Mastermind at my office is always a lot of fun and as the office expands and matures the topics tend to get a bit more technical in nature. That creates a challenge for some of the newer agents whose eyes start to glaze over. So every once in a while I have to reign in the conversation and steer it back to day-to-day operational questions. Like what happens on multiple offer night.
One the policies that we have at Bosley Real Estate is that if an agent gets an offer on his own property AND is in multiple offers, one of the managers ( in this case, me) steps in to represent the Seller. In an era where offers can be signed back multiple times, this is the third best way to handle a situation like this. The first of course, is to categorically refuse to represent a buyer, either as a client or customer, in the transaction. The second is to clearly state that you operate on the “one shot rule” so bring your best offer and be prepared to lose by one dollar. But in our system the listing agent presents first then leaves the premises and has no way to know what other offers are. If the seller wants to send all the offers back, the listing agent has no advantage over any other agent thus guaranteeing that everyone remains on an equal playing field. Everyone is treated fairly.
Last week I was called in to manage an offer situation and the result of that process provided a great topic for the following day’s mastermind session and highlights some of the issues that managers need to remind agents about.
So let me set the stage. The sellers come to my office and settle in to our large boardroom. We wait while the other agents arrive. There are supposed to be six in total including the listing agent and another agent from my office plus four agents from other competitor offices. All six have registered their offers through the front desk. So we begin. The listing agent presents first. She brings in four copies of her offer. One for each of the two sellers, one for me and one for herself to refer to. The next Bosley agent presents, with three signed copies. The next agent presents with one copy of his offer which I review with the two sellers straining awkwardly to follow along. The next agent also presents with one copy of the offer but as soon as I turn the page I realize that the buyers have not signed the signature page. The next agent also only has one copy but is missing our schedule A. The final agent doesn’t show up or call.
So with six registered offers only four bring the required and properly executed paperwork, two bring enough copies to go around, one misses essential signatures, one misses the required schedule and one doesn’t even show up. Not good. Despite the efforts, or perhaps because of the efforts of all the agents, the house sells well over the asking price, but it highlights two critical aspects of the offer presentation. First, it is essential to have enough copies to go around. I think that we often miss this critical step in the heat of the moment. There will be a time in the not-so-distant future when we will be using our tablets to conduct the sale but for now agents should provide multiple copies if only to be polite to all the parties in the room. Second, while you have every right to revoke your offer before the presentation, it is important to follow the necessary protocols. An agent must, at the very least, inform the listing brokerage that they will not be presenting. Sometimes it’s the little things that go along way to a successful transaction with the added benefit of staying out of RECO’s hair.
mark mclean is the Broker/Manager at the Bosley Real Estate Queen St W office and Director at Large for the Toronto Real Estate Board and is currently a candidate for TREB President Elect in the upcoming Spring election.
Toronto has a problem. For the past several months, or longer, there has been a shortage of freehold listings in the first-time and move-up markets. You will get different answers depending on who you talk to, but the main culprits include; low-interest rates, the Land Transfer Tax, tighter government regulations and higher consumer debt. The real answer is probably E, all of the above. Unfortunately for buyers the old saying rules…Desperate times call for desperate measures.
Recently one of our agents sold a condo for a young couple anxious to get into the housing market. Their goal was simple; parley their extraordinary talent for decorating and renovating. They did it to their condo and now wanted to do it with a house. Start small and slowly increase their net worth the old-fashioned way…buy a home with good bones, renovate and sell, then buy something bigger and do it all over again. It has been done successfully by many talented individuals over the years. But here is the problem. The couple in question have been watching the market for some time. They have heard the countless stories of wild bidding wars and are now convinced that the only way to win is by working with the listing agent. Their thought is that either they will get it at a lower price or at the very least get the inside advantage at offer night. The example given above should highlight a number of key concerns for both buyers and agents.
