Ten years and two-thousand blog posts, and I don’t think I’ve ever covered this topic before.
After being part of a very strange offer presentation last night, I thought long and hard about how the process “should” play out, and how it almost never does.
There should be a basic set of principles every listing agent adheres to during an in-person offer presentation, and believe it or not, it would almost always help the seller…
I had an interesting experience the other night.
I was presenting an offer on a freehold property in the east end, in competition with four other offers, and offers were being reviewed with the sellers and the listing agent, at the house.
Having registered my offer first, I was first to present.
Often when you’re 9th of nine offers, the listing agent might say, “We’ve already seen eight offers, so excuse us if we go through this a bit faster,” and then proceed to look at the negotiable points, smile, thank you, apologize again for the expediency, and thank you once more.
When you’re the first offer to present, it’s often the opposite.
Sometimes the listing agent will take this as an opportunity to read every single word on the page, or at the very least, read every single clause and pertinent detail.
Quite often, a listing agent will run through the boiler-plate offer in advance of presentations, so that the seller understands what to expect. And the agent will read through the listing brokerage’s “Schedule B,” which every buyer agent will present, so that they don’t have to read through it once offers are being presented.
My experience the other night was nothing of the sort.
It was bizarre.
I was asked to sit down in the living room, and the agent said, “We’re doing this really informally, have a seat.”
I took two copies of my offer out of a folder, and said, “Well, this is your show, so let me give you these, and please proceed as you wish.”
The agent then took one copy of the offer, and started to flip through it. He buried his head down, and said nothing to me, or my clients.
I found it odds, and borderline awkward, so to kill the silence I began talking about my clients, and how much they liked the house.
The agent said nothing.
He just kept reading.
I conversed with the sellers, as the agent kept reading, maybe once or twice he muddled something like, “…..this is good,” and the whole “presentation” itself took no more than sixty seconds.
Amazingly, the agent looked up and said, “Alright, great, yeah, thanks so much for the offer.”
Then he stood up.
I was so confused, but I didn’t want to draw attention to what had just happened, so I stood up as well, shook his hand, took back one of my two copies (as is the custom), and shook the sellers hands as well.
So by, “What had just happened,” do you follow? Do you see what went wrong here?
He never read ANY of the offer to his clients!
As I walked out the door, I realized they were in the dark! They had no clue what the offer was!
This guy just sat there, reading to himself, and never once read a single term of the offer to his clients, who were sitting right next to him.
I’ve probably been in 500 offer presentations, and I’ve never experienced this before.
You would think that the agent would say, “We have an offer here for $1,750,000, with a $100,000 deposit, closing on February 21st, etc., etc., etc.”
Maybe he doesn’t want to start with, “We have today’s date – yes, this is the 21st of November, correct, and this is Dick Smith & Jane Smith, yes, this is the correct spelling of your names, and this is 123 Smith Street, legal description PT LT 204, PL 209, City of Toronto, etc.,” but for the love of God, at least tell your clients what price the buyers are offering!
I thought long and hard about the process as I drove back to my office, and as much as I wanted to give the agent the benefit of the doubt, and discover a way in which this was his “process,” I realized, that he simply had no clue what he was doing.
Then I looked him up in IMS, and saw that he’s done 6 deals in the last 12 months, but he’s never had a listing in Toronto.
The process got me thinking: what should an offer presentation look like?
There are many different ways that the process can play out.
For starters, the listing agent might elect to review offers via email, or there might be in-person presentations. Those in-person presentations could be at the property, at the brokerage, with or without the sellers and/or family, lawyers, etc., and the time could be day or night.
But when offers are in person, and are in front of the sellers, I do believe there’s a way to go about the process.
As I’ve said, every listing agent is free to proceed as he or she chooses.
But I’ve compiled a list below of actions the agent should take, or questions the agent should ask, as well as why.
1) Ask about the buyers.
Have some common decency.
Yes, the be-all, and end-all, is money.
Unless you’re reading some one-in-a-million personal interest story in the Toronto Star where a home-seller picked a bidder representing a much lower offer, simply because they had a “connection” with that buyer. But the other 999,999 times out of one million, the winner is going to have the best price.
But how do you get to the best price?
It’s not so cut and dry.
Emotions run high in any property purchase, and offer presentation. Both the buyers, and the buyer agent, can change their minds or act a certain way based on the emotion involved, or what they’re reading into the situation.
The buyer agent’s job is to “read the tea leaves.” His or her job is also to remain calm, and take emotion out of the situation. I’ve personally witnessed buyer agents pop off for various reasons, give too much information, refuse to give information when asked that has no downside, and make a host of different mistakes.
I believe that the very first order of business (after pleasantly thanking the buyer agent for being there) should be to simply ask, “Can you tell me a little bit about your buyers?”
Just as the buyer agent doesn’t want to offend the sellers or the listing agent, the listing agent should avoid insulting the buyer agent by demonstrating that he or she couldn’t possibly care less about the buyers.
There are people out there that care who buys their home. And whether the sellers are, or aren’t, those people, you want to at least give the impression that they are. You want the buyer agent to feel at ease, feel like he or she is being respected and valued, and that you want to hear a few quips about the buyers.
“Their names are Mike and Jane, they’re first-time-buyers, they really want to know where you got that sofa….”
It’s simple, it takes maybe 60-seconds, and it’s harmless.
