Barter System?
Bond Salesman?
Ummm….Barbecue Sauce?
We all know what B.S. stands for, and we all know what B.S. is.
But most importantly, we all know how to identify the most incredible example of B.S. when it’s starring us right in the face…
Remember the movie “Liar, Liar” with Jim Carrey?
It was a pretty good flick; at the time.
I distinctly recall the scene where his son is playing a round of “What does your Daddy do?” with his classmates and he announces that his father is a “liar.”
His teacher says, “Oh, you must mean he’s a lawyer, not a liar!”
The sheepish kid just stares at ground and concedes, “Yeah, I guess….”
Lawyers are liars, to some extent. It’s part of the job and it’s accepted.
So too are real estate agents.
You have to lie sometimes – it’s inherent in any negotiation.
But there are big lies and small lies; bad lies and good lies; and then sometimes there are those lies that are just so ridiculous that they insult your intelligence.
Those lies are just complete B.S.
A used car salesman will always tell a potential buyer, “Now I don’t want to pressure you in any way, but I do have a nice young couple from Peterborough coming back to look at this ’89 Le Baron convertible, and they’re not the first ones to fall in love with it either!”
We often do the same thing as real estate agents.
As a listing agent, you want to let people know that there has been interest in the property, even if there hasn’t been. Your job is to market the property but also to do everything you can to find a buyer willing to pay top dollar.
If you go to an open house and you ask the agent, “Have you been busy today?” What kind of agent is going to answer, “Nah, no way, I think I’ve had one person through this crappy old house.”
But there is a point when feigning interest can go too far.
For example, if you said that you’ve had ninety showings on the property, wouldn’t the savvy buyer think to him or herself, “Well, how come none of those ninety people have come forth with an offer? If ninety rational buyers aren’t interested in this property, then surely there must be a reason.”
I suppose an idealist might suggest that, “Problems can arise when stretching the truth, which is why you should always be honest!”
Perhaps.
But a listing agent has to convey that there is interest in the property or else he loses any advantage or bargaining position.
On Thursday, I submitted an offer for a condo by the waterfront.
The unit was fairly priced at $325,000, and it was exactly what my client was looking for. It offered him the space he needed without breaking the bank, and this unit had no parking space, meaning the price reflected the larger unit size rather than an underground parking space that he’d never use.
The market is very busy at the moment, but only “the best” get multiple offers and sell for over the asking price.
This unit has been on the market for 12 days, which isn’t an eternity by any stretch. But in this entry-level price point, any of “the best” units will sell in 1-3 days if they are well priced and in the most popular buildings. We’re in that busy of a spring market already.
This unit didn’t fall into that category as the building is not the most popular and it wasn’t under-priced for multiple offers, but my client isn’t looking to be in competition and he is very aware of which buildings won’t afford him that luxury.
In this market, it’s very fair to assume that if an entry-level condo hasn’t been scooped up during the first week of the listing, then it’s not worth the asking price. I know it’s crazy to assume that something “should” sell in a matter of days, but there are scores of active, entry-level buyers out there, and buyers are savvy enough to sort through the CityPlace and Fleet Street garbage, eliminate the over-priced crap that’s going to sit on the market for 184 days, and then evaluate what’s left.
We submitted an offer of $310,000, which I think is fair. The property isn’t worth the $325,000 asking price, and we had a little flexibility on price.
But what I received from the listing agent was perhaps the biggest and worst load of B.S. that I have seen in quite a long time.
On the fax cover page, she wrote:
“Thanks for your offer. We have had three offers, all close to a deal. The owner is willing to try to work out a deal with your client before going back to the previous interested parties.”
Wow.
What a load of B.S.!
Can you see it?
Can you read that once over and identify ten different ways in which that is thoroughly ridiculous?
I understand that you need to demonstrate some sort of bargaining position right off the bat, but this takes things too far.
I read her statement this way:
“Thanks for your offer. I am a terrible salesman! I keep receiving offers but I’m so incompetent that I can’t seem to turn any offers into sales! You’re the fourth person interested now, in twelve days, yet the condo remains unsold. I wish I was better at my job…”
Yeah, that’s about right.
She could have said, “Thanks for your offer – we’re still getting showings every day and the owner is in no hurry.”
But no, she took things way too far.
She tried to pretend like in twelve days for a condo that isn’t in high-demand, she has now received four separate offers, and they’ve been “really close” but she hasn’t been able to pull the trigger.
Now she’s even throwing in, “We’ll try to work with you on this and we promise that we’ll hold off on contacting the bazillion people who are lined up outside to buy it until you’ve had your fair chance.”
If this agent received an offer on the condo, she had a very good chance of turning it into a sale.
If she received two offers on this condo (keep in mind – these offers weren’t at the same time, ie. multiples, but four offers in 12 days can be strung together to leverage somebody to ante up), then I don’t see any way in which a half-decent agent can’t turn one of these two offers into a deal.
