Bully Offers: The Devil’s New Plaything

Business

6 minute read

May 7, 2014

This is getting out of hand.

The only thing worse, for frustrated buyers in this market, than seeing a house listed at $689,000 sell for $902,000, is seeing that house sell for that price……..three days before the scheduled offer date.

Bully offers are taking down properties before the rest of the market and the buyer pool has a chance to act, and buyers are throwing up their hands and saying, “What the hell do we have to do in this market?”

Even worse: agents are asking the same question.

What can we do?  And what are the rules?  Let’s discuss…

NoBullySign

A few weeks ago, I wrote a blog post called “End Of The Bully Offer?”  In this article, I suggested that perhaps bully offers were a thing of the past, and that in the upcoming spring market, they would virtually disappear.

Well, I was wrong.

In fact, I could not have been more wrong.  I could have tried to be more wrong, but I would have been unsuccessful…

I was so wrong, that it would have been tantamount to saying, “I think Donald Sterling is a really great human being” around the same time.

Not only have bully offers not ceased to exist, they’ve actually ramped up in activity.

They are, in my humble opinion, ruining the business, or at least the way they are handled is doing so.

I often assume that everybody reading my blog is a real estate expert, so for those that aren’t familiar with bully offers, let me offer a very brief refresher:

When a single-family home is listed in Toronto, on May 6th, the listing will detail, “Offers reviewed on May 13th,” with the expectation that there will be multiple offers, and the house will sell over asking.  A “bully offer” is submitted by an aggressive buyer before May 13th, often on the very day the listing comes out, and often for an obscene amount of money.

That is a bully offer.

Bully offers, once upon a time, were a well-kept secret in real estate.  They were a seldom-used tactic, by aggressive agents and their buyers, and they often paid off.

Today, everybody knows about bully offers, and everybody’s doing it.

It’s the very reason that I suggested, six weeks ago, that they served no purpose anymore.

But an alarming trend continues to develop in Toronto, whereby more and more houses are selling via bully offer.

And this is perhaps the most frustrating trend in real estate that I’ve seen in my 10+ years in the business, for one simple reason:

If we can’t agree WHEN we’re going to look at offers, then we’ve finally reached complete chaos.

Chaos, you might suggest, is listing a property for $599,000, when you know it’s worth $800,000.

Chaos, you would believe, is when fifteen people submit offers on the same house, on the same night.

Chaos, I would agree, is when there is no set, identifiable method of reviewing multiple offers, and whereby the listing agent can “send back” offers to improve until the clock strikes midnight, if he or she so chooses.

But at least when houses sell for 125% of the asking price, amidst two dozen offers, there is some order to the process.

But what if we can’t even agree when we’re going to review offers?

If a listing comes out on May 6th, and the listing agent specifies that offers will be reviewed on May 13th, then most of the buyer pool is waiting for that date.  Believe me – we would all like to avoid “offer nights,” and the multiple offers that come with it.  We would all like to be FREE to submit offers whenever we choose.  But we’ve accepted this process, for what it is, with all its faults, and with such a heavy advantage to the seller, because we have always been in a seller’s market.

Now, it’s gotten even worse.

Now, you’re told that offers are going to be presented on May 13th, but you find out that it sold on May 7th, and you never even had a chance to see it.

What’s the point of saying “Offers reviewed on May 13th” if you’re really open to a bully offer at any point?

And if this is the new 2014 spring market, then what the HELL does a buyer do?

It’s really scary to think that this could be the new norm.

I met with buyers on Saturday and told them that two of the houses that we were scheduled to see – both with offer dates this week, had been sold via bully offer on Friday night.

It’s bad enough that properties are selling for $200K over asking, and it’s worse that you’re always competing, but to have to constantly worry that a house sells when nobody is expecting is about the worst offence I can think of, and it’s just rubbing salt in the wound.

One thing you can do, hypothetically, is register an offer on a property that you’re interested in, so that the property can’t sell from underneath you with a bully offer.