I think it’s a huge mistake to just take the offer in your hands, and start reading it.
“Kill them with kindness.”
“You catch more flies with honey.”
However you want to describe it, you need to start the process out on the right foot.
2) Tell the agent if you plan on going through the offer quickly.
As I alluded to above, there’s nothing wrong with this.
In fact, in the interest of time, a listing agent should go through the “Schedule B” with the seller before looking at any of the offers.
But once the buyer agent sits down, if you want to blow through the offer, just tell them!
“Thanks Jake, your buyer-clients sound like really nice people. So we’ll take a look at the offer now, and, as you know, we’ve already seen seven of these, so forgive us if we whip through this, but my sellers basically have this memorized by now…”
That took, what, eleven seconds to say?
The theme here is respect, on both sides. Just as the buyer agent doesn’t want to piss of the listing agent, the listing agent should make sure the buyer agent is kept informed with everything that’s going on, feels good about the process, and feels like the process is professional. If buyer agents think the process is fair, they’re more likely to advise their clients to be aggressive.
3) Don’t just look at the price, and move on.
The theme continues.
It’s rude. It’s that simple.
And while some of you cynics might suggest that you should call a spade a spade, I’m telling you from experience, buyer agents are emotional, and every agent has an ego. I’ve seen buyer agents feel disrespected, and tell their clients, “Screw this.”
4) Ask about the buyers’ financing.
Now we’re past the whole “respect” angle, and into doing your job.
You would be shocked how few listing agents ask about buyers’ ability to actually obtain financing, and/or close the transaction.
Whenever I have buyers from the United States, they all ask the same question: “What type of proof of income or financing do you need to accompany the offer?”
And boy oh boy are they ever confused when I answer, “None.”
They’ll ask, “So…how does the seller know that I’m qualified financially to be making this offer, or to be closing this deal in four months? All I’ve done so far is bring a cheque for five percent of the purchase price.”
And I reply, “What can I say? This is the way real estate is bought and sold in Toronto.”
I always ask buyer agents an open-ended question, “Tell me about your buyers’ financing situation.”
From there, you’ll get any number of answers.
Some buyer agents tell you everything right down to the clients’ SIN number.
Others think there’s something awry, and won’t provide any information.
The right response would likely be, “What do you want to know?”
As a listing agent, I’d like to know if the buyers have a current pre-approval, and for what purchase price (then I know if they’re likely to increase their offer, if need be), as well as what percentage they have for a down payment.
I want to know if they need CMHC insurance.
I want to know if the “partner” in this deal is somebody that can close, or not.
In the spring, nobody asked these sorts of questions.
Today, on the buy-side, I’m getting asked maybe 40% of the time.
5) Ask if the buyers have something to sell.
This goes hand-in-hand with the above.
If the buyers are looking to purchase a $1,000,000 property, and they have a $50,000 deposit cheque in hand, where are they getting the other $150,000? Do they need to sell a condo?
If they do, I want to know where it is.
What’s it worth? What building is it in? How easy or tough will it be to sell?
In order to get a bridge loan for a purchase, a buyer, using equity from the sale of an existing property, needs to have that property sold firm.
So if the proposed closing date on the house purchase is 30 days, do I think they can get their condo sold firm in 25-26 days to avoid a scramble before closing?
6) Ask if this is the buyers’ best offer.
Does this sound greedy?
Am I being hypocritical, because I call out greed when I see it, and yet I’m suggesting a listing agent should ask this question before all offers are being presented?
No, this is about something different.
This is about understanding how the buyers and the buyer agent arrived at the price they have on the offer in hand, and whether or not they’re being “strategic.”
I always tell my buyers, “Don’t hold anything back for a ‘second round’ as you don’t know one is coming. Not only that, you’d rather ‘win’ outright on the first shot, then get into a second round of bidding with multiple buyers, who might throw the boat and beat you.”
But what do other agents do?
Every agent provides different advice.
And as a listing agent, I ask, “Is this the buyer’s best offer?” because I want to know if they’re holding anything back, or trying to play a game they shouldn’t be playing at the onset.
The house is listed at $899,900, and this agent is offering $950,000, up against six other offers.
“Is this the buyer’s best offer?”
“No, it’s not, we assumed there would be a second round.”
Well then what is this offer on the table in front of me? Is it an appetizer? A minor flirtation?
Why don’t you call your clients, and put your “real” offer on the table.
That buyer agent is free to do as he, and the clients, please. But more often than not, they’re shooting themselves in the foot by playing games. Properties are not won in this market by offering less than you’re actually willing to pay, in competition.
So sometimes, it’s the listing agent’s job to ask a simple question: is this your buyer’s best offer?
Having read this through now, you might be asking, “What then should the buyer be doing, asking, or saying?”
The buyer agent’s job is simple: don’t piss off the listing agent.
Hand over the offer, and let the listing agent present as he or she sees fit.
Watch the eyes, hands, lips, and the table is made of glass – those tapping toes, of the sellers, and try to get a read.
But the worst mistake a buyer agent can make: try to take control of the table.
There’s nothing worse than a buyer agent who holds the offer in his hands, talks as he sees fit, and then reads the offer to the seller like a bedtime story. The listing agent should feel as though he’s in the driver’s seat.
Call it ego. Call it arrogance. Call it control.
I call it common sense.