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Posts tagged ‘multiple offers’

4
Nov

Transparency at the Offer Table. Not Just a Pipe Dream

transparency blogAt a recent mastermind session our group talked about the frustrations we often feel when we are at the offer table. There are many opportunities for the evening to go wrong because the process is secretive and often skewed to favour the listing agent and there is always a chance that we, acting as a buying agent, will have to go back to the buyer and let them know that they didn’t get the house. Sure, it could be as simple as price, but as you know, there are many chances for error, incompetence or fraud.
So in our meeting, we wondered if there were a way to sell a home with complete transparency. Could we make the process so fair that everyone who offered and lost could walk away knowing they were given every opportunity to buy the house? We worked through several possibilities, talked through potential land mines, and played devil’s advocate on a number of different scenarios.
One of our solutions could be best demonstrated by this example. You’ve listed a property for $699k and have received 5 offers. You’ve told all the participating agents that you will be running the process as follows…after everyone presents you are going to meet with the agents collectively and disclose only the price of the highest bid. At that point you will give the agents 1/2 hour to speak to their clients and return, if they so wish, to participate in the second round. Four agents return for the second round and present their offers again and once more you meet with them and announce the winning bid. This process continues until there is only one agent standing. In many ways it mirrors an auction process but requires the skill of a buyer agent in negotiating fairly with the seller and the seller agent. All agents are present and counted for so there is no chance that there are phantom offers. At no time is it made clear which agent has the leading bid, nor does that agent know how close the other offers are. The winning offer is successful based on its merit (and or price) and there is no opportunity for shenanigans. In the event of an offer from the listing agent, the manager or someone else from the office manages the process and the listing agent is unaware of the other offers.
From the surface the idea seems to have merit until you dive into REBBA 2002, which is the Act that we must follow (in essence, our play book). In it, there is expressed direction that an agent does not have the right to disclose any terms of an offer even if directed to by the client seller. So if you liked the idea of a completely transparent offer night, don’t hold your breath.
It occurred to me that rules and regulations are brought about to govern the way business is conducted TODAY. When the way business is conducted changes, the rules (or laws) get updated. We see that happening today with the Condominium Act which was first enacted in 1998. Certainly a lot has happened in that world over the past 16 years and even with tweets and updates, one wonders if an act that old holds the answers to an ever-growing segment of the real estate market. Like the Condominium Act, I wonder if, when first established, REBBA 2002 could have ever imagined a market as strong and unrelenting, or something as strange (back then) as bully offers.
At the end of the day, the only answer is hard work. As the listing agent, our job is to run offer night in the most professional way which, among other things, means refusing to represent your own buyer. We need to keep the lines of communication open with every agent bringing an offer, explain the process that will steer the presentations and stick to them religiously, and above all be fair and honest to everyone involved in the transaction. For buyer agents, come prepared with your best offer, have a good deposit, and make sure your buyers are nearby. Keeping simple rules will make the transaction go smoothly, eliminate confusion, and keep everyone out of court.

mark mclean is the Broker/Manager at the Bosley Real Estate Queen St W office and President-Elect for the Toronto Real Estate Board. The opinions expressed here do not reflect the opinions of TREB or Bosley RE.

3
Nov

What’s An Optimum Number of Offers?