If a property comes out on May 6th, and is scheduled to review offers on May 13th, then register your offer on May 6th, and thus you will, by law, have to be informed of any bully offers or registered offers.

This is all theoretical, or course, because there are two major problems with this:

1) It opens the door to forty potential buyers, all registering offers on the day the property comes out, even though they can rescind their offers at any time.

2) A listing agent can still sell the property out from under you without notifying you of a registered offer, if he or she so chooses.

I know that point (2) is possible, because it happened to me.

By law (if you can even call it that…) a listing agent must inform any agent, with a registered offer, when any subsequent offers are registered.

Well, a few weeks back, I submitted a bully offer on behalf of my buyer clients, and the next day when our offer was set to expire, the listing agent called me and said, “Sorry, but we sold it to somebody else who had a stronger offer.”

I said, “What ‘somebody else?’  There couldn’t be ‘somebody else.'”

She said, “Well, there was, there is, and we sold it to him.”

I said, “But there can’t be another offer.  It’s impossible.  Because, you see – I was never notified that another registered offer came in.”

“Yeah, well…..” she said, as she drifted off, counting her commission, not really caring at all.  “That’s just the way it goes.”

Indeed.

That’s just the way it goes.

I registered my offer, and submitted my offer, and my clients and I waited.

Then amazingly, the property was sold to another buyer, when I was NEVER notified that another buyer had registered an offer.

This is a blatant offence of RECO guidelines, but as I told my buyers, there’s really no repercussions.

Filing a RECO complaint would do nothing but make an enemy of this agent, and hurt my chances of working with her down the line.

It’s too easy to defend yourself in a RECO complaint and just say, “We told the girl working our front desk to page any agents who had registered offers, but she was terrible and ended up being fired, so we’re not surprised that she didn’t send out those pages.  Oh, and she’s now surfing off the coast of Australia, so unfortunately can’t be contacted.”

I’m sorry to burst the public’s bubble, but RECO doesn’t have the time or resources to chase down every single complaint that they get.  Organized real estate doesn’t have a watchdog; only the illusion of one.  Organized real estate can be, and often is, completely unorganized.

And it’s problems like bully offers and not notifying interested parties that will forever go unchanged.

It’s been tough enough on buyers so far in 2014.  We don’t need to make it tougher.

I understand that sellers are emotional, nervous, anxious, and at the same time – greedy, but if you say “Offers reviewed on March 13th,” and you’re going to look at a bully offer on the 7th, then there has to be something they can do for the buyers.

A listing agent should email/page/phone every agent who has booked a showing – both those showings that have taken place, and those booked in advance, and say, “FYI – a bully offer has been registered on the subject property, and we are looking at it on May 7th at 7:00pm.”

Then if the buyer says, “Ah screw it, we can’t act that quickly,” at least they had the chance.

Otherwise, it’s just chaos out there.

One of the properties I was scheduled to show on Saturday afternoon had sold on Friday night with a bully offer, and the listing agent didn’t even call to tell me.  I would have shown up, got the key out of the lockbox, and shown a property that had already sold.  Or, I would have shown up, and found no key in the lockbox – just to waste my goddam time.

Chaos, I tell you.

It’s just nuts out there…

Written By David Fleming

David Fleming is the author of Toronto Realty Blog, founded in 2007. He combined his passion for writing and real estate to create a space for honest information and two-way communication in a complex and dynamic market. David is a licensed Broker and the Broker of Record for Bosley – Toronto Realty Group

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32 Comments

  1. joel

    at 8:36 am

    It seems that agents have really created a terrible environment for real estate in Toronto! Maybe if everyone continues with this ridiculous behavior we will start to see houses listed for their actual value and then we will have a ‘normal’ market, where only A+ houses have multiple offers. \if not it will be even more important to have a good buying agent that can preview houses for you the second they are listed and try to get their clients in that day to make an offer. I think that this is a reasonable response to listing every house for much less than market value and I have no problem with it.

