Or perhaps the better question is: are all offers worth considering?
Take that one step further: are all offers worth working on?
In the eyes of a person submitting a crummy offer, of course the offer is worth working on! But in reality, and in the eyes of the seller, it’s often just waste of everybody’s time.
And if there’s one thing that will never change in real estate, it’s that nobody has any concern for anybody else’s time…
You know that saying, “This isn’t worth the paper it’s printed on?”
Well that holds true in many facets of real estate.
I was explaining to a new agent the other day that a signed and accepted Agreement of Purchase & Sale is worthless without a deposit cheque, as it’s truly nothing more than eight pieces of paper.
He asked me, “Isn’t this firm and binding?” To which I answered, “Yes, it is.”
But if the buyer in that transaction walked away, and changed his or her mind, the seller would have to sue the buyer in a court of law to proceed with the transaction, and if the seller had the time, money, and wherewithal to take legal action, he or she would win.
In reality, people don’t really sue each other (as I wrote in last Friday’s blog….). The seller in this case would simply re-list the property and re-sell, and eat his or her humble pie.
The Agreement of Purchase & Sale, “signed, sealed, and delivered,” is worthless without a deposit cheque to bind that buyer to the deal, or give him or her an incentive not to walk away.
Use the same logic when it comes to the offer itself, and you’ll see the theme of today’s blog: many offers aren’t worth the paper they’re printed on.
You might not think that we see “worthless” offers in a red-hot real estate market, but we do, and they can bring about a range of emotions from frustration, to anger, to laughter. It all depends on the situation.
Let me regale you with three recent experiences I’ve had…
I had a property up for lease in midtown for $2,800 per month, and as the rental market has slowed significantly through 2014 (perhaps low interest rates are causing everybody to buy?), the unit was actually vacant for the first time in seven years.
My client lives in NYC, and owns three Toronto condos, and this unit is one he’s rented out for seven years, never with issue.
This time around, the tenant moved out, and a few days later, I received a call from a buyer-agent who wanted to know what my landlord/owner was “willing to do” in order to get a deal done.
He asked me, “Would your landlord consider painting the unit?”
Naturally, I responded, “I’d have to ask him, but I can tell you unequivocally that if your clients want to paint, they’re more than welcome, and they don’t need permission.”
After all, why not get free painting out of this for my client? You’d be surprised how often that works…
He pressed on, and said, “Have you seen the state of the condo?” I told him that I had been there lately, and I was familiar with what it looked like. “Well my clients want to know if your owner would consider…..umm…..sprucing up the place a little bit.”
He went on to rattle off a slew of items that he felt “needed” to be done, and I told him that he had the wrong unit, the wrong landlord, and the wrong agent. His requests were ridiculous.
The next day, I was emailed an offer for the unit, that as you might have guessed, wasn’t worth the paper it was printed on.
First and foremost, it was at $2,600 per month. So even IF my client was willing to entertain this ridiculous offer, he’d be down $2,400 over the year already.
The “Schedule A” had most of the standard lease clauses, but then there was a section that said (I’m paraphrasing here…) something to the extent of:
The Landlord hereby agrees to make the following improvements to the unit before the closing date:
1) Paint all areas of the premises, including but not limited to, walls, ceilings, doors, closet interiors, baseboards, and doorjam.
2) Remove carpet in bedrooms and upgrade with engineered hardwood floor, or new carpet of the Landlord’s choosing.
3) Upgrade existing kitchen appliances (fridge, stove, dishwasher, microwave) with models 2013 or newer, in stainless steel.
4) Upgrade existing curtains and curtain rods to vertical roller shades.
5) Install custom closet organizers in master bedroom and second bedroom.
I stared at page three of this “Offer To Lease” for a good thirty seconds, with very little facial movement.
I just didn’t understand why somebody would submit this offer, since it was utterly ridiculous.
I clicked “Reply” on the email, and simply said, “Thank you for your offer, but we politely decline. Best of luck in your search. David.”
I didn’t expect to hear anything back.
An hour later, the buyer’s agent called me, and said he was “confused” as to why I would dismiss his offer out of hand.
He went on to tell me – and this is absolutely amazing, that his clients were “doing my client a favour” by helping him upgrade a severely out-of-date space. He figured that the unit was in a state of disrepair, and that it was clear the landlord had no pride of ownership, and no interest in keeping up the value of his biggest asset. He told me, “If your owner were to paint, put in new floors, appliances, and add some closet organizers – he would be getting 2-for-1 on his money!”
Wow, what a sales pitch!
