLhNb8fdHt4 Listen to it here: http://www.soundcloud.com/ktrealty Catch clips and highlights of the show here: http://www.instagram.com/kormendytrott ************************ Our Social: Instagram: www.instagram.com/kormendytrott  YouTube: www.youtube.com/user/kormendytrott  Facebook: www.facebook.com/kormendytrott  Twitter: www.twitter.com/KormendyTrott Soundcloud:http://www.soundcloud.com/ktrealty  LinkedIn: www.linkedin.com/company/ktrealty  Pinterest: www.pinterest.ca/KormendyTrott  TikTok: www.tiktok.com/@kormendytrott?lang=en ************************ In 2011, Ariel Kormendy and Adrian Trott formed The Kormendy Trott Team, now often referred to as KT (thanks to our logo!). The foundation of KT is built on providing unmatched value and attention to detail in everything we do. From our ever-expanding, comprehensive list of exclusive services to our expertly trained team, you will receive the highest level of care throughout your entire real estate journey. Originally a team of two in Milton, Ontario, the KT Team has grown into a large team of exceptional REALTORS®, a client-care department, and now includes KT media, KT Commercial and KT Property Management to provide our clients with a complete lineup of genuine, professional, and proven services across Halton Region, Peel Region and the surrounding Regions within the Greater Toronto Area. We’d appreciate it if you’d subscribe and follow us for behind-the-scenes footage, real estate tips, industry secrets, exclusive listings, KT Confidential - the real estate podcast, and more!

Duration:: 18m
Broadcast on:: 24 Jun 2024
Audio Format:: mp3

Hey everybody, welcome back to Kiti Confidential, the real estate podcast. This is episode 293. I'm here with Steve Chiqueto. You're not going to get away from saying hi. I know. Hi. In today's episode, we're talking about what happens when deals go bad. Enjoy. Steve, how are you today? I'm wonderful. How are you, Adrian? I'm great. Thank you. Thanks for joining me. I appreciate the invite. Absolutely. Ariel's away and we have limited space so we can't really have guests on our podcast until we get into the new studio. I'm going to say this is different. Yeah, you're not keen on sitting this close to me. You're coming into arm wrestle. Yeah, I would do, but I have arthritis in both elbows. Of course you do. So if I lose, that's why. We don't even have the elbows on the table. No. No. I'm too old for that stuff. How have you been lately? Good. Busy. Very busy. Yeah, you mentioned yesterday, you're quite busy. Very busy. Good busy though. Yes. Like to be active. How are you finding the market now? Residential? Yes. Unpredictable. And I would say about every two weeks, something new shows up. I feel the same way. Yeah, I mean, I find it fascinating. And I've said this from day one. How quickly things change? You know, three weeks ago, we were seeing decent homes presented properly, marketed well, moving quickly. Now things are sitting. You know, they're sitting and what I also find, which is a bit surprising is activity, is way down as well. In terms of buying or showing. Yeah, showing and things like that, which surprises me a little bit, especially with the announcement, the Bank of Canada made. I think there's a lot of hype around that and people were expecting it to have a big impact. I mean, as a dollar, and we did the math last week, and it was, I mean, it makes a difference certainly, but it's not profound. But we were hoping that it would instill some confidence in buyers and get them out shopping. And that's the biggest thing that I've been saying, is it's kind of a psychological win that, you know, we're out of this tunnel and the light isn't a train anymore. You know, like things aren't coming up, it's the start of things potentially getting better from a cost of living perspective. I was wondering if the surge of inventory that's now been around for a little while, if it had anything to do, potentially with the proposed capital gains increase, which is taking effect in five days. Five days. Potentially though, it's not confirmed, right? - Yeah, well, past, didn't it past the second, the center, whatever, which surprised me. I thought it would get shut down. - I'm not surprised. I knew we, everyone's been talking about it for a while. Like, and there's a lot of countries that do it, so I think it was inevitable given the country's spending habits. - Yeah. I think there's a lot of misunderstanding around it though. - There is, I don't think we'll get into it in too much detail, but I was hoping, I'm hopeful, we'll say that, there's still some people out there that are selling in hopes of not being affected by it, but in reality, they have to sell and close by then. - And that speaks exactly what I just said. I mean, that speaks to the misunderstanding around it. I mean, June 25th is when your closing has to occur. Well, if you listed a house last week, all the best closing by June 25th. - Yeah. - You know, how are we today, June 20th? - June 20th, yeah. So not happening. - Yeah. - And two days, those days are holiday, or weekends rather. And