Imagine this scenario. You are the listing agent holding court in a multiple offer situation. You have five offers on your house which you listed for $699,000. Your expectation was that with any luck you might reach $750,000. Agent Steve’s offer is for $710k, Agent Robert’s offer is for $740k, Agent Susan shows up with $745k, Agent Betty’s clients are $760 and Agent Matthew smokes everyone by bringing in $780k.
You have a couple of choices here assuming all offers are clean (no conditions) and have roughly the same closing date. Choice one, accept the highest offer and break out the bubbly, or roll the dice and send them all back in hopes that you can get even more. Sure you might lose one or two but given the current market conditions in Toronto there is a pretty safe bet that you can squeeze a few more dollars for the sellers.
So in this scenario you send them all back. The conversation goes a bit like this….thanks for all the offers. Frankly they are all pretty close so the Sellers have requested that we give you an opportunity to improve your offers. In this example all the buyers improve their offers. Agent Steve improves to $725k, Robert gets to $750k, Susan’s clients are tapped out and only improve to $752k, Betty brings back $760k and Matthew’s clients have lost too many homes to go home empty-handed so they lay it all on the table with $802,500. So pretty simple decision really…..or is it?
As the listing agent you are in possession of all the offers. There is plenty of time (lets assume irrevocable time is 11:59pm on all offers) so you decide to try something. You call in Agent Steve and have a conversation that goes like this….”Hi Steve great job on the offer but it’s not the highest. However my seller really likes your buyer and wants to make you an offer. We are going to sign it back to you for $820k. I know your clients are waiting outside so I will give you 10 minutes to decide”. If the clients balk you move on to Robert. If Robert’s clients balk you move on to Susan, then finally Betty. If Betty’s client agrees, then they have bought a house. If not, then you still have Matthew’s very good offer.
In this example I have kept it pretty simple and haven’t complicated it with deposit amounts or short irrevocable times which might skew the results but the question remains, is this way of handling offer night appropriately? Do you find any moral dilemma in handling things this way? Ultimately you are getting the most for your client so you are doing a great job, but are you just playing with the other agents to the transaction? It seems that this is a delicate chess game where a lot could go wrong so ask yourself if the risk out does the reward?
We had a big discussion at our company today and couldn’t really pinpoint anything wrong although we did wonder if the listing agent had an ethical duty to let all the other agents know they were in a sign back. sleazy seemed to be bantered around but not illegal. After all is it any different when you have only one offer but kindly ask the Buyer Agent to improve their offer?
I’m sure there will be a lot of discussion to follow on this topic and will certainly add additional comments as they come.
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.
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.
Happy Tuesday. I’m not sure how I feel about being back to work after a long weekend. It seems like there is a lot more to do when I come back from an extended weekend. Today was no exception as this afternoon I headed to the Bosley Real Estate HQ for our last Bosley U class (our in-house new agent training program).
Today, as part of our discussion on offers, we spent some time on the registration process. The question came up about when to register an offer. One school of thought is to register at the last-minute, come in to table with a strong offer and a short irrevocable time. This is very much a bully tactic that has worked over and over again, however if not played right, can offend more often than be successful.
The other theory is to register early. Registering early has a number of benefits. First off it has the potential of scaring off any potential buyers who are afraid of multiple offers, but more importantly, a registered offer keeps you in the know because a listing agent must contact you if he receives a bully offer or any other change to the listing. Here’s an interesting story that may illustrate how not registering can cost you big time. Agent Smith has a client who is desperate to buy a house on Major Street. After many months of looking, a perfect house comes on the market through another listing company. Agent Smith is unavailable to show the house so he tells his client to pop into the open house on the weekend. The client falls in love with the house and informs Agent Smith to prepare an offer for presentation on offer night which is in three days. A couple of days before offer night Agent Smith is checking the computer and realizes that the house on Major is listed as sold. He calls the listing agent who tells him that they received a bully offer yesterday. The listing agent tells Smith that he changed the listing to remove the offer date and called everyone who showed the property as a courtesy and managed to drum up one additional offer. Smith now has the dubious honour of telling his client that his dream house was sold from underneath him.
What went wrong? Agent Smith should have done a few things. First, even though he wasn’t at the showing, he could have called the listing agent and made him aware that his clients were coming. Next he should have called the listing agent as soon as he knew his client was interested and asked to be kept in the loop. At the very least Smith probably should have checked the listing a couple of times a day OR could have booked a showing for the morning of offer day because he would be in the listing agency’s computer. Better yet, he should have prepared an offer, even basic in nature, and had his client sign it so he could officially register.
What about you? Do you register early or swoop in last minute with a good offer and short irrevocable? Or does each case call for a different tactic?