I can’t say I disagree, since putting money into your condo might net you a higher return if and when you sell, but this was an investment property, not a primary residence. The landlord wants to keep his costs down, and if and when he sells, whether it’s next year, or in twenty years, he’ll probably renovate and maximize his return.
I think the agent deliberately used the word “Upgrade” in his clauses, rather than “Replace” because it sounds better. He may have been sly, but in the end, the offer he submitted – for $2,600 on a $2,800 listing, asking for about $30,000 in renovations, wasn’t worth the paper it was printed on.
We leased it for $2,750 on a 2-year term to a fantastic tenant who was relocated from Vancouver, and they didn’t ask for anything at all…
A short time ago, I had a very small condo listing for $255,000, which was on the market for about 20-25 days before we got our first offer. I’ll admit – the listing didn’t exactly fly off the shelves, but this was in a building that typically doesn’t sell well, or rather, the units don’t sell quickly.
The offer we received, was absolutely ridiculous: $201,580.
I sincerely believe that there’s zero significance to that number, and it was picked at random to make it look like there’s some logic behind it.
All I saw was an offer of 79% of the list price, and I may have only ever seen 1-2 offers this bad in my career.
So I sat on the offer, did nothing, and to be perfectly honest, I wasn’t in any hurry to deal with it.
The agent who had emailed the offer eventually called me to ask if I had received it, and I said that I had, and that I didn’t know what to do with it. He asked what I meant, and I said, “I mean I have no clue what this offer is supposed to represent, why it was submitted, and what you and your buyer expect to happen next.”
He simply said, “We expect a sign back.”
“This offer isn’t going anywhere,” I told him bluntly, but politely. “There is no deal to be made here, and your client is not the buyer for this unit.”
“You never know until you try,” he told me.
“Yes, I do know,” I replied back. “You could have offered $225,000, and we’d be having the exact same conversation. That offer wouldn’t have gone anywhere either.”
He finally relented and said, “Well, just present it to your seller, and see what he signs back at.”
I told him off-the-cuff that I didn’t need to present it to my seller, since it was utter nonsense, and that it was a complete waste of all of our time. In reality, I have a legal obligation to present all offers to my seller, but with a good relationship with the client, I’d probably just send an email like this:
“Hi Bob, we received a real lowball offer today of just over $200K and I just kind of tossed it aside. Just keeping you in the loop, but don’t worry – this isn’t indicative of the market, and it’s rare to see something like this come across my desk.”
The offer sucks, and we’ll throw it out.
Now does that email constitute “presenting an offer to your client?” I think it does. I need merely mention the existence of my offer to the client to have “presented” it. I don’t need to take my client for a candlelight dinner and hand him a gold-embossed file folder with the offer.
The buyer’s agent in this case told me, “I want proof that you’ve presented the offer,” and now things were getting a bit silly. I told him “I don’t need to present it to my seller” after he asked me to “get a sign back,” and I was just saving us all time. But he took my response as literal – that I would not inform my client that the offer existed, and that’s when he got aggressive, and sent me the “Offer Presentation Acknowledgement Form.”
Ah, yes! The dreaded OPAF!
The only time you pull out the OPAF is when you have no interest in working with that cooperating agent again during the rest of your career. Pulling the OPAF on another Realtor, in most cases, is like going to the school principal’s office to rat on your classmate.
The basic premise is this: you want to know that your offer has been presented, and thus the OPAF requires the seller to sign the document and say that he or she has seen the offer.
I might use this in the case where a listing agent has his or her own offer, competing against my offer, and I don’t trust that agent as far as I can throw them. I want to know that the offer has been seen by the seller.
Of course, I say “might,” because pulling out the OPAF is a huge slap in the face to that agent. It says, “I don’t trust you, and I want you to prove something to me.” Without much recourse in this industry, I figure there’s no point to the document anyways.
So once I was on the receiving end of the OPAF, for this piece-of-crap $201,580 offer on my $255,000 listing, I had to get my client to sign it.
I love this guy – he wrote on it, “Please note that I have reviewed, and rejected, your awful offer.”
Childish, I know. Unprofessional, perhaps.
But this offer never should have been drawn up, never should have been presented, and wasn’t worth the paper it was printed on.
I sold that unit for $248,000 two weeks later, just to show you that there was no real merit in the $201,580 offer to begin with…
Seriously folks, I understand trying to get a deal, and I know what it means to work hard and get the best price for your client, but these two situations show you that some buyers and their agents are just clueless.
You might think that if you submitted a series of $250,000 offers on $299,900 listings, over and over, across the city, that somebody might eventually bite, but I can guarantee that in this market, it just won’t happen.
Offers like that aren’t worth the paper their printed on…