If she received three offers on this condo, how can she not play all three parties off one-another and find somebody to bat an eyelash?
And now if I’m the fourth person to offer, and they’ve all been “close to a deal,” then how is this property still available?
Well, because none of this ever happened.
I’m assuming we are the very first offer, and everything else was B.S.
I’m okay with a little B.S., but this just insulted my intelligence.
They signed back at $322,000, and we signed back at our max – $315,000. There is no reason to go any higher, and I never push my clients without a reason.
My client is already prepared to offer on a smaller unit – actually a ‘large bachelor’ – tomorrow morning for a Bay Street property. We’ve identified three properties, three prices that make sense, and we’ll see which one we can work with.
I told the listing agent all of this because sometimes you just have to be honest in order to get a deal done.
But she said, “Yeah, well, maybe in a few days your client will have changed his mind and we’ll get this ball rolling again.”
She just doesn’t get it.
You can’t want something to happen so bad that it just magically does.
If I were a betting man, I’d bet that tomorrow we offer on the Bay Street property and it’s accepted the first time around. The property is well priced and we’re going in slightly under the asking price.
I don’t have a 180 I.Q., but I’m also not a complete moron.
Sometimes I wish my industry colleagues would be a little more transparent and leave the complete B.S. at the door.
The load of B.S. that I was fed on Thursday made absolutely no sense. I talked to a few of my colleagues about it, and they laughed and agreed that the agent is either lying, or is telling the truth and she’s the worst agent in the world and can’t close a door, let alone a deal.
I’m sure that if the listing agent actually sat down and analyzed what she said, she would probably realize that.
I don’t mind being lied to in the course of a negotiation, but I hate being treated like a moron.
I’d almost call it “unprofessional,” but I’m really not sure how to define that term anymore…
Have a great weekend, everybody!
Kyle
at 8:33 pm
Before buying our current house, we put what we felt was a very strong offer on another property that had been on the market for a week. We knew the sellers and listing agents were hoping for a multiple offer situation that never materialized, because offer day had already passed. Hours after our offer was presented, the listing agent called our agent back to say they had received another offer and wanted to know if we’d like to improve. We all know phantom offers aren’t allowed, but lets face it they happen. Our BS radars were off the charts, we were so convinced that there was no other offer we told our agent they could either take our offer or let it expire. To no ones surprise the listing was still active the next day, which makes me even more confident that there was no other offer. And if there was it certainly wasn’t as strong as ours. It took another 2 weeks for the house to finally sell, at the same price we initially offered. And the thing is, had they worked with our offer we would have improved, but we were so convinced that we would just be bidding against ourselves, that we said F— ’em.
David Fleming
at 1:04 am
@ Kyle
Agents always tell their clients, “Well there IS another offer because the listing agent said so. There has to be. You just can’t ‘say’ there’s another offer if there isn’t. Nu-uh, no-way. That doesn’t happen.”
Well, could it? Does it?
Offers are supposed to be registered with the listing brokerage. When I have an offer, I call XYZ Realty and say, “Hello, I’d like to register an offer, please.”
I feel that every brokerge should have an “Offer Registry” whereby any offer presented/registered is recorded in a log. It should contain the date, property, agent, brokerage, and price.
If there are any accusations of ‘phantom offers,’ then you can always fall back on the Offer Registry.
I’m very interested in this topic. I’m going to speak with my manager and perhaps with the Bosley’s and see what they think about ‘phantom offers,’ ie. if they exist/happen, what the reprocussions are, what we could do to curb them, etc.
Amy
at 10:32 am
Buying a house/condo becomes such an emotional situation for a lot of people that agents, good and bad, play off them, getting people to pay thousands more than they need or want to. Housing prices are through the roof, especially in places like Toronto, and the agents directly benefit from this. Of course, everyone wants to sell their property for as much as they can get, but artificially inflating the value with phantom bids is ridiculous. Selling property is like a secret auction, so you can’t really know if these purported offers are genuine. Perhaps Canada should shift to a sealed bid system and only physical, registered bids with proof of ability to pay will be considered. If you’re into game theory, then always accepting the second-highest and not the highest maximizes benefit to all parties, but I don’t think such a reasonable law will ever be implemented here. Scotland, I believe, uses sealed bid systems.
Justin
at 3:34 pm
Perhaps off topic, but I’ve found that that “phantom offer” nonsense, as the person above referred to it, is pervasive throughout the condo rental market. I recently had to rent out a 1 bedroom condo in Mississauga, and experienced it (or at least suspect so) multiple times.
In the first instance, someone had made a rental listing for a unit at $1150/mo. This unit was on the ground floor of a highrise, had a pedestrian footpath literally arms length from your livingroom and bedroom windows (terrible privacy), and had no patio/balcony (just a small door joining said footpath). For these compromises, the price (about $100-$150 below market for a place that size/location in Mississauga) was reasonable. The next day I expressed my interest in the condo.
