The idea for this blog post actually came to me in a dream, but more on that in a moment…
A buyer-client of mine was a bit frustrated last week when a property that we were going to view, sold before we could get in. She asked me, “Don’t they have to tell you there’s an offer?”
I told her it’s not that simple. Who am I, to “them?” How do they know I have an interested client?
Trust me – it’s always easier said than done…
Call this pathetic if you must, but I actually dream about real estate.
I know we can’t control what our subconscious does for eight hours each night, so it’s not really my fault.
But it’s frustrating because at the very time when I need rest, I dream about the very last thing I need to be thinking about.
And my real estate related dreams are always incredibly accurate, which is rare for dreams.
I mean, think about it – dreams are always like 8/10ths accurate.
Let’s say you’re dreaming that you’re painting a fence.
Everything about the situation is accurate – you have painter’s clothes on, the fence has chipped paint and needs painting, and you have all the necessary equipment.
Except in this case, you’re painting the fence with spaghetti.
Doesn’t that sum up how we dream?
Everything about that dream is accurate except the spaghetti.
But when it comes to my real estate dreams, they’re always so accurate, it’s scary.
I feel like I’ve had dreams where I review multiple offers on a listing for two hours.
And the other night, I had an incredibly accurate dream about losing out on a property because I wasn’t informed about a competing offer.
In my dream, I met my clients – who were actual clients I dealt with in 2005. I wonder why they were in my subconscious, but that’s a topic for another day…
We met at a property, walked through it, and they loved it.
We went back to my office on Merton Street to put together an offer, and we signed it up, and emailed it to the listing brokerage.
The listing agent called me and said, “I’m sorry, David, but we’ve accepted another offer.”
My clients were crushed, but I told them, “Don’t worry guys, he can’t accept another offer. Not when ours is on the table. He would have had to inform us that there was another offer.”
I got really salty with this listing agent; condescending, snarky, and cocky. I told him that he couldn’t accept that other offer, no way, no how.
The dream ended there. I think it made a right turn into me lost on campus on the first day of school. Maybe we’ll come back to that later…
But to my earlier point about dreams never being quite accurate, in the case of this dream, everything seemed accurate, except for what I told my clients.
There is a time when a listing agent can’t accept another offer, without informing you of the existence of said offer, but it’s not in the situation I described in my dream.
Let me lay out three scenarios:
- You’re making an offer on a property, but there’s already an existing offer on the property.
- You’ve already made an offer on a property, and a subsequent offer comes in on the property.
- There’s an offer date set, and a bully offer is registered.
Let’s examine those three situations, and ask the question, “Does the listing agent need to inform you of the competing offer?”
1) You’re going to make an offer on a property, but unbeknownst to you, there’s an existing offer on a property.
This is where things got off track in my dream.
In my dream, I told my clients that the listing agent can’t accept another offer, because we’ve just submitted one.
That makes no sense.
It’s like painting the fence with spaghetti.
If a seller receives an offer, of course he or she is free to accept that offer! They don’t know if, and when, another offer is going to be registered.
Some agents, however, don’t necessarily agree.
I had a listing on Lombard Street a while back, and I got two offers one morning, and by the early afternoon the property was sold. We did really well – $30,000 over list, and it blew away my expectations.
Later that evening, an agent called me and started, “Hi David, I have an offer for you on Lombard Street, it’s a really nice young couple…”
But I interjected and said, “Listen, before you continue, I want to let you know that the property was sold conditionally this morning.”
The agent lost his mind.
“Oh well that’s VERY professional,” he started, just dripping with sarcasm, as his nice-guy, friendly, agent-to-agent demeanor immediately changed to disdain.
“What a Mickey Mouse operation you’re running there,” he told me.
“I was never informed of these offers, nobody called me, and I’ve just wasted my time and my clients’.”
He was right. He did waste time.
But this is the market we’re working in.
Things happen fast.
The property had been on the market for four days, so it’s not like he, or anybody else, didn’t have a “fair” shot at it.
Should I have called him? I could have.
It’s very common to page all the agents who have shown a property to tell them there’s an offer registered.
But the point here, and the point to this blog post – asking when you need to disclose and inform agents of registered offers, is that I was under no obligation to do so in this case.
I had two offers, and $30,000 over list, for a property I thought was priced reasonably-well at the list price.
I had a very quick irrevocable (we actually only had 30 minutes to accept this deal), and there was nothing to gain by “working the phones” and trying to drum up other interest.
There’s a time and a place for that, no doubt. But this wasn’t it.
I was very pleasant with this other agent, who tore me apart on the phone. I hate taking the high road, but I always do, since you never know when you’re going to run into that agent again.
I wanted to tell him, “Buddy, how hot is this market? How quickly are properties selling? Did you ever think to call the listing brokerage and ask if there are any offers?”
But I didn’t. I just took his abuse until he hung up on me.
Fifteen times a week, my phone rings, and it’s another agent asking me, “Any offers on 123 Smith Street?”