First lets look at the process from the buyer’s point of view. You go into an open house and see the home of your dreams. Well, lets clarify… the home of a lot of people’s dreams. So you ask the listing agent to represent you in purchasing the home. Now, aside from the obvious pitfall of asking them to represent both sides of a negotiation, you are signing a buyer representation agreement with the selling agent. It is important to understand what this means, otherwise you could find yourself in a situation where you owe two commissions. More to point however is that jumping from agent to agent will do you more harm than good. The simple fact is that you are hiring an agent to walk you through the process, negotiate on your behalf and in your best interests, keep confidential facts about your motivation to themselves, review competitive properties and help you determine an offering price, arrange and oversee things like home inspections and appraisal visits, and hook you up with contractors or movers and finally, provide a great deal of follow-up service. All these things are tough to do when your agent is also representing the seller especially when there are many people competing for the same home.
There are some basic mechanics about offer night that most buyers don’t know about either. First, if the selling agent is representing you, he must tell other buyer’s agents. He must also disclose if he is lowering commission. The point of this disclosure is to level the playing field for all buyers. That being said, some companies take great pains to ensure a fair and equitable process, so contracting the selling agent just doesn’t make sense if your motivation is to save money.
On the surface, contacting a listing agent seems like a no-brainer, but the reality is that a trusting relationship is the key to a successful home purchase in our competitive market.
I had an interesting conversation with one of the agents in my office yesterday. He is a strong producing agent who is feeling rather frustrated with all the multiple offers going on. Since January he has been in ten such scenarios and lost all ten. If it weren’t for his listings I’m not sure I would be able to talk him off the ledge. Multiple offers seem to be the focus of a lot of discussions around the office (see today’s article in The Star on winning a bidding war, http://bit.ly/HBlh7b ) and while we often talk about Buyer fatigue, the new malady might just be Agent fatigue.
I might just have the answer for winning more offer presentations. It is so simple yet so genius. Sell your clients a FSBO property. Let’s face it, Agents stay away from FSBO’s. They’re not supposed to, but we all know they do. At our company we devote part of our training to dealing with private sellers because, while still a very small segment of the market, agents will come across them from time to time and need to know how to negotiate with a private seller. We should also recognize that, for the most part, FSBO’s aren’t flying off the shelf. Personally, I’ve passed the same three large round blue and green directional FSBO signs for the last 2 months. (Interesting how FSBO’s don’t need to adhere to city bylaws regarding open house signs isn’t it?). It reminded me of an interesting situation one of my agents had a few months ago. She had been working with a buyer for a few weeks and after several failed offers they found the perfect home for sale being offered privately. My agent talked to the sellers and managed to organize the showing with her clients. The house was for sale for $749,000 but her research showed that it was easily worth $850,000 and that under normal conditions (read; massive bidding wars) the house could reach into the $900k range. The sellers said they were trying to get a bidding war going. The instructions clearly stated that all offers were to go to the Seller’s lawyer. My agent’s clients were interested in the house so she called the lawyer to ask if there were any offers registered. His response was “yes, we have an offer on the table for $745,000”. Fabulous. Well it turned out perfectly for one buyer. Sadly it was not ours. That’s a story for another day. The point of this is to illustrate that it is not always in a Seller’s best interest to go it alone.
Let me state unequivocally that I am not against people selling homes themselves. There are lots of situations where involving a Realtor just doesn’t make sense. In a 2010 NAR survey of buyers and sellers, about half of the FSBO sales typically occur when the seller knows the buyer. Here are some other interesting points from the survey;
• Over 60% of all FSBO’s sell for 10% or more below the market than if they had they had sold after obtaining the services of a Realtor®
• Over 65% of FSBO’s end up in some sort of litigation or legal dispute ending up in court or arbitration and costing them more than the expected savings of selling on their own
• Most FSBO’s take longer to sell than if they had listed with a Broker
What’s the take away here? While the NAR report talks specifically about a very difficult U.S. real estate market, there are some interesting things to talk about with potential FSBO sellers and buyers; namely pricing and future litigation. Remember, if you are offering on a FSBO or mere posting listing it is extrememly important that you offer no advise to the seller. To do so puts you in an assumed multiple representation role. If the Seller asks “what should I sign it back at?” your response should simply be ” I am representing my client and as such I cannot offer you any advise”.
Naturally I would love to hear any stories you might have regarding your experiences with dealing with FSBO’s or mere postings.