Home Seller loses $100K in today’s Market
If someone gave you $100k tax-free, what would you do? Go on a trip around the world? Buy a new car? Maybe quit your job and go back to school? Now let me ask you; what would you do if you lost $100k because your agent screwed up? If you are like most people you would probably start by screaming and pulling out your hair. Of course, I am talking about bully offers. This is the second time I have written about it. You can check out another article hear, http://bit.ly/yadRHu but this post talks about what happens when bully offers go bad.
Here is the story. The names have been changed to protect the guilty and I modified the price. Agent Liz lists a stunning home in downtown Toronto for $1.2m and decides, with the seller, to hold back offers. On the first day of the listing Agent Bob shows the house to his client who is absolutely in love with the home. Bob’s client lost out the night before on a $1.3m house that needed several hundred thousand dollars in renovation so when he saw Agent Liz’s house he figured he could go as high as 1.6m. He tells Agent Bob that he wants to bid high on the house and that he has been approved by his bank. Agent Bob calls Agent Liz and tells her that he will be coming to the table on offer night and asks that he be kept in the loop should anything develop before offer night. Agent Liz agrees. The next day, the house is reported sold by Agent Jay in a bully offer for $1.5m. Agent Bob is furious. He calls Agent Liz who tells him that there were too many people to call and the bully offer had a very tight irrevocable time.
Okay, now the house is sold firm, but sadly the damage is done. If she is smart, Agent Liz will do anything in her power to keep the news of the other offer quiet, but, if it got out what recourse would the seller have? Naturally he might launch a lawsuit against the agent and complain to The Real Estate Council of Ontario and in a worst case scenario, Agent Liz might be responsible for the difference between Agent Bob’s offer and the accepted price. Most likely however, she would be fined for not contacting any of the agents that had shown the property. In this case, there are two things to consider; first, the seller accepted the bully offer of his own free will. Second, it would be very difficult to prove that Agent Bob’s client would have actually bought Agent Liz’s listing for what he said he would pay. Remember, there is nothing as constant as change, and who is to say that on offer night, Agent Bob’s client simply changed his mind.
So, how do agents, on both sides, protect themselves? First of all, any listing agent should recognize that if you are going to be entertaining a bully offer you are under a greater responsibility to ensure you give everyone an opportunity to play the game. Missing one or two phone calls can cost you your commission. In a discussion about this event, one of the agents in my office said that she keeps an email log of every agent who has shown her listing so that if a bully offer appears she can send out a quick group email. In response to Agent Liz’s comment about the tight irrevocable time, she should have told Agent Jay that she needed more time to reach the seller and discuss their options. While Agent Jay might be a little irked at the delay it is important to recognize that he isn’t going away. His clients want the house. Agent Liz lost control of the situation. How could Agent Bob better protected himself? One simple move, have his client sign an offer right away and get it registered with the Agent Liz’s office. I have always been a proponent of registering quickly. Not only does it guarantee a seat at the negotiation table, it can scare away those buyers who don’t want to be in a bidding war.
The current market in Toronto is hyper competitive these days. With anywhere from 5 to 15 buyers for every listing, it is understandable that bully offers have found their way onto the real estate landscape. Knowing your role, on both sides, will minimize your risk to you and your client. As usual, I look forward to your views, comments and concerns. This post may not represent the views of Bosley Real Estate.