I was chatting with someone the recently who said, oh, I have an accountant who can get creative to make it work. - Nice, they admit that. I prefer to say I enjoy accounts that work in the gray. - Yeah. - They work in the gray. - Well, and you do see a lot of, I mean, certainly in the condo market, a lot of houses, or condos rather, that are vacant or tenanted. So that may be the case with them. Maybe we'll see them pull off the market as we near the end of the month. But I think, I mean, a lot of the kind of real estate chatter right now is about how soft the condo market is, and the amount of inventory specifically in Toronto. I think a couple of months ago, the investors got very, very nervous, and everybody was putting things on the market. And there's just so much choice right now. I mean, we saw that with a condo I had listed. I mean, thankfully we got it sold, but, you know, week over week, there was just, you know, they were out doing the number of listings that were coming onto the market. - Yeah. - Yeah. - Crazy. - Yeah, it'd be interesting to see where you go. The other thing could be school, right? - For sure. - School's ending. - Yeah. - Summer's around the corner. So it'll be interesting to see that the summer holds. But that's not what we're talking about today. Today we're talking about when deals go sour, or go sour with, or I don't remember the words you used. - When deals go bad. - When deals go bad. - I think I just watched a Jerry Springer episode. When deals go bad, you see Jerry's-- - Different deals. - Yeah, yeah, yeah, exactly. - Well, what did you have in mind when you were thinking that? - Well, it was interesting. You know, when we were texting about, you know, a topic, and I think you made a good point. When you talk about something relevant, or something that's happened recently, it kind of, it's easy to talk about, 'cause it's just happened. - Yeah. - So I was working, I mean, there's a couple of ways that we can get into a couple areas where deals fall apart. You know, after it's conditional, there's various things that happen. But I was negotiating a commercial lease for almost 30 days, okay? And it's not like it was 100,000 square feet. It was relatively small by all standards. But there was just a bunch of stuff that occurred at various steps that caused goal posts to change and way people were negotiating and things like that. It was just brought a top of mind, you know, 'cause it was interesting the way things played out. - So that was more buyers and sellers not being able to put a deal together over whatever the circumstances are, or tenants and landlords, whatever maybe. - In summary, it was lack of transparency. - Okay. - This is what led to it. So very, very high level. The person who I was negotiating with on behalf of my client was representing the landlord, but also the tenant, okay? So he was originally trying to find a sublease and they were doing this before they had spoken to the landlord. They found us and we got into a conditional acceptance and then they decided to pull the landlord in. So everything basically restarted with the landlord unbeknownst to us, okay? - So you had already come to an agreement with the tenant? - Correct. - Or sorry, the tenant. - With the tenant for a sublease. - For a sublease. - Yep. - And then it went to the landlord for approval. - Correct, but it wasn't disclosed to us that it was a sublease. - Right. - Okay, we were negotiating with a numbered company. - Okay. - Is all we thought. Yeah, so it was, I mean, in that case, it was lack of transparency that caused the deal to fall apart. - I mean, whose fault or what caused that? - What caused the lack of transparency or what caused the deal to fall apart? - Well, it sounds like the whole process was kind of messed up. - It was, it was. Basically what happened in the end is the tenant refused to provide a mutual release to the landlord to get out of the space because they didn't want to pay the two months of fixturing period that we were gonna get. - Right. - And then what ended up happening from what we understand, the space that the tenants had leased themselves, which was two months or two years premature to their lease expiring, they weren't granted the permits. - Oh interesting. - To get what they wanted. - So this took a month and you could just tell, I mean, this, this realtor I was negotiating with, based on his write up, he had a lot of experience, you know, 20 years in the business. - He was aware of his assemblies. - Yeah, he was representing the tenant, right? And then all of a sudden he's representing the landlord. We actually got more favorable terms when we submitted to the landlord. But what happened is things kept getting dragged on and dragged on, which started to impact my tenants timeframe. Okay, so before we firmed up again, we were like, well, we gotta push it now, 15 days, 30 days, which put them up in arms. So it was just a whole bunch of things because of lack of transparency, you know? - Well, there's, when you said when deals go bad, I was thinking more afterwards, but I actually