Happy wednesday. Two interesting conversations that arose from this week’s Mastermind group revolve around the same topic. It must be something in the air. In one situation, an agent talked to a long time friend about his future house hunt. The friend was quiet blunt in his belief that he will only buy through a listing agent. My agent came to me looking for some good bullet points so he could formulate the perfect rebuttal.
In the second situation one of my agents got a last minute call from someone interested in her listing. He was interested in putting in an offer but only as a customer. The customer then insisted on getting information on the owner’s reasons for selling, wanted all kinds of assurances from the seller on work done, wanted to know the seller’s story, and a host of other pertinent information. He also wanted to get our agent to reduce her commission. As it turned out, there were two other offers and our agent made it very clear to the other agents that she had an offer and that the buyer was only a customer and that there was no commission cutting.
In the continuing hot Toronto market, buyers are looking for two things….an inside advantage to win in multiple offers AND to save a bit of money along the way. So what do you say to someone who thinks dealing with the listing agent is a better way to go? For starters, be careful what you wish for.
We are seeing buyers contact listing agents more often than ever before so this is clearly the time to ask the question. The reality is that no matter how you slice it and dice it, it is very tough to represent the interests of two competing entities especially when the forces of multiple offers add to the equation. There are several ways around it but the point of this post is to simply remind us all of our fiduciary duties along the way. We need to take extra precaussions and take more time. In the end, you want everyone to feel like they were treated fairly.
Sure there will always be agents who will use the “home field advantage” to double their commission. Unless RECO makes some tough decisions on this matter, it is going to keep happening and ethical agents will continue to draw the short straws. We can only hope that those who get caught face stiff penalties. So, for now, let’s focus in on the topic of representation and what that exactly means.
We talk about this basket of ‘fiduciary duties’ that we owe to a client, but what does it really mean? In plain language it means that we owe our clients honest accounting, competence, confidentiality, good faith and full disclosure, loyalty and obedience. I think we can all find examples of how our duty plays out with our clients on a daily basis. A customer, on the other hand, is not owed the same duties however he must be dealt with fairly, honestly and with integrity. I would be the first to argue that these terms can have a broad range of meaning. Common sense should dictate here so when in doubt simply imagine standing in front of a judge answering questions about what you said and to whom.
If you’ve been in the real estate business for any length of time then you’ve heard this one before. You call the listing agent with an offer and they ask you for 24 hour irrevocable. It seems like the owner is unreachable. Yes, immediately after signing the listing the Seller left town or gone into hiding. Meanwhile back at the ranch, the listing agent is busy rustling up other offers. Hey, I’ve actually got no gripe with this tactic if it is legitimate. In fact any listing agent worth their salt should be jumping on the phone and hustling up more offers. It’s encouraged. Unfortunately this can be a dangerous game and often agents push the limits of acceptable behavior.
Case in point. Team Jones from ABC Realty lists a hot new loft condo. Agent Black shows it on the second day on the market and her client wants it. An offer is prepared with a four-hour irrevocable. As requested, it is sent to the listing agents. They respond by saying they need a bit more time to find their Sellers so Agent Black resubmits the offer with a longer irrevocable time. Team Jones tells the agent that they will do their best but aren’t sure if they will be able to reach their clients in time. Low and behold, they get their own offer, which, it should come as no surprise, is just slightly better than Agent Black’s. Oh and the sellers mysteriously surface just in time for offer presentation. Naturally you can see the problem here. Team Jones knows what the other offer is.
I posted my frustration on a Facebook group and wasn’t expecting the 40+ comments that ensued. This is obviously not a one-off problem. While the Toronto market is ground zero for multiple offers, it is also thick with agents taking advantage of the inside scoop. The reality is that buyers today are looking for an advantage. The Internet has made it all the more possible for them to find properties on their own. As our rolls change from house finder to expert negotiator there is a belief buy Buyers that working directly with the listing agent can get an advantage and score a deal along the way. If the property has been on the market for some time and there aren’t multiple offers than this thinking is probably accurate. Add in another Buyer or two and the playing field changes. Dramatically. The antics of an unskilled or unprepared agent can clog up the RECO complaint department.
Is there a way to set the record straight? My Facebook mini rant elicited 2 decent suggestions. One agent suggested this clause….Notwithstanding the Irrevocable Clause contained herein, the Buyer hereby states that, if the Seller does not accept the Buyer’s offer within 4 hours of its presentation to the Seller or Sellers Agent, the Buyers offer is automatically revoked. Obviously a hard-nosed stance. The other suggestion was sealed bids.
Sealed bids seem like an obvious solution even when the owner resides outside of town. “offers will be reviewed at xyz location on a particular day at a particular time”. I think one could make the case that this is one positive move that could actually make us smarter and more valuable Realtors. It would probably eliminate phantom offer complaints too. Unfortunately the decision to adopt sealed bids rest solely on our freinds at RECO.
Sadly any solution is arriving late to the party. For now, the message is clear. No matter how “good” an agent’s reputation, don’t fax or email your offer until you know when it will be presented. There is no sense showing your offer to the listing agent and allowing them to sit on it. The reality is that any wily agent will look for a loophole that exists within the law in order to maximize their commission. Any complaint is often hard to prove and with their huge backlogs of complaints, RECO is not likely to get to it for 9 months to a year. By then, your buyer has found something else and is snuggled in nice and cozy and probably unwilling to support your case. I know this goes through a listing agent’s mind.