You knew this post was coming…
After yesterday’s discussion opened the door to other ways of “auctioning” off properties – which is how some Torontonians would describe a typical multiple offer situation on a Toronto family home for sale, I figured we should follow up and talk about how to improve the current system.
One major problem with that, of course: there is no system.
Maybe that’s the first problem to address…
When trying to “pick” a price to offer on a property that has multiple offers, I tell my clients the following: “Find a price where you’ll be very happy to pay that amount if you are the successful bidder, but where you’re also happy to let it go if somebody bids $100 more.”
It wasn’t until last week when a client finally said exactly what I’ve always been thinking: “David, that’s the stupidest thing I’ve ever heard. It’s impossible.:
Of course it’s impossible! That’s the point!
But being involved in a multiple offer process, where you – the happy-go-lucky, nervous-nancy, first-time home-buyer are trying to “pick” a price to offer, in a blind contest, is almost mission impossible regardless.
Nobody really enjoys the process, except, of course, the eventual high bidder!
But is there any way to refine the process itself to allow more transparency?
Is there any way to satisfy the scores of buyers (and agents like me…) who are crying, “There has GOT to be a better way”?
I’m going to make a few suggestions below, some of which are far-fetched, some of which are simple solutions, and most of which will never, ever, be implemented…
1) Offer Registry System
So simple, right?
One of the major problems with multiple offer situations is that we don’t know (or don’t believe) how many offers are registered, and who has them. You can call the listing brokerage at 6:30pm, when offers are being presented at 7pm, and ask, “How many registered offers are on 123 Smith Street?” They might tell you, and that number might be up to date. Or, they might not tell you. Or, that number could be low, or high. You just never can be 100.00% sure.
Every licensed real estate brokerage in Ontario should have an “Offer Registry System,” whether it’s via TREB or other regulatory boards, whether it’s a software program, or something in between, and this system should track ALL registered offers.
But it will never happen.
I know that at my brokerage, and other full-service, reputable brokerages, we track all offers in our appointment system. If the receptionist, or anybody at any computer at reception, pulls up a property’s address, it will show each and every registered offer, as well as the agent’s name and brokerage.
Unfortunately, this does not go on at every brokerage, and it never will.
Well, because of all those chop-shop brokerages that so many members of the general public believe will “help open doors to new business models,” ie. they’re crappy discount firms, with no brick and mortar, being run out of some licensed broker’s mother’s basement, whose phone line goes to a call centre. Do you think they could have the capabilities to track all registered offers?
It’s so simple, folks. But it will never happen.
But since this is an exercise, I’ll flush out my point here, and explain what I would like to see.
Every brokerage should have a central offer registry system, and every agent should be able to access it. If I want to check and see if there are any offers registered on a property, I should be able to log into MLS – the broker version, and click somewhere to see HOW MANY offers are registered, and WHO has them.
It’s too easy for an agent from XYZ Realty Corp to tell you “There’s six registered offers,” when there are only four, thereby misleading you, and your buyers, to offer a higher price. And more often than not, there are no repercussions for that agent.
I’m telling the truth here, guys. Reputable brokerages would NEVER get away with that crap, and agents would be reprimanded by their brokers. But if you’re dealing with a shady brokerage, and they tell you there are eight offers – ask to see a copy of the list of agents with those eight offers. If the agent tells you “no,” then you decide if you want to proceed…
2) Dual Agency
I have a colleague who sits on the RECO Ethics Committee, and she says that more than half of all cases that come before the panel have to do with listing agents who double-end a property (ie. provide buyer and seller), in multiple offers, without feeling the need to inform the other agents that the listing agent has his or her own offer.
Shady as hell. But it happens all the time.
The public often says, “Who cares? The listing agent got the most money for the seller, and that’s what’s important! What does it matter if he or she didn’t play nice with other agents?”
Well, two wrongs don’t make a right. And for every happy seller, there are scores of angry buyers…
Some people think that dual agency shouldn’t be permitted, as it represents a conflict of interest. I agree, but only in some cases. If you’re representing the buyer and seller, for a property that’s been on the market for 6 weeks, and you have to somehow educate the buyer on what would be a reasonable offer, while not giving away the seller’s position, then yes, that could be a conflict of interest.
