Mastermind for March 21 Market talk and Multiple Offer Rules
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.