Being Prepared: Is It A Double-Edged Sword?

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…

DoubleEdged

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!

Or………is it?

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.

Dammit.

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.

Checkmate.

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…

33 Comments

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  1. frank says:

    You can call it negotiating or getting the best price but at the end of the day, he made a comment that was fictitious to improve his clients chances of getting the full asking price. Call me naive, stupid or self-righteous, I’m an anonymous commenter and really don’t give a shit what another anonymous commenter thinks. I think its hypocrital to chastise other professionals for varying degrees of the same type of behavior. It would be like an alcoholic chastising a crack head for their habits.

    1. ScottyP says:

      Well, it’s a slippery slope as soon as you question the moral integrity of other anonymous commenters. That said, I shouldn’t have called you self-righteous; this blog is one of the few bastions of the Internet where the discourse is usually above name-calling.

      (Generally the quality of the comments on this blog is uncommonly high, so when someone says something that could be considered naive, I’d like to think the comment rather than the person should be subject to scrutiny. Even when they’re anonymous.)

      I see both sides of the argument here; my initial comment was praising David for being willing to tell it like it is, above all else. But upon further reflection, I strongly believe that David didn’t do anything wrong *at all* — both in the context of current “rules” and on a higher, moral plane: Namely, that an agent with less scruples would have done the easy thing and taken their commission cheque at $1,029,000 instead of operating in the best interests of their client.

      David could have done a better job of explaining in the first place that he actually did have a prospective buyer in the pipeline lined up for the following day, as he clarified in a later comment. Mind you, it was certainly not a “locked-in” buyer — it was still prospective in nature, and could have easily led to nothing. But it did not behoove David to disclose *anything* more to the “other side” than he did.

      He should be commended for the work he did, not told by long-time commenters that he’s lost some of their respect. After seven-odd years and literally thousands of blog posts, I think he’s earned the benefit of the doubt.

  2. RPG says:

    This is probably the dumbest conversation I have ever read on this blog, and I’ve been an active reader since almost day one.

    I simply cannot comprehend how anybody takes issue with this.

    Not only have the negative readers failed to see the point of this post, and made issues where there are none, but it’s like you’ve all become socialists overnight, and live in this golly-gee fantasy world where the term “single dad” should get you a $50K discount on a house.

    This is called “capitalism,” and it’s present in every single industry.

    Many of you, such as Geoff, Dave, & Frank, seem to have failed “Introduction To Commerce.”

    I guess David should have taken the first offer presented to him, and then NOT negotiated? Collect his 5% commission for not negotiating? Or maybe, maybe the reason he is a top agent is because he read the situation like an expert poker player, after the buyer agent overplayed his hand, and thus he earned his commission like 99% of agents would not.

    I think I’m actually dumber for having read these comments. Some of you folks should just stick to “photos of the week” and ignore any posts that deal with adult situations in the real world.

    1. Geoff says:

      My simple point, is not that what David did is ‘wrong’ or ‘against the rules’ or ‘bad negotiating’.

      Just that after so mahe’s posted about sneaky or underhanded negotiating practices, this doesn’t totally read right.

      One wonders how his client would have felt if that one deal had fallen through.

      1. jeff316 says:

        I’m late to this party, but I think David’s post about the interpretation of preparedness can influence buying and selling is absolutely valid, and this sale is a great example to illustrate his point. That being said, sometimes David puts in a little bit more detail than necessary and once in a while that hurts his case. But this blog is so consistent and well done it is impressive that he slips up so rarely.

  3. Chaz Givens says:

    “what buyer can afford $1,029,000, but not $1,049,000”

    When money is as essentially free as it is right now, the figures are essentially arbitrary. So, yeah. Hey, I applaud you for getting the most for your client. But, geez, something doesn’t feel right about this market.

  4. natrx says:

    I’m saying this now but I would walk away from all these games.

    But at the end, it was the listing price so what did the seller expect.