But if you’re in multiple offers, and you’re representing the buyer and seller, all you have to do is look at the highest offer, and then draft an offer even higher for your buyer to sign. That isn’t a conflict of interest.
It’s unethical, illegal, cheating, and exceptionally shady, but it’s not really a conflict of interest.
Nevertheless, I think that measures need to be taken when the listing agent has his or her own offer on a property, when there are other offers from other brokerages.
At Bosley Real Estate, we always have a broker or manager take over for the listing agent, and review the offers, while the listing agent represents the buyer. That’s the ethical way of doing things.
But again, we couldn’t really make this a rule via organized real estate, could we? Because what if the agent IS the broker of record? What if the agent works for a company with 2 other agents, and where the manager/broker is completely absent? Or better yet, what if the broker/owner is unethical too and encourages this kind of behaviour?
Simple solution, impossible to implement. Sad, but true…
3) Structured Bidding Process
This one is my favorite, because it would NEVER happen.
Think about the following offer situation…
The listing agent tells a buyer’s agent, “I’ll review the offers, and take the highest one. No question about it. You have my word: I will not send anybody back to improve.”
Then, after reviewing six offers, the listing agent takes the top three offers and tells those buyer agents, “We’re sending you all back to improve. But listen – we are taking the top offer, no if’s, and’s, or but’s. I guarantee it!”
Then, after reviewing those three offers, the listing agent tells the top two buyers, “You’re both so close, that we can’t make a decision. So please go ahead and improve your offers, and we’ll pick a winner.”
So my question is this: is that unethical, or is it simply “negotiating?”
Some believe the former, but most believe the latter. And seasoned real estate agents, no matter if they work with buyers or sellers, will tell you that this is “negotiating” at its finest. They’re just playing the buyer agents like a fiddle, and dragging them right along. A seasoned agent might say, “Hey, nobody has to play! They can drop out at any time!” They wouldn’t be wrong…
So what is my solution?
We have to implement some sort of process that adds transparency, structure, and formula, while not limiting the listing agent’s ability to negotiate the highest price possible for his sellers.
Somewhere, there has to be an identifiable, structured, “offer review process,” otherwise, it’s just mayhem.
And mayhem currently prevails…
4) Avoiding False Advertising And Misrepresentation
If a property is listed for $799,900, and it says in the broker’s remarks, “Offers reviewed on November 19th, 2013 at 7:00pm,” it’s not false advertising if a the seller turns down an offer of $799,900.
However, if on “offer night,” the seller gets two offers – one as high as $810,000, and they turn both down, they MUST re-list the property at $810,001, otherwise the $799,900 asking prices is blatant false advertising.
Well, up until recently, that was the rule.
However, my manager recently chatted with a broker of record at another firm (a well known firm, at that), and he told my manager, “We here at XXX Realty respectfully disagree.”
The case in question was exactly as described above: a Bosley agent submitted an offer on a property that was over-asking, and the seller turned it down, but continued to offer the property for sale at the original list price.
My manager called the listing agent’s broker of record, and that broker simply said, “We disagree.” The property was continued to be offered at the price which the seller was NOT going to entertain.
That is false advertising, in every sense of the word.
This cannot continue, and if it’s a new trend, it’s a terrible one.
This type of behaviour has to be reprimanded by organized real estate boards, otherwise, what purpose do they serve?
That’s my list, folks.
And it’s a short one, believe me!
As always, I’d love to hear other suggestions.
Just keep in mind that as I’ve noted above, real estate is far from perfect, and some of these solutions or ideas would be impossible to implement. We also have the Competition Bureau barking at us every time we try to “force” a brokerage to do anything, whether it’s for the good of the public or not, as it would be deemed “anti-competitive” to force brokerages to do anything they don’t want.
Some of my ideas just couldn’t be implemented because of the doors that have been opened in the past few years, all of which were opened, apparently, to help consumers. Kind of ironic, but I digress…