  2. IanC

    at 8:40 am

    Filing the complaint would probably hurt your changes with working with just about everyone, not just her.

    For many professions: doctors, police, politicians… reporting such offenses comes at a very high cost to the reporter.

    That agent’s actions were absolutely blatant, and she sounded so smug.

    This story makes me kind of sad.

  3. Kyle

    at 9:19 am

    I’ve noticed a LOT of houses selling in under 5 days on the market lately. Usually a sure sign of a bully offer. I think i’ve even seen a 0 days on the market. One of the funniest was 582 Broadway, sold in 2 days, with “Photo Not Available”.

    Part of me wonders how many listing agents are bullying their own listing. If there was a significant percentage, i think it might be cause for concern. But otherwise i see no issue with the practice and in my opinion those buying agents winning these houses before offer night are adding value for their clients and differentiating themselves from the rest of the pack. Maybe this forces buying agents to change the way they work (for the better, in my opinion). Maybe instead of having many active/semi-active buyer clients that they just spam with Stratus reports every day, hoping for one of those clients to see something they like something, it means that agents have provide more focused personalized service to a smaller group of active buyers. Maybe agents will need to know exactly what each of their clients wants/needs and goes through all the new listings and calls up their clients to say, “123 Easy Street is the one, but we have to act fast, how soon can you meet me there?”

    It takes hard work and orchestration to stay abreast of new listings that are appropriate for your clients, to be able to move fast and have your clients ready to pull the trigger at a moments notice, so i say kudos to those agents for making sh1t happen.

    1. joel

      at 2:58 pm

      Well said Kyle, completely agree!

  4. Chroscklh

    at 9:48 am

    In my country, real estates became very hot market following hanging of president; misleading low price and multiple-offers, sometimes 1,000% over ask was norm – Government introduce “Price is Correct” legislation (from gameshow) – if u go over ask, you lose. On day 1, three people (with friends in govt) bought house for $1 before sellers realized new rule and raised asking price. Those 3 sellers try to back out but cannot or jail. Now people ask 10 billion cuzas for house barely worth 300 million cuzas.

  5. M

    at 9:58 am

    I don’t understand how accepting a bully offer would be a sound strategy from the sellers perspective. It seems akin to hiring someone for a job without posting for it. In the hiring situation, you might think the person referred to you is the best person for the job, but isn’t it better to interview a range of candidates and know for sure? Likewise for accepting the bully offer. The bully may say that they won’t re-submit their offer on offer night, but it seems like a pretty weak bluff to me.

  6. Joe Q.

    at 10:01 am

    By not informing registered buyers’ agents of an incoming bully offer, isn’t the listing agent denying his client (the seller) the opportunity to get even more money for the home being sold?

  7. Paully

    at 10:14 am

    I guess as a listing agent now instead of actually taking pictures and measurements at the house, all you have to do is post a video clip of Cuba Gooding Jr. and Tom Cruise screaming “SHOW ME THE MONEY!”

    I don’t understand why any vendor would accept a bully offer. The bully’s M/O is to get the property without having to face competitive bids. It would seem that accepting the bully offer means possibly leaving money on the table. If a bully is prepared to offer 25% or 30% over list on day one, they should be perfectly capable of offering the same amount on day eight.

    It’s no wonder that listings are tight, even with real estate at all time high prices. Who in their right mind would want to get involved in trying to buy back into this market? You might sell for a ton, but if you are trying to buy something else, you could get screwed many times over.

    And strangely, here in Willowdale, every day I pass a good number of SFH dwellings with old, faded “For Sale” signs that were up all winter. How can these houses sit unsold and unloved for six months or more when things are going so crazy in the overall market?