liked this angle of it because it happens often. And I was chatting with one of the guys on our team recently and he put a lease together on a property that we have in a market and in a market, both as an industry and geographically, that's just not moving. And like, there's so many properties available for rent within a few kilometers, like, it's like 150. And nothing's moving. And we were able to get an offer on this place. And this particular offer was closing date of like 45 days out. So the tenant wouldn't move in for a month and a half. And the landlord's really keen to get somebody in sooner. And they were willing to walk away from it. And fortunately, you know, this was Sherry on our team. He was able to convince the landlord that he was crazy not to take it because of the fact that one, we had very few showings. We had at this point, I think maybe one other offer, if any. And the likelihood of getting a better offer with a quicker closing was very unlikely. - It's interesting actually, 'cause just like my story said, you know, not what you were, that wasn't what I was expecting either 'cause when I was thinking this morning about possible topics, I mean, the easy ones are, you get a conditionally accepted offer and then financing doesn't come through or home inspection doesn't come through. Those are common, but I think the point you raise, which is very important. And I think it's something that we're good at as a team is you have to set expectations with your client, you know? And that's just not at a prelisting conversation with how dynamic the market is. That could be weekly. That could be a couple of times a week. - Absolutely. - You know, I mean, I've had that happen as well. The Sherry experienced, and I think sometimes in the heat of it, people are so short-sighted. You know, they'd forego one month rent, what is it, you know, two grand? And have it sit on the market for another three months, which is now gonna cost you six grand. - Right. So. - Well, and I think the discussion I had with him at that point, when I learned about how he had put in a fair bit of effort to persuade the landlord to accept the offer, which he was successful at doing, is that, you know, real estate agents' responsibility is, there's several. And, you know, when it comes to selling, there's first of all, selling the product of the end user, you know, being able to, but at the same time, because we're not very rarely are we dealing with the buyer directly when we're representing the seller, we're dealing with their agent. So not only to prepare the product and the advertising and marketing to make it saleable and convincing the buyer to get excited about it, we then have to sell the agent representing them and kind of filling their mouth with words to sell it back to their client. And then we also have to sell the offer to our client, the seller, and convincing them it's a good offer. And I had one not long ago where the seller that I was representing was almost willing to walk away from a deal over a closing date that was a week later than they wanted, a week in a market again, where nothing is selling. And the price point we ended up getting was exactly what I told them they would sell it for, but for some reason they just had this higher number in their mind, despite several conversations. And I finally convinced them like, you're crazy, you cannot walk away from this, nothing is selling. I had an agent that had the exact same model for sale around the corner who had called me during this whole processing, hey, how's your listing going? I'm not getting any showings. And here I am with the seller that was contemplating not accepting an offer over a week later closing. That's bonkers. - Yeah, so you bring up other agents too though. I find actually, I had at least a couple of weeks ago, had two offers on it. And the first one that came through, I find it interesting how nicey, nicy everybody is at first until you push back a little bit, start negotiating or something else comes to the table. And that goes a long way with me. I actually had this conversation with clients last night, the feel you get of how an agent, not just represents themself, but represents their clients. Like you can go a couple hundred bucks more than what we're asking for on a lease or $10,000 more on a property. But you gotta do that gut check, man. You know, you really do. If it seems shady, is it worth it? Worth jeopardizing, not closing on it, even though? - Well, it's funny you say that because that deal I was just talking to, the buyer, the agent I was working with who was representing the buyer, I was not very comfortable with. And I couldn't put my finger on it. I gave him the benefit of the deal because we had nothing else to work with at the time. And he pulled through and it came together. But I was, you know, I prepped my clients accordingly. Listen, I don't have really high expectations. You know, it could go south, which means, you know, we're gonna be back on the market in a week. But I prepped them and I said, you know, it's likely they're gonna need