The gentleman renting the condo said he’d love to have me as a tenant, but that he wanted to show a few other people the place first. He phoned me back a couple of hours later the same day and fed me this line:
“I’m really sorry, but I’ve had several other people come to see my condo today, and all of them have been interested. I’ve been offered $1300 per month, BUT if you’re willing to match that, I’d be willing to work out a deal with you.”
I fail to believe that someone else would pay this much considering the compromises, when identically sized, finished, and located units were on the market for the same price, but without any of the drawbacks (one literally the same layout in the same building, on the 20th floor).
But what threw up the red flag for me was: if someone was genuinely willing to pay that much more than the asking rate for this unit, why wouldn’t the landlord simply accept the offer and be done with it? Why would he come back to me and ask me to match (not exceed) it? Why am I being presented with this “opportunity”. BS. He knew nothing about me and hadn’t done a credit/reference check. There was no reason for a preference at this point.
Unsurprisingly the condo reappeared on Kijiji and various other websites a day or two later, still looking for a tenant.
It seems like everone wants to play BS games when it comes to real estate. I’m not looking forward to buying in a couple of years.
I finally started looking at units listed by agents on MLS rather than private listings, and surprisingly the level of BS dropped substantially. Go figure. To be honest, I thought it would have gone up with all of the things I read on here, heh.
jeff316
at 11:47 pm
The problem with the potential for fake bids is two fold, in my view — 1) is it really a problem? Or do we just perceive it to be a problem when things don’t go as we hoped?
In Kyle’s case – I’d get my back up too in that situation – but just because the listing was active the next day and eventually sold for asking doesn’t mean there wasn’t another offer.
And it’s not all sellers jerking around too, I can’t imagine how many times a seller’s agent has been warned of a bid, only to not have that bid come in. Either way, both sides face risk. It’s a stressful time so we often tend to think the worst of others when things don’t go as planned.
Issue 2) If we decide that there is a problem, will the changes actually fix the problem?
Sealed bids does nothing to stop fake bids in the sense we’re discussing here – the seller’s agent can still tell the buyer’s agent that they likely have six agents preparing bids, so bid high. Interestingly, in the UK the Scottish system is viewed as the system that is the least friendly to buyers as it pretty much guarantees bidding war each and every time.
Our whole economy is premised on the secret auction model. If we want to deviate from that for real estate transactions, then that’s fine but other than public auctions, there are few transactions where buyers are truly aware of what their competitors are offering; because when you think of it, neither you nor I know what the other guy just paid for his burger at McDonald’s or that computer at Future Shop, or for that electrician to wire your home.
There are other ways of increasing consumer confidence that fake bids are not an issue without wholesale change of the system, in my opinion.
Kyle
at 9:25 am
@jeff316
I agree with you.
“1) is it really a problem? Or do we just perceive it to be a problem when things don’t go as we hoped?”
Having been on both sides of the negotiating table on many occasions, i don’t see phantom bids as a problem, IF phantom bidding were a known and accepted practice. What I see as the problem, is the RE Industry saying its unacceptable, when in fact the RE industry can’t and won’t properly police it. If the RE Industry would just make phantom bids fair game, it would quickly become just another tactic in an agent’s tool belt. And the market would adjust and actually become more efficient, fair and transparent.
“Issue 2) If we decide that there is a problem, will the changes actually fix the problem?”
As a consumer, i would NEVER put my faith in any fix, that involved industry self-regulating. Anyone can get their buddy to register a fake bid or submit a fake sealed bid. As long as the records are being kept by the brokerage or any other industry participant there will always be questions about their veracity. My own personal rule of thumb now, is this: it ain’t a bidding war until i’ve seen the other bidder. People will get out of bed for a bidding war, they don’t just phone their offers in. As far as i’m concerned, If the supposed other bidder or his agent can’t be bothered to go to a mutual meeting place to present offers/counteroffers, then maybe it’s because the other bidder doesn’t actually exist.
jeff316
at 6:28 pm
I agree, it is a tough situation. The industry takes flak for not doing a better job of making consumers feel comfy — but many consumers are unlikely to find comfort in an industry-run solution anyway — independent approaches to the problem will make people feel more comfy, but in reality won’t result in more protection from any fake bidding problem.
Kyle, I like your personal policy there about showing up. That’s what people need to do – set a boundary and stick to it. That boundary may be a ceiling price, it may be certain offer conditions, it may be asking all offer to show up in a multi-offer situation.
I think the key is to be smart and not get pulled into a situation you’re not comfortable in; fake bid or no fake bid, we’re responsible for offering what we think the property is worth (to us) within our means, regardless of whether or not there is another bid. Just stick to your plan, your numbers and what you’re comfy with and it will be fine.
Marina
at 1:33 pm
I think a lot of the problems can be solved if there is no re-bid (i.e. no sign-back process) in multiple offers. You make an offer, and they either take it or not.
If the next day the property is still not sold and you want to make another offer, then fine, but same deal – one shot.
This makes things close to a sealed bid, but the seller can still pick a lower offer if the conditions are better.