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March 22, 2012

8

Mastermind for March 21 Market talk and Multiple Offer Rules

by mark mclean

One of the things I love about our Mastermind meetings is how we often go on wild tangents. While it is sometimes hard to corral the group back onto a topic, you often get a great perspective on a bunch of things and with most tangents, you just never know where you are going to end up. We had another lively talk so if you missed it, you missed some great stuff.

There as been so much chatter in the media about “bubbles” that, quiet frankly, it is getting a bit boring. One of my Twitter friends, MortgageJake,  had messaged my the other day to say how annoyed he was with all the negative press and that he has simply tired of hearing how the real estate market was going to get kicked in the face. Naturally, saying everything is great is no way to sell the news and as Jake pointed out…. if it bleeds, it reads. Of course Mastermind is a great venue to talk about real estate and when you have 20 real estate agents in a room you get a lot if information….FAST. We spoke of a number of different articles including a recent Toronto Life article that revisited a bunch of “experts” on what their predictions were for 2011. Of course they were all wrong. So, it seems that even the best predictors can’t get it right, which makes our job that much more challenging. At the end of the day all we can do is give our clients up to date information and help them negotiate their purchase or sale.

What adds to the frenzy surrounding the bubble talk is the continued heat  in the housing market. While inventory remains low, things are not likely to change so our discussion moved on to how agents are dealing with multiple offers. After a rather lengthy discussion it seemed that the only clear consensus was that there was no clear consensus. Here are some of the scenarios that the agents have seen over the last year where there are 5 or more offers. Have a look. Do you have any to add?  

Scenario One;  The typical model is the Selling agent invites Buyer agents to present in order of registration. All the offers are sent back for improvement even if there is one or two clear winners.

Scenario Two; The Selling agent only sends back the top two and sends the rest home. This is a dangerous one and probably not in the best interest of the Seller’s client. One agent told a story of telling an agent that she should go home because she wasn’t in the ballpark. The agent insisted on presenting again and in the end her offer was the highest.

Scenario Three; You let all the Buyer agent’s know that they have one shot only and they should bring their best offer. The problem with this is that buyers rarely show their best offer first. As we say, “there is always a little left in the tank”. Furthermore you will almost always come up against an agent who insists on having a chance to improve their offer. I have yet to meet a seller who isn’t interested in looking at a higher offer.

Scenario Four; The Selling side picks one offer, not necessarily the highest offer, and negotiates with that buyer only.

Scenario Five; I have only come across this one once. In this scenario, the Selling agent asks all offers to be faxed in. He then keeps sending them back until there is only one left. This scenario scares me a little for obvious reasons, but perhaps there is some method to the madness. While it seems like a giant game of Chicken, the end result is the highest price to the seller.

Scenario Six; The Selling agent reviews all the offers with the Seller then calls up her own client buyer and brings in a last-minute offer which is naturally higher. Yes, it happens. We have seen it on many occasions. It is marginally legal and completely unethical but some Selling agents will be pretty blunt about telling you that having your own offer gives you the advantage.

Scenario Seven; One offer is clearly well ahead of the pack but the Buyer’s agent has only given you 10 minutes irrevocable to make up your mind. Interesting tactic that works some of the time.

Least we forget, our duty, as a representative of the Seller, is to negotiate a sale that not only meets or exceeds the client’s expectations of price, but also has acceptable terms and/or conditions. The best way to handle multiple offers is to set the rules well before offer night. While easier said than done, one agent told of a great experience they had with an agent who’s listing was going to see multiple offers. Before offer night, the agent sent an email to all the agents who had registered with specific instructions on what the Seller was looking for. Without mentioning price she indicated that offers would need to be free of conditions, have a certain closing date, and irrevocable time.  Naturally every seller is different and the decision on how to handle offer night needs to be discussed well in advance. A single person with lots of free time may not care if the negotiations drag on into the night while and elderly couple may appreciate a simpler approach. Regardless, it is important to develop a strict protocol.