    David, I was wondering, let’s say the buyer said “Look I’m going to use you as an agent… will you cut 1.5% off the listing price to save on the buyer’s commission portion?”

    Or is the impact it’ll have on the selling vs asking too much of a risk for the industry in general?

  5. Wow, this is utterly bizarre. I’m shocked at some of these responses.

    I think a lot of folks missed the point – about how playing your hand, and being “too prepared” can weaken your negotiating position. That was the point of today’s blog, after all.

    I don’t know what I can add to this argument, to be honest.

    Ethics? Don’t even go there. This is called “negotiating.” I would love to see one of the naysayers on here take less money for their home than their agent can get them. Call it a bluff if you want, or call it fact; I had an agent texting me saying their buyer didn’t want to be in multiple offers but they would make a move the next day.

    I think some of you guys need to really consider what “ethics” are, and how they differ from being a nice person who bends over backwards, leaves money on the table, gives all their money to charity, etc.

    As I said, not much I can add here, if folks don’t agree. I’m not going to try to convince them…

    1. The BeesKnees says:

      You need a like button David!

    2. Paully says:

      I think what some people are missing is the fact that it is not really a negotiation if you are not prepared to walk from the deal.

      If the single dad had a firm price ceiling, he could have let the sign-back expire and give the vendor some time to stew over it for the rest of the night. Agents love to say that “your first offer is usually your best offer,” so if the only offer had walked, it would have likely put David on the defensive, since he had recommended the sign back at list. A lot of things would go through the vendor’s mind after turning down over a million dollars!

      Then the next day, the buyer could re-submit another offer. He might lose in multiples, but he just might have convinced the vendor that his last offer is the best that they will get. The only way to know for sure is to walk away from the table for a while.

      Unfortunately for the buyer, and fortunately for the vendor, the buyer and his agent clearly telegraphed that he was not prepared to walk from the table, so David was correct to use that information to his vendor’s advantage.

  6. The BeesKnees says:

    I’m surprised at some of these responses! Our job as listing agents, representing our seller clients is to negotiate with buyers & their agents to get the highest price & most favourable terms possible. Period. David was not trying to get tens of thousands of dollars above the asking price he set, he felt the house was worth what he priced it at & that this particular buyer would be willing to pay that price! End of story and well done!

  7. Long Time Realtor says:

    Although it’s alway easier to bluff with other people’s money, a fiduciary has certain duties that should not be trifled with.

    I am not so sure that our intrepid host should be feeling quite so chuffed today, despite being on the winning side this time.

    Serious negotiating mistakes and perhaps a few RECO violations can be easily overlooked when feeling so flush.

    Tread softly my friend. Be always humble in victory and gracious in defeat.

    1. jeff316 says:

      Love the blog and would hire you as agent but have to agree with this ^^^. Absolutely.

  8. Dave says:

    “Offer day came, and sure enough, we had ONE offer on the property.”

    “I told the listing agent to get me $1,049,000, or we would sell it to another agent’s client the next day.”

    Ethics. Know of them?

    Remind me never to get involved in an RE deal that you’re a part of.

    1. Krs says:

      Yeah, this post totally rubs me the wrong way and reinforces the sleazy agent stereotype. Playing with people’s emotions and finances.

      1. frank says:

        It didn’t help to say that the buyer was a single Dad either.

        1. ScottyP says:

          He’s being honest in telling his story, folks. This is how things work. None of us have to like it, and maybe one day David himself will make alterations to his approach, but the bottom line here is that David has one responsibility and one responsibility only: To his client.

          If you want more regulation to curtail such practices, be my guest and contact your local MPP. Tell him or her that you want changes made to the Real Estate and Business Brokers Act. But as things stand, David *is* playing by the rules, and has been kind enough to share his various experiences with you and me, unvarnished and uncensored.

          You can either read a RE blog comprised of gumdrops and lollipops, or you can read a RE blog that tells it like it is. Sometimes you’re not going to like what you read; but to demand a shoot-shooting blog that also refrains from hurting your sensibilities is silly. Put another way, you can’t have it both ways, people.