multiple offersGiven the scarcity of listings in the Toronto market these days its understandable that we touch on the topic of multiple offers from time to time. It’s probably because no two scenarios are ever the same but last week, at our weekly Mastermind session, the question turned the multiple offer topic around. When listing a property is there an optimum number of offers that our pricing should attract? We went around the room to get everyone’s opinion on the matter.
History dictates that we only need one good offer to sell a home so theoretically we should price the home to attract that one buyer. Unfortunately (or fortunately) the cards are stacked in favour of the Seller so even pricing fairly can lead to two or three or even four offers because there is just no sure way to predict how desperate a buyer might be but the question remains, do we try to price to get one offer or do we under price to attract multiple offers and hopefully push up the price for the buyer? (and if so, by how much?). If the choice is to under price to create excitement then how low do you go and how many offers are you hoping to attract? We had several opinions on the topic because pricing really is a moving target. The answers ranged from 2 to 10 offers.
There is a slippery slope to all this if you are a Seller, and I have written in the past about a seller who only got one offer on her property on offer night and was totally annoyed with the agent despite getting full price. The fact remains that underpricing can be dangerous. Sometimes we price a home thinking we have determined perfect market value and then we are hit with multiple offers. Sometimes we list under market value and get only one offer if at all, and then there are those cowboys who list hundreds of thousands under value and hope to generate 50 or 60 offers. But not getting an offer on offer night puts an agent on the defensive right away. The client is looking to you for answers. Where are all the offers? What’s wrong with my house? In this hot market why isn’t my house selling for over list price? Simply put, there are just too many variables to know for sure and it could be as simple as it’s raining or the buyers couldn’t get baby sitters.
So when it comes to the list price, know your competition and nail the market value. Under price just a little to create some interest but not a flood of buyers. Take the guesswork out of the listing and have the home inspection done well in advance.
In the end, everyone should know that it’s the Seller who determines the final list price but it is up to the agent to conduct an in-depth market evaluation and then determine the right strategy to get the Seller the most money.

mark mclean is the Broker/Manager at the Bosley Real Estate Queen St W office and President-Elect for the Toronto Real Estate Board. The opinions expressed here do not reflect the opinions of TREB or Bosley RE.

25
Jun

Did Real Estate Get It Wrong On Who Pays The Commission?

rewrite the rulesWhen I think of some of the shenanigans that go on these days between agents and clients I can’t help wondering if our industry got it wrong. Did we made a fundamental mistake when everyone agreed that the seller should pay the listing and buying agent’s commission? If we could go back in time and re-write the rules, would we be subjected to stories we hear about today?

Think about some of the issues that we deal with on a daily basis. Agents are pitted against each other to offer comparable services for lower commissions despite the fact that they are the ones who lay out the most capital and accept the biggest risks. Buyers are looking to save on their home purchase so they contact the listing agent in hopes of gaining the inside edge. Multiple offers are rampant ( a condition of the market ). One may even argue that new business models (offering rebates or mere posting services) don’t solve the fundamental problem that exists…. The agency relationship.

One could argue that true agency, where buyers and sellers pay their respective agents for services rendered, doesn’t exist when only one person pays the bills. Did our industry get it wrong? It’s a question that comes up every time I hear about a buyer agent asking a listing agent to reduce their commission to make a deal happen or when a listing agent’s own offer miraculously wins in a multiple offer.

In a true agency relationship the seller would contract a listing agent to market a home including all the basket of goods and services that go with it, as well as ensure that the transaction went smoothly. The selling agent would have a unique understanding of the neighbourhood because he or she would be hired because of their local knowledge not because they were offering reduced commissions for doing two sides of a transaction. The seller and the agent would be free to negotiate a fee and the law would stipulate that the listing agent could not represent a buyer thus eliminating chances for error or corruption.

In a true agency relationship the buyer would contract a buyer agent to find a home, negotiate a sale price, and work with the listing agent to ensure a smooth transaction. The buyer’s agent would be duty bound to provide expert and professional service and work in the best interests of the buyer and be free to negotiate an appropriate compensation.

A few things would need to change. For instance, dual agency, also known as multiple representation would no longer exist. We would not have customers anymore, just well-informed clients. Controversy would no longer exist on how commissions are paid and what incentives are being offered. Flat fees might be more widely adopted and we might see the development of two types of real estate brokerages, those that list homes and those that act for buyers exclusively. Naturally there is the problem of compensating the buyer agent but perhaps bank legislation would have to allow a buyer’s commission to be rolled into the mortgage or sale price.

I’m not suggesting we need to throw out the current system. It’s not perfect but, for the most part, it works.

mark mclean is the Broker/Manager at the Bosley Real Estate Queen St W office and President-Elect for the Toronto Real Estate Board. The opinions expressed here do not reflect the opinions of TREB or Bosley RE.

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