Stay with me here, folks!
I’m not trying to get all metaphorical on a Friday, or look for any sort of deeper meaning here (although the photo below is pretty cool!), but rather I came across two similar situations this past week, which had entirely different results.
As a buyer, being prepared to submit your bid in a multiple offer situation is of the utmost importance. But is there such a thing as being too prepared?
Follow my story – and you’ll see what I mean. It truly is a double-edged sword…
I don’t have to define this, do I?
Everybody knows what a “double-edged sword” refers too, right?
I was thinking last night about two situations I had recently; one where I was representing the buyer, and one where I was representing the seller. In both situations, the buyers were exceptionally well-prepared to present their offers, only the result was different in both cases.
Lucky for me, I was the beneficiary in both cases.
But it made me question whether some “rules of thumb” in real estate can backfire, and whether there really can be a blanket-approach to anything in today’s real estate market.
What I’m referring to about “being prepared” has to do with submitting an offer, as a buyer.
Elementary contract law dictates that you need consideration for any contract to be firm and binding, and in real estate, that comes in the form of a deposit.
The deposit is written into the Agreement of Purchase & Sale, only it isn’t always handed over with the offer itself.
This is where “being prepared” comes into play, and a good buyer agent will always tell his or her buyer that having a certified deposit cheque on hand will help strengthen the offer. A good buyer agent will also tell his or her buyer that being present for the offer (not physically in the presentation, but being “around”) is a tremendous asset.
This is “being prepared,” and it is the smart thing to do. Only, I recently experienced this working in my favour, and then experienced it working against the buyer in another case.
Let me explain…
Last Monday, I was making an offer on behalf of a buyer client on a west-end property, listed at $699,900, and I was in competition against six other agents.
With seven total offers, we had a pretty good feeling overall that we’d be the victor, or at least be in the running.
As is ALWAYS the case, I instructed my buyer to obtain a bank draft for $40,000 made payable to the listing brokerage, and I would present that along with my offer. I also instructed my buyer to “be available,” so she and her boyfriend were at the coffee shop across the street from the listing brokerage.
It took the listing agent about an hour to zip through the seven offers, after which he came out and had a chat with me.
“David, I’m going to do you a favour here,” he said. Famous last words…
“You aren’t the highest offer,” he told me. “But the highest offer we have was presented by an agent who didn’t bring a cheque, and who wants a 120-day closing.”
He went on to tell me what I suspected as well: that the agent didn’t exactly work for a brand-name brokerage, and he didn’t really trust the guy. If there was a cheque, then that would mean a LOT! But the combination of no cheque, plus the bizarre 4-month closing date was rubbing the seller, and the listing agent, the wrong way.
“Can you get your people to come up on their offer price?” he asked me. I asked him flat-out, how much we were talking, and as a wily veteran, he just smiled and said, “I can’t tell you that, come on.” But I told him, “If you want me to come up and match his offer, then you’d better give me an indication. I can’t throw darts in the dark here.”
So he did. He told me I was low by $9,000, and that his clients wanted to close on July 15th.
So I went across the street to Starbucks, and my buyers initialed the change in the purchase price, the change in the closing date (I think we had asked for July 30th, so it wasn’t like this was an important facet of the offer, but rather the competing offer’s closing date was September), and we submitted our revised offer and got the deal.
We had the second highest offer when all the bids were submitted, but we got another kick at the can because the top offer was presented by an agent that wasn’t prepared.
He had no deposit cheque, his clients were probably at home in Markham, and he had no flexibility when it came to revising his offer.
You simply MUST bring a certified deposit cheque to the offer table when you’re in competition! If you don’t, you risk losing out to an inferior offer that does have a cheque, or you risk the listing agent asking the second-highest bidder, who has a cheque, to bump their offer up.
You also have to be available on offer night, “just in case.”
That’s how it’s done, folks!
Is that the fail-proof method?
Let me tell a second story…
I’m going to change the dates and prices here, just to keep the anonymity of the folks involved, but last month, I had a listing for a west-end home that we priced at $1,049,000, and although it was priced accurately, and located in a pocket where we don’t always see multiple offers, we did in fact hold back offers.
Offer day came, and sure enough, we had ONE offer on the property.
Remember the days when an offer was a good thing? Now you hear the sad trombone as you lament not having multiple offers.
In any event, the buyer agent emailed me in the morning to say that his client had gone to the bank to get a bank draft, and that they’d be prepared for 6pm when we were looking at offers.
I arrived at my client’s house slightly beforehand, and I told him that I wanted the whole shebang: $1,049,000, or bust.
He actually thought I had over-priced his house! He wasn’t convinced in the value at $1,049,000, but I told him, “We’re in a seller’s market, so let’s use our leverage.”
The buyer agent texted me shortly before 6pm to say, “Just in the car with my client, I’m coming in!”
He came in, and dare I say that I was equally surprised and yet expectant at the same time, as he presented an offer for $1,000,000 even.
I wanted the full asking price!
The buyer agent was a really nice guy, and clearly working hard for his client. He told us how the buyer was a single dad, with two kids, and he loved the house and everything about it. This was where he wanted to spend the next 10-15 years of his life!
I thanked him for his offer, and then asked him to excuse us so we could discuss.
As soon as the door shut, I told my seller, “We’re signing back at the full asking price.”
My seller was pretty uneasy with that.
He thought our asking price was a bit high, and he was weighing the validity of the offer in front of us.
But I couldn’t help but think we were dealing from a position of strength.
Consider the following:
1) The buyer went out and got a bank draft.
2) The buyer came to the listing presentation and was sitting in the car outside.
3) The buyer happened to be a single dad, with two kids, bidding on a 3-bedroom house in an area where there are a lot of smaller 2-bedroom houses.
We signed back at $1,049,000, and I handed the offer to the buyer agent. He wasn’t pleased, and in an incredibly bold and agressive move, which I really respect, he signed it back to us at $1,029,000.
At this point, my seller wanted to take the deal. But I told him what I knew to be true: the buyer was going to buy this house, tonight, no matter what.
The buyer was well-prepared; but dare I say, a little too well-prepared.
It’s one thing to show up, in a multiple offer situation, with a deposit cheque in hand, and with the buyer sitting outside in the car. But it’s another thing entirely to be the ONLY offer, and still do those two things.
I’ll be honest, folks: had the buyer’s agent simply emailed me the offer, at the same $1,000,000 price, I probably would have hoped to meet somewhere in the middle – or maybe $1,035,000.
But they played their hand, and my seller and I saw it.
They were so well-prepared for this offer presentation, that it showed us they were going to buy the house no matter what.
I didn’t even take physical possession of the $1,029,000 sign-back when it was handed to me. I didn’t tell my seller to sign-back either. I told the listing agent to get me $1,049,000, or we would sell it to another agent’s client the next day.
We got our price in the end; $1,049,000, and my seller was quite pleased. I think the buyer got an amazing house for his kids, and he should be happy no matter what.
Bottom line is this: what buyer can afford $1,029,000, but not $1,049,000?
And if it’s a matter of pride, or paying a price you want to pay, then an emailed or faxed offer shows you’re ready to walk away.
But showing up in person, with a deposit cheque, both agent and client, well, that’s a bit too well-prepared.
So as for that old adage about “always showing up in person, with a certified cheque,” it doesn’t always apply.
Despite what your mother, your boy scout leader, and the U.S. army told you, there IS such a thing as being too well prepared…