  8. ScottyP

    at 10:30 am

    Agent: “So, after a good 10 minutes of research I’ve determined that your house is worth around $850,000.”
    Owner: “Okay, so why are we listing for $650,000?”
    Agent: “To garner as much interest — and to receive as many offers on offer night — as possible.”
    Owner: “Okay! Sounds great!”
    Agent: “Hold the phone. What’s this? An offer for $910,000?”
    Owner: “But I thought we already decided that offers would be submitted on offer night?”
    Agent: “No, but this is a BULLY offer. And it’s for $60,000 more than what I deemed in my infinite wisdom to be the ‘true value’ of the house!”
    Owner: “Really? That’s good, isn’t it?”
    Agent: “You bet it’s good. Less stress for you, less work for me.”
    Owner: “Okay! Sounds great!”
    Agent: “Excellent! Everyone wins here, except for the jackass showing his clients the house as we speak.”
    Owner: “Screw him, I’m sold!”

    1. Duncan

      at 3:23 pm

      Ha! Good one!

  9. Rlst8isgreat

    at 10:58 am

    As a Broker being in the biz since 2000 in addition to confering with colleagues in franchised and non-franchised offices in different parts of ths city, the conclusion was the following: this is a process with undefined guidelines and protocol. It all comes down to the fairness and biz practices of the individual listing agent…..sorry to say….

    If you as the listing agent clearly state an offer date and time in the body of the listing, you should stick to your guns and not be pressured by anyone out there with some questionable offer. Failing that, you as the listing agent are not working for your selller. How do you know that you may not receive a better offer on offer night??

    Realtors are to blame for this practice and in the words of Radiohead: You do it to yourself you do and that’s what really hurts….

    As buyer agents we work too hard to be pitted against this horses***

    If we’re going to be innondated by rules then let’s have some clear cut ones for bully offers or as listing agents not succumb to this vulgar practice.

    Best of luck to all colleagues working in this environment.

  10. Geoff

    at 11:19 am

    @ Chroscklh

    In Canada, you buy house.
    In Soviet Russia, House Buys You!

  11. George

    at 11:21 am

    It is logical to suggest that sellers should decline all bully offers, but everything changes once the money is on the table. It is hard to turn down the opportunity to end the drama and lock in a nice sale, 100% guaranteed. It gives the seller extra time to plan their own purchase, allows them to stop the parade of people coming to see their place, and returns their life to some state of normalcy. The listing agent saves a ton of time as well, and their influence upon the seller should not be discounted.

  12. Kyle

    at 12:38 pm

    “Bully offers are taking down properties before the rest of the market and the buyer pool has a chance to act, and buyers are throwing up their hands and saying, “What the hell do we have to do in this market?””

    This crazy market is hopefully going to result in innovation from some of the smarter agents and their clients. I’ve seen some enterprising buyers agents moving even further up the transaction life cycle. Forget about preempting offer night, these guys are preempting the decision to sell. I know of a few instances, where real buyers and their agents have combed the neighbourhood and made a list of addresses, and then systematically approached each one. There are other agents, that i know of looking for the tell tale signs that a house is going to come to market soon, so they can get their clients in their first. They look for the houses with the mountain of purged clutter on garbage day, or they’ll look for the houses where some some sprucing up is going on (planters in front of a house that never had planters before is a pretty good sign).

    Anyhow i think this short term pain is good for the Industry. Sure supply is tight and rules aren’t written in stone, but to the good agents out there there’s no point crying about the state of the nation. Innovate don’t commiserate.

    1. jeff316

      at 7:58 pm

      You’ve touched on a great point. I think there was a time when the market was relatively steady and competent agents could make a decent living as a buyer’s agent with relatively minimal difficulty, with the rise of the online MLS system really facilitating the work on the agent’s end. I think that’s why there is a lot of push back from agents in situations like this – the job is becoming more complex. Specializing, innovating, and providing added-value is becoming more and more important to success in the business. (That’s not to say there aren’t agents already doing this.)

      I think one of the things that frustrated buyers (and some agents) tend to ignore is that the more structure that is put in place in the bidding process the less room there is for strategy, manoevering, and innovation in the process of buying and selling a home. A smart agent and a smart client can use those to their advantage to find the right house in the right area for the right price, but maybe in a less orthodox manner.