        2. Ed says:

          Oh boo-f’ing hoo. Single dad? Really?

          I guess we should have just given him the house.

    2. Alex says:

      How is it ethical for him to take less money than he thinks he can get for his seller? It was entirely up to the seller to let David know if he wanted to take less money for the house because he felt bad for the person buying. He could have said at the initial offer presentation “I know you can get me $50000 more, but I think this guy is nice so let’s just give it to him for his offer price”, since he didn’t it’s up to David to get top dollar for his seller. Since he did actually believe he could get the original price for the house then it isn’t unethical to tell the offering agent that he believes that.

      1. Virginia says:

        Agreed, I think most of these posts places the blame on David despite the fact that he is representing the sellers interest and not the buyers. Whenever an agent gives me a call to discuss their buyer’s position, I take it with a grain of salt. At the end of the day we’re trying to do our best for our clients, not discount $40k for single moms/dads, $50k for newly divorced singles, $100k for first time home buyers, etc. I don’t think he sucker punched the buyer either seeing that he only asked for the full asking price and nothing more than the number that is on the listing. The only problem I could see here is if David disregarded his clients request to accept the previous lower priced offer despite their instructions, that may have caused him to be in some sticky situations if the buyer walked. But the actual discussions between David and his client’s, we’ll never know.

    3. Kyle says:

      Perhaps RECO, should form a team of real estate Social Workers to provide emotional support for naive buyers, who don’t understand that a SELLING AGENT IS WORKING FOR THE SELLER! What would be unethical, would be for David to have said,”Let’s just accept 1.029M and call it a day, so that i can get my commission cheque.”, knowing full well that he could have gotten his client more. Do not rely on the selling agent to look out for your emotions and finances, that’s your own job.

      1. ScottyP says:

        Exactly. No one put a gun to the buyer’s head and forced him to buy the house for asking.

        People seem to think that just because there was only one offer, the seller was supposed to lay down and accept whatever was given? Poppycock.

        Add to this the fact that the buyer clearly exposed his desire to buy the house come hell or high water, and David behaved as any good selling agent should behave: In the best interests of his client.

        Meanwhile, from the buyer’s perspective there’s little shame in paying the asking price for a house he loved in this crazier-than-crazy market. Win-win-win, except for the holier-than-thou among us.

        1. frank says:

          I do appreciate the blog and Dave’s honesty. However, it seems unethical that he would tell the buyer that the property will be sold tomorrow when in fact that’s not the case. If its a win-win and for sure thing, why bother lying about it? just say the price is firm and that’s it. How is this different from any other lie used to manipulate buyers? Its not illegal for me to walk down the street and tell everyone to f$%k off so does that mean its ok for me to do it if I’m angry? Its also makes it hypocritical to chastise other realtor’s for bidding wars or other unethical behaviour. The fact that this is how things work is not really surprising. Your justification is as weak as your moral attributes ScottyP and Kyle and thank f#$k you’re not my realtor.

          1. ScottyP says:

            @frank

            David chastises other realtors for listing at $1.05 million, getting a single offer at $1 million, then signing back for $1.15 million — $100,000 above the original asking price. (Thereby wasting everyone’s time.)

            Or, for listing $200,000 below accepted market value, getting 15 offers, then sending all 15 offers back — even those with no chance of winning. (Thereby wasting almost everyone’s time.)

            Or, for listing at $1.05 million, getting no offers, then re-listing for $1.15 million — $100,000 above the original asking price. (Thereby wasting his client’s time.)

            Whereas in David’s case, he listed for $1,049,000, and tried his darndest to get his client… wait for it… $1,049,000! Do you see the difference, FRANK?

            I’m not a real estate agent; clearly, neither are you. But if you honestly believe that, in any industry, one should never use the “this deal may not be on the table tomorrow” tactic, in ANY type of negotiation, then I thank f#$k you’re not my client.

