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.
Despite all we hear in the media about multiple offers and the hot Toronto Market, there are still lots of houses that aren’t flying off the shelves. In fact there are plenty of properties, condos excluded, that seem to be just sitting around. We have one great listing in our office that is a total surprise with 36 showings in 2 weeks but no offers. Now it may be a tad overpriced but it is at least within spitting distance. So apparently it’s not just the sellers who are frustrated. Agents are feeling it too. Well last week’s Mastermind touched on the interesting topic of submitting an offer that is lower than a Seller’s expectation, also known as a “low ball” offer. First of all, how low does an offer have to be before you consider it a lowball? As an example, lets say we are talking about a $600,000 house. Is a low ball $580k or is it $520K? The short answer, of course, is that it depends. If every house on the street has sold for $525-530K then a $520K offer is not far off the mark, but if those houses are selling for $599-625k then yes, $520k is a bit of a stinker (presuming the market has not changed). So I wonder if low ball offers are really about perception.
The reality is that during the course of your career you will inevitably either show up at an offer table with what will be perceived as a “low ball” offer or you will be on the receiving end of one. How you play out the offer will determine if you win or lose. Here’s the thing. We are all capable of coming up with a fair price. There are a lot of tools at our disposal. But generally homes are priced too high because eith the seller assumes his home has more value than a similar home or the agent has priced it high in order to get the listing. As a listing agent you have to decide; A. Is this a listing worth taking in the first place? B. How much over market value does the Seller want to list for? C. Can I convince agents to submit an offer on this over priced listing? D. Will I be able to convince the Seller after a few weeks on the market that the house is overpriced? E. If someone submits a low offer (actually a good offer) am I capable of convincing the Seller that it is worth accepting? F. How much is this listing going to cost me in terms of time and money? These are all serious questions to consider at your initial Seller interview.
On the buy side, you have done your homework. You have looked at all the comparable homes, in fact you have the experience of actually touring previous sold homes and had even sold one just a few houses away. If anyone knows the true value of this listing it is you and the buyer has hired you to get him that house at fair market value. The only problem is that the house is listed $100K over the previous sale and it has been on the market for two and a half months. The Sellers paid to much in a bidding war last year, they renovated a bathroom and put on a new roof and now they are getting divorced. It’s time to put your skills to the test. There is no question that you face an uphill battle. The Sellers are not willing to be the only couple in the city (in the past 15 years) to lose money in real estate. Is there a solution to this insurmountable problem?
As Joe Friday said, all you can do is present the facts, “just the facts”. Here is the market, here is the buyer, and here is the money. There is no room to interpret it any differently yet there are a few things you can do to cushion the obvious blow to the Seller’s ego.
1. Try to present the offer in person. A low offer delivered by fax is just not going to work in your favour.
2. Be empathetic. Understand the Seller’s pain without seeming contrite.
3. Offer a long irrevocable time to let the Sellers come to grips with your offer on their own terms.
4. Talk about the appraisal function and how the sale might not meet financing conditions at their price.
5. Convince the Sellers that the Buyers are willing to make concessions on certain items in the house.
6. Be willing to let the offer lapse and try again later.
Hopefully a little time to digest the offer is all a stubborn Seller needs. What is it they say….time heals all wounds? If you have been in real estate over 20 years then you know that it IS possible to lose money in real estate and losing money is likely to stir a bigger emotional response than making money.
The opinions of this Blog do not neccessarily represent the opinions of Bosley Real Estate.
Just when you are struggling for a topic for your blog, bam, one falls into your lap. Whew. That was close. Here is the story. Last week agent Jones receives an offer on one of her new listings from Agent Lee. It is a good starting point and the Sellers decide to sign it back, giving an irrevocable time of 6pm the following day. At noon the next day Jones gets an inquiry from another agent, Agent Smith, on the property and lets Smith know it is currently in sign back until 6pm. Agent Jones calls Agent Lee to get an update on the status of the sign back and lets him know that there have been a number of inquiries about the property including one very serious agent. Agent Lee says he is working on it and will let Jones know shortly where his clients stand. Over six hours pass, then at 5:30 pm Agent Lee texts Jones to let her know that he will be sending along an accepted offer in the next 15 to 20 minutes. At 6:10pm Lee sends the accepted offer to Jones however, by that time, the irrevocable time has passed even though Lee’s clients signed it at 5:30pm.
So the question is…deal or no deal? Agent Lee is arguing that if the Buyers signed it at 5:30 then there is a legally binding agreement therefore it is a deal. However, Jones argument is that in real estate there are two parts to accepting an offer. One is signing the offer within the specified irrevocable time and the other is communicating that acceptance. (Actually there is a third part; acknowledging the receipt of that acceptance). In this situation, Lee did not get the accepted agreement to the sellers or Agent Jones on time. In defending himself, Lee said that technical difficulties caused the offer to be delivered late.
With a dead deal from Lee, the Sellers were free to accept an offer from Agent Smith. The story puts the importance of the irrevocable time in a clear light. If it says 6pm it means 6pm. Not 6:05 or 6:10. Lee might argue that he was only a little late. That’s like being a little pregnant. Technical difficulties don’t mean anything today. Fax or scanner doesn’t work? Take a picture with your phone and email or text it.
Have you had a similar situation? Can you relate? How do you prepare your clients? I would love to hear your stories.