  13. lulu

    at 1:55 pm

    After seeing the 195% over asking house sold in two weeks ago, anything is possible to me in Toronto Real Estate market. More and more immigrants settle in the city and land is become extremely rare, there is no new supply, what can buyers do, pay more for a piece of land and start their family there, TO house prices will go higher and higher each year. We just need to suck it up.

    Honestly i think sellers that accept bully offer is not so wise, lose out all other offers on offer night is a very risky move, maybe some buyers are willing to pay more than the bully one, there is money left on the table.

  14. Josie Stern

    at 3:36 pm

    David I follow your blog and most times, even though I do not comment, I agree with you. This time, though, I have to comment. You described how an agent sold a property to another buyer even after you registered your offer without telling you. You further said that you did not report this agent to RECO for fear of repercussions. I am deeply disappointed. I have been selling real estate for 25 years and I am VERY busy but never too busy to scare the daylights out of agents. Believe me NOBODY likes to receive a complaint from RECO which they are obligated to respond to. And although I agree with you that RECO would probably just give this agent a warning, regardless, this agent would think twice before doing it again. I have read RECO cases where the agent was fined heavily for such a transgression because decisions at RECO are arbitrary depending on who is dealing with the case. Blogging about these transgression without a follow through complaint is useless. I further do not agree with you about the agents attitude with you after you report them. I have reported many agents and my experience has been that they dot their i and cross their t when they deal with me afterwards. Another thing you have to remember is that many agents cannot write a proper sentence and many hire a lawyer to respond to the RECO complaint. Well this costs money and time and believe me they do think twice before doing it again. I will continue to report agents as long as I am breathing because it is the only way to ensure that when that agent deals with MY clients again they will be dealt with fairly. So I have to respectfully disagree with you.

    1. Joe Q.

      at 11:21 pm

      One would also hope that an uptick in (justified) complaints by Realtors would prompt RECO to start treating them a bit more urgently.

    2. JP

      at 11:22 pm

      I couldn’t agree more. Thank you Josie.

      If no one reports slimeball tactics like this, agents like this will continue to do it without repercussions.
      IF she doesn’t want to work with you again, is that really such a bad thing, if this is the way she behaves? I suspect she WILL work with you again, but she’ll make damn sure she does so ethically.

      I’ve reported agents before.

      Sorry David, but my personal opinion on this is much the same as those that complain about our Mayor but didn’t vote.

    3. ScottyP

      at 12:47 am

      I like the cut of your jib, Josie Stern.

  15. frank

    at 4:29 pm

    This isn’t a new norm for:
    1) bully offers
    2) housing prices
    3) interest rates

    1. Kyle

      at 5:40 pm

      Care to expand on why it isn’t? All these things have been the around for the last 3-5 years, so how long does something need to persist, before we can call it a new norm?

      1. frank

        at 11:55 am

        I would describe bully offers as a temporary anomaly which will almost cease to exist when the trend of increasing house prices is reversed. Bully offers will elevate the price of a house and probably affect other houses in the area in the same way. There is a breaking point, hence temporary. Additionally, what percentage of the population are in a position to make such outrageous offers? Its not like RE is tapping into an a massive revenue stream with endless resources.

  16. Todd

    at 6:50 pm

    Real estate agents have made a complete mess of the Toronto market. Congrats.

  17. Long Time Realtor

    at 7:21 pm

    I’m inclined to agree with Josie Stern on this issue David. RECO can do nothing if they don’t have a file.

    And as far as fretting over how this agent might treat you in the future if you do file a complaint, just ask yourself this – could she treat you any worse than she already has?

  18. ANoder

    at 8:10 pm

    Another agreeing with Josie. Do nothing and the Realtor just keeps pulling the same stunt until one day someone else complains. To publish it and purport to do nothing encourages this type of transgression. It doesn’t matter if the unregistered telephone person didn’t make the call, the ultimate obligation s on the brokerage and listing rep.