            Go ahead and consider me morally bankrupt from your pseudo-high horse — I couldn’t care less about what a self-righteous mouth-breather like you has to say. The moment David feels the need to take ethics lessons from the likes of you is the moment he should shut this blog down for good.

          2. Lolita says:

            Frank I’m curious, if this was your house, would you have taken the $1,000,000 offer?

            Would you look to hire a realtor who would tell you to take the first offer and not negotiate? Your argument is weak too. To suggest that ScottyP and Kyle have “weak moral attributes” because they wouldn’t jump at an offer $50K under asking, in a seller’s market, after one week of the listing, is absolutely ridiculous.

          3. Kyle says:

            The buyer and his client could have called David’s bluff, they could have bluffed themselves and said that there is another property that they are likely to offer on tomorrow. But every action/statement comes with a potential risk/reward for either party. That’s what negotiation is about and it’s clear that the buyer wasn’t willing to risk losing the house.

            It’s called negotiation. Both sides are adversaries. And anyone stupid enough to take what their adversary says at face value and not consider what or why he is saying it, deserves to pay more. You can call me immoral if you want, but i prefer to call it, “not being stupid”. If you don’t think either side is going to try to use tactics to manipulate, influence or persuade the outcome then you’re stupid, if you think the buyer’s agent mentioning his client was a single dad wasn’t a tactic then you’re stupid, if you think negotiation comes down to “Yes i will accept”, “No the price is firm” then you’re stupid. In life you can be stupid (e.g. whine about how selling tactics are unfair, or how the Government should step in to make it more transparent and put laws in place on how to conduct sales) or you can not be stupid (e.g. learn how the game is played, and get a damn good negotiator on your side).

  9. crazyegg says:

    Hi All,

    Having deposit checks IN HAND at the offer presentation is now the unofficial NORM in Toronto.

    This wasn’t the case several years ago when you could drop off the deposit check the next day.

    Without consideration at the time of acceptance, the listing agent now risks too much especially now during the frenzy. What happens if the buyer reconsiders and backs down once he has had time to think some more: “OMG, I bought that dump for how much???”

    Regards,
    ed…

  10. frank says:

    “I told the listing agent to get me $1,049,000, or we would sell it to another agent’s client the next day.”
    So you lied in order to force their hand? You got one offer, how do you know it would sell the next day?

    1. Ed says:

      How is this “lying?” Isn’t it negotiating?

      Lying is saying that you have ten registered offers when you have two, and THAT is a RECO offence.

      Suggesting you have an agent telling you that they’d bring an offer the next day isn’t the same thing.

      You people are all either really naive, or just really sour market bears who wish they could afford housing. I’m thinking it’s the latter, since you can’t really be naive enough to suggest that David did anything other than HIS JOB in this case, and I think he did it pretty darned well.

  11. Mrs. Obvious says:

    Geoff,

    I think you are mistaken, David doesn’t particularly like when agents price low, expecting offers, don’t take any of the offers which are AT ASKING, and then bring the listing out at a higher price the next day.

    According to the story, David priced fairly and while he hoped he would obtain even more for the house, he was ready to work with the offer so long as he got his original price.

    I think the second answer to your question is obvious.

    1. Geoff says:

      @ Mrs. Obvious

      I don’t think it’s that clear. While he has definitely railed against that, he’s also said that before, when he’s been in the same situation but where he was presenting the offer, that if you price a house and it gets one offer, that means the market has spoken.

      David, why don’t you weigh in here. To be honest I lost some respect for you. Yes I realize that you are trying to get as much for your client as possible (but then so are the other realtors who play games with pricing, so that argument is not relevant). It does smell a bit of do as I say, not as I do.

      1. ScottyP says:

        The market did speak. They sold the house for $1,049,000.

  12. Geoff says:

    Umm.. don’t you usually get upset when people list their house, expecting multiple offers, and get one offer, and then sign back at full asking? Wouldn’t you normally rail against such practices?

    PS I suspect anyone who can afford a $1M house can afford a $1.1M house, no? Why not sign back at that?

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