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8 Comments Post a comment
  1. Mar 28 2012

    I couldn’t agree more! I think Scenario #1 is the best way to handle offers and I try to act accordingly. Seller agents bringing their own offers should not be allowed , buyer agents don’t stand a chance! It’s unethical

    Reply
    • Mar 28 2012

      I think listing agents getting their own offers is happening more these days.Buyers think they can get a better deal. At our company, if an agent is in multiple offers and have their own offer as well, the manager (me) acts for the seller so that the listing agent doesn’t know what the other offers are or get an advantage. Keeps everything level.

      Reply
  2. Josie Stern
    Mar 29 2012

    I’m confused about your comment in scenario 6. It isn’t “marginally legal” for a listing agent to bring in their own offer last minute at all – it is clearly illegal. You surely know that a listing agent has a fiduciary duty to get the highest price possible for the seller. A listing agent increasing their offer marginally after viewing all other offers is not just unethical, in my opinion it is illegal. This listing agent has effectively suppressed competition which may have procured more money for the seller. Furthermore if that listing agent was reported to RECO, which I would undoubtedly do if I were involved, that agent would be fined if the facts revealed unethical behavior.

    Reply
    • Mar 29 2012

      Hi Josie, first of all let me say that I really appreciate the feedback.I think it is so important to keep the lines of communication open. it is the best way to make us better at what we do. As to your comments. When I was writing this blog and particularly 6, I was thinking specifically about one well known downtown agent who has pulled this move at least twice that I know of. After two of our agents presented seperate offers, she came out to say that she just recieved her own offer and they were going to review it. Five minutes later she lets our agents know that the sellers are going to work with her offer. The reality is that I think it would be hard to challenge. Here’s the thing; If we say that offer presentations are going to happen at 7pm and someone shows up at 9pm we have a duty to our clients to present it. Naturally we would let the other agents know. That is perfectly legal. This agent would argue that her client decided at the last minute to submit an offer, conveniently after the other agents have presented mind you, but still legal if it happened in good faith. Unethical? Absolutely. But I believe it would be next to impossible to prove culpability. What do you think?

      Reply
  3. Josie Stern
    Mar 29 2012

    What do I think? I think if I were involved I would take the case apart and surely find a way to report this agent to RECO. I know it takes a huge effort to do so but it’s the only to clean up the industry. Mark if this agent did this at the last minute, you know their behaviour was questionable. An astute co-operating agent, who is detail oriented, would surely find holes in the offer presentation procedure even if just to prove that this lisitng agent did not treat co-operating agents fairly.

    I am waiting to hear about a case that I submitted to RECO recently whereby the listing agent behaved in such a way that he sold the property for $38,000 less than my offfer because he couldn ‘t take the time to make one phone call to me.

    If the facts of unethical behaviour are documented properly and the complainant takes the time to present the case to RECO, I believe RECO would fine them.

    Reply
    • Mar 29 2012

      I do think we are on the same page here but honestly, we laboured over what to do and in the end we (the agents and the managers) didn’t think we could make the case. We knew exactly what she did, but do you think the buyer is going to testify against the agent? No way. And without that testimony, there is no case.
      As with your situation, we had a case, probably similar, where an agent at another firm accepted a bully offer on a property that our agent’s client was prepared to pay even more for. Just one call and maybe that seller would have made another $100K. The Selling Agent claimed to be too busy to make the calls. RECO is overworked and the process takes too long. I think TREB should take a more active role in policing it’s agents and make the process happen in under a month. Adhere to a three strikes your out policy, and levy hefty fines.

      Reply
      • Josie Stern
        Mar 29 2012

        That sounds good. Why don’t you run to be a RECO Board of Director amongst the many other things you do? We need people of action to clean things up.

      • Mar 30 2012

        Hmmm. It’s funny you say that……

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