    RECO follows-up on every single complaint, it may take years to come to a hearing but if it has merit and is properly backed up, it will go to a hearing and losing all or even most of the commission earned in a fine then having this decision available online for years is a tough lesson.

    Yes, the conundrum is that you may very well run up against this Realtor again and you’d rather protect your buyer client if you do, but if they’re not prone to follow this particular rule of ethics and and fair dealing, what makes you think they’ll deal fairly with you at all?

  19. Kyle

    at 8:42 pm

    Most of the time I’d say reject the bully offer, but right now the utter and complete lack of supply is what the seller has to his advantage. In many hot neighbourhoods, there may only be one or two active listings at a given point in time. That’s not necessarily a situation that’s guaranteed to remain over the next 6 days. Last thing you want is to reject a bully offer on day 1, just to have your neighbour’s house come on the market and sell to him the next day. I don’t think you can ever take any market for granted.

  20. Rlst8isgreat

    at 9:35 pm

    Just a note with regards to Kyle’s comment on finding homes for buyers that are not yet listed…having resorted to this method in the last few years I can tell you that this is not as straight forward nor an innovative way to approach the short supply/ bully offer frenzy.

    In my experience, sellers in high demand areas know they’re in the driver’s seat and once you approach them they often, despite being shown recent MLS stats and the ensuing discussion “suggest” ridiculous prices. You can have any argument ready in your back pocket however nothing supercedes their greed..if we ever have a balanced market then perhaps this bully nonsense may take a backseat…

    Kyle, your commentary is valid and seems to be the most logical given the majority of posts on this blog but at least in my experience what you suggested, although valid does not always pan out.

    1. Kyle

      at 9:57 am

      Agreed it is not new to find homes that aren’t listed yet and is probably a hit or miss strategy. However I am seeing anecdotal evidence that it is happening more frequently now that supply is so low. I know of three instances in my neighbourhood in the last year – 2 were successful and 1 was not. However there could have been many more attempts that i am not aware of. The thing i find different in this market, is that agents seem to be taking a more direct approach, instead of leaving notes in mail boxes (which may just be agents fishing for listings), they seem to be making lists of 5 to 10 addresses and then knocking on doors. And i think agents are more actively gathering intel in the community and making connections to find out who’s buying and who’s selling.

      I assume this strategy works best for a buyer who is looking for something very specific or rare, not necessarily for a buyer who is mainly trying to avoid the premium associated with bidding wars and bully offers. Because as you correctly said sellers will expect a premium. But i can certainly see in this current market for certain buyers, this strategy being one that a savvy Realtor pulls out of his tool kit. For example if say a client wanted a fully-renovated, detached, 4 or more bedroom house, with parking and finished basement in the Garden Avenue Public School district, West of Roncy; then he/she could wait until one comes to market (i can’t recall ever seeing one listed, even though the neighbourhood is full of houses like that) or he can shake the trees and offer a premium.

  21. Jim

    at 12:23 pm

    I wonder if the buyer was born with a silver spoon in his/her mouth. The monthly carrying costs would make the standand of living very poor for the average buyer. With things so expensive and increasing, City Hall’s market value tax assessment + next yrs tax increase might it impossible to keep the house. I smell a loss.

    I hope the broker for the buyer did an analysis of his client’s ability to afford such a house and the listing agent was drunk on “success.” And the owners of 1 King St E can sell their units.

    Isn’t greed wonderful?

    1. Geoff

      at 8:20 am

      @ Jim

      “The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA [and Canada]. Thank you very much.”

  22. John Doe

    at 12:07 pm

    Do you want to really know why houses in Toronto are overpriced?

    This agent listed a house for $950K. Then proceeded to take offers from people. Declined all the offers..

    Then he re-listed the exact same house not even 2 days later for 250K more! New price 1.2 Million! Wow.. it went up $250 in less than 2 days.. Very nice commission! Shame he didn’t work for it, he merely scams people for a living.

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