an extension on the finance condition, which they did. So they were comfortable doing that when it came time 'cause they knew it was likely to happen. - And the deal ended up coming together. But I didn't think it, I really didn't think it would. I was just waiting for that call where he would be like, I'm so sorry, you know, they- - It's what I find fascinating. I mean, Lisa's is a whole other podcast, but I find fascinating how everybody's nicey-nicey at first. Okay, but then, like I said, when you start negotiating or you push back or you challenge, or they get an inkling that, you know, they're not the front runner, the lead horse anymore, how the back gets up, you know? I think that's when the true colors show. And that puts me right off, to be honest, especially if I have somebody else who's doing it right. And doing it right could just be a matter of keeping your mouth shut and letting how you represented them on paper talk, you know? - Yeah, I mean, there's the other deals where the agent is, as you say, nicey-nicey during the negotiations 'cause they wanna put a deal together and then you have the conditional deal in place and then they disappear, unresponsive, you know? And they're at that point, I remember one time I sold a house conditional and then I had to go somewhere. I was on a vacation, short trip, three or four days. Conditional period ended like the day after I returned. So I landed at the airport and I called him from the airport and-- - Called the agent. - The agent, sorry, thank you. And he answered and I said, hey, you just wanted to check and I just got back. How are things coming with the finance closet? It expires tomorrow. Oh, I haven't spoken with my client. - Of course. - In a bit of week. - And I'm like, great, this is it. And I knew instantly he's not coming together and it didn't. - It's fascinating to me. I mean, having been on the other side of the equation where it's your clients who need to get their conditions waived, home inspection, finance, they're, I'm on 'em. Like, I'm more stressed about it than they are just trying to get it done. Like the lack of, I don't know if care is the right word. Like, are you that busy where, you know, you just don't care? Like, I don't understand that. - Well, there's some agents who I was dealing with a local agent recently and she was amazing. Like we had, they were the, she represented the buyers, the conditions expired, let's say on like a Tuesday. We were at Wednesday the week before and she managed to get it all wrapped up by Friday. - Love it. - Right? And she put in a lot of effort to make that happen. And, you know, I'll remember that forever. I made notes, we make notes on every transaction so we can go back and see how things have been with different agents. And, you know, we'll serve her well in the future if somebody's working with her, but it also made my clients, they were able to enjoy the weekend. - Yeah. - Right? Like little things like that go a long way. - And to me, it always, always, always blows down communication. - Oh. - You know, good, bad, or otherwise, you know? You know, it's, it's, I'll touch base with you on Monday. Nothing, nothing to update on you. Just every couple of days, just to keep everybody at ease knowing that you haven't forgotten about it. - Yeah. - Yeah. - Yeah, it doesn't take much, it's just little efforts. - Yeah. - Makes a big difference. - It's amazing, though, how people survive, not doing those little things. Like it's-- - Are they surviving? I don't know if they're maybe, they're not making a Mercedes payment this month. - Yeah, that's right. - They're white Mercedes payment, yeah, exactly. - Yeah, lots of those out there. - Cool. - One quick question before we wrap up. If you had one tip for a new real estate agent coming into the industry, one thing they could do to improve their odds of success, what would it be? - Have the tough conversations up front. - Okay, such as? - Such as price expectations, such as, how long the house is gonna sit expectations. The reason I say that is you see it all the time, okay? People that haven't been properly canceled. You know, and then they're in the situation and wondering why, as opposed to, if they're given the heads up before. If things aren't that way and they're better than what you've explained, kind of an under-promise and over-deliver, but communicate. Be honest and have the tough conversations. - All comes in a communication. - And I find it's a maturity thing, you know, and a confidence thing. A lot of people avoid those conversations and I would say don't. 'Cause it's easier to have it in this environment versus when you're in the heat of battle. - Not only will it contribute to their success, it will also make them sleep better. - Oh, without a doubt. - Yeah. - Without a doubt. - That's a good one, I like it. - Cool. - Thanks for joining. - Thanks for having me. - There you have it, hope you enjoyed this episode. If you did, make sure you subscribe and leave a comment. Let us know if you have any questions we can discuss in the next upcoming episodes. Bye. *BEEP*