That’s what you do in this market, as a buyer’s agent. You don’t expect that the listing agent will call you if there’s an offer, unless it’s the second or third situation on our list above.
So while the agent in the story above was clearly pissed at me, he was 100% incorrect about the way disclosure of offers works, in this case.
If you’re a buyer, or a buyer’s agent, contemplating an offer on a property, there’s always going to be a chance that: a) there’s already an offer on the property, b) the property has been sold in the past 24 hours and is awaiting an update on MLS.
It’s up to you to find out if there are any offers.
2) You’ve already made an offer on a property and a second (or third, etc) offer is registered.
This is a completely different situation from the one I described above.
To use a common metaphor, you’ve got your foot in the door.
That door can’t be closed without you moving your foot, voluntarily or otherwise.
If you have registered an offer on a property, whether the listing agent and seller have reviewed your offer or not, if a subsequent offer is registered, you must be informed.
I wrote a blog post a few years back about a property on Monarch Park, where I submitted an offer for a buyer client.
The listing agent told me they’d review my offer, and get back to me.
A few hours later, she called and said, “We’ve accepted another offer.”
I told her, “That’s impossible. You can’t accept another offer because I have the only registered offer.”
She told me, “No, we had another offer come in after yours, and we’ve accepted it.”
Having walked her down my intended path, I then said, “Right – an offer came in after mine, but I wasn’t informed. You never told me, and you can’t accept that offer without informing me. My offer was made, predicated on the fact that I had the only offer. With a competing offer in play, the terms of my offer would have been completely different.”
She said, “Thanks so much, have a great day,” and that was that.
I had to then try and explain this to my buyers, who were understandably pissed.
These are the situations where you know the agent could be fined by RECO, but you don’t pursue it because you know the complaint will go in a box with 10,000 others just like it.
Bottom line – if you register an offer on a property, that property can’t be “sold out from under you” via a subsequent offer.
It can happen, as per my story above, but that breaks the rules.
Where agents often allow themselves to fall into a grey area is when there is an “offer night” and there are multiple offers registered.
The listing agent tells people there are three offers, then four, then five, and so on.
But eventually, the listing agent stops updating people.
Maybe he told one agent when a 5th offer came in, but didn’t tell another group of agents when the 6th and 7th came in.
Ultimately there’s 12 offers, but most of those agents were never updated as to how many there were.
An agent, representing a buyer who made an offer based on the understanding that there were seven offers, goes bezerk when he or she hears there were, in fact, twelve.
I’ve been in this situation before, where the listing agent says, “Come on, man, there were so many damn offers! They kept coming, first five, then ten, then fifteen – they just kept coming. What do you want me to do?”
“Your job,” I told the agent. True story. There were twenty offers on this one property, and I was told there were five. Suffice it to say, our offer was way, way too low…
3) There’s an offer date set, and a bully offer is registered.
Organized real estate has yet to fully figure out how to deal with bully offers, but there are some accepted principles.
If you, as the listing agent, put the property on MLS with an “offer date” set – ie. Monday, August 29th, but then on Saturday, August 27th, there’s a fantastic bully offer registered and you elect to work with it, you have to “make a reasonable effort to contact any and all parties who have expressed an interest in the property.”
What does that actually mean?
Your guess is as good as mine.
However, it’s generally accepted that you, as the listing agent, are supposed to page every agent who has booked a showing.
Not shown the property, but booked a showing – so including those agents who have showings in booked into the future but have yet to show it, and those agents who booked a showing but cancelled (the logic there being that they might reschedule, and have demonstrated an interest).
That would constitute “contacting all interested parties,” but of course, there are going to be a lot of other people who were interested, but weren’t contacted.
The point is – how are you supposed to know who is interested? There could be hundreds of people who were going to attend the open house. But how were you to know who they were?
Short of dropping flyers from a hot air balloon, I don’t know if there’s anything you can do.
Now what if you’re a buyer-agent who hasn’t booked a showing, but has emailed the listing agent and said, “Keep me in the loop – I’d like to be informed if a bully offer is registered”? Well, as you might expect, it’s the responsibility of that listing agent to keep that buyer agent informed.
And as you also might expect, there are a lot of complaints at RECO about listing agents not keeping buyers, and buyer agents, informed when bully offers come in.
So in the three cases above, we have three situations where you, as a buyer, are interested in a property, and three very different sets of responsibilities on behalf of the listing agent when it comes to keeping you informed as to offers.
And in the three cases above, you’re also going to have grey areas, and different interpretations and expectations on the part of both listing and buyer agents.
So in the end, I think you can never go wrong as a buyer agent, making calls, and checking in – both with the listing agent, and the brokerage.
If you’re showing a property at 4pm, you can always call the listing agent at 9am and say, “I’m showing the property at 4pm, so please let me know if you get any registered offers between now and then.”
That’s what the agent in my #1 scenario above did not do, and in the end, he blamed me.
When in doubt, make calls.
Being informed is key.
And it’s going to be essential as we head into the busy Fall market after Labour Day…