Can A Seller Accept A Pre-Emptive Offer “Without Notice?”

Business

7 minute read

May 25, 2023

A client and loyal blog reader asked me this week, “What are your biggest pet peeves about the industry?”

I smiled and said, “We’re only seeing one house.  We’d need an entire Saturday tour to provide me the time to answer that question…”

I can’t possibly imagine compiling a list of all of my pet peeves.  Then again, I regularly use this blog as an outlet, so I’m sure we could come up with five, ten, or one hundred in no time.

Some pet peeves come and go.  Some linger like a head-cold that should be gone in two or three days, but the symptoms of which go on for two weeks.

And then there are other pet peeves that sting like a scorpion, only to completely disappear, and yet return again years later like that friend from high school that you thought you had seen the last of.

But then all of a sudden, that friend is back!  And not just with a “like” on one of your social media posts, but rather text messages or emails saying, “We should get together and catch up!”

Huh?

Why?

We moved on.  We have different lives.  In fact, our lives are so different that we have absolutely nothing in common except for one thing: we used to be friends.

Wait….where was I going with this?

Some real estate pet peeves fade away or completely disappear, only to come back with a vengeance.  Like an old friend who still wants to talk about why you didn’t room together in first-year university and what an incredible impact that had on his or her life…

One of my biggest pet peeves back in 2017 or 2018 was when real estate agents started posting in the brokerage remarks of their MLS listings, “Fuck off, I can do whatever I want, and I plan to.”

Except that’s not verbatim.

They were writing something like this:

That’s not a listing from 2017 or 2018.

That’s a current listing.

And agent 12345 with a Hotmail email address is basically telling listing agents, “I don’t care what the rules are, nor do I believe in cooperation, professionalism, or anything of the sort.  I will do what I want, when I want, and act with impunity.”

What are we talking about here?

Well, for those not following, let me break it down to the basics.

A property is listed for sale on Tuesday, May 16th for $999,000.   There is an offer date specified for 6:00pm on Wednesday, May 25th.

The listing notes, “Seller may consider pre-emptive offers.”

This opens the door to a “bully” offer being submitted ahead of that scheduled offer date on Monday, May 29th.

In the case above, the listing agents are specifying in the listing that they will not notify cooperating agents if/when a pre-emptive offer is submitted, and will accept the pre-emptive offer as they see fit, in defiance of the rules of organized real estate.

Do you get it now?

Back in 2015, before this was even a thing, I filmed this satirical video to try to explain just how insane this process is:

That video was supposed to be shining a light on how complicated and intense the Toronto real estate market is, and the theme, “What If The Wold World Worked The Same Way As The Toronto Real Estate Market?” was supposed to drive the point home.

Looking back, the idea that an interested buyer wasn’t even notified of a pre-emptive offer (albeit, on a tube of toothpaste at a pharmacy…) was about 2-3 years ahead of its time.

In 2017-2018, this was happening constantly.

Agents were detailing on their listings that they “reserve the right” to change the scheduled offer date of a property – without notice.

The idea was ridiculous.

But more importantly, we had to ask ourselves why an agent would want to do this?

Is it laziness?

Is it self-interest?

Is it ignorance?

It has to be one of the three or all of the three.  Perhaps a combination therein?

I sat down today and searched brokerage remarks for the words “without notice” and there are 177 current listings with something to the effect of this:

Not only does buddy with a Yahoo email address refuse to update his out-of-date listing, since this offer date was a week ago, but he’s also thumbing his nose at the rules of organized real estate.

“Reserves the right to accept pre-emptive offer without notice.”

So how does this work in practice?

Let me explain how the process is supposed to work.

On Friday afternoon, I showed a property to clients who were head over heels for the place and we decided to submit a bully offer.

I had them go to the bank and get a certified cheque for $100,000 as a deposit, we satisfied ourselves of the contents of the home inspection, and at 5:15pm, I submitted an offer for $1,600,000, unconditionally, with a deposit in hand, to the listing agent.

I know the listing agent.  She was cool with it.

Usually, the listing agent will see if the seller wants to sell for this price, or more, and if the seller does, then the listing agent will notify all interested parties.

Who are “interested parties?”

Well, for one, how about all the agents that have booked a showing?

Pre-Emptive Offer Registered On 123 Fake Street, Irrevcoable at 8:30pm.  Please call L/A asap if interested.

That’s the email that would go out to all the agents who have booked a showing, and anybody else who “expressed an interest.”

I waited past 6:00pm.

And I waited past 7:00pm.

At 8:20pm, I was sitting in a restaurant – which I almost never do, because I’m “boring” as people regularly tell me, and I saw an email on my phone:

2 Offers Registered On 123 Fake Street

Then immediately after, another email:

3 Offers Registered On 123 Fake Street

It’s no coincidence that these emails went out five minutes before my offer was set to expire.  The listing agent waited until she had an offer in hand that was better than mine, and sent out the email.

She called me and said, “You’re beaten.  Let me know what you want to do.”

In this case, we came up to $1,660,000 and we bought the property.  There’s about two hours’ worth of story missing here, but that’s not the point.

The point is: that’s how things should work.

How do they work in the case of agents who break the rules?

Well, let’s read a recent RECO bulletin that details a similar situation, a subsequent complaint, and how the agent involved was disciplined:

 


 

Mishandling of delayed offer presentation, pre-emptive offer and multiple representation leads to discipline

Originally published in For the RECOrd (April 2022)

Case summary

A property was posted to the local multiple listing service (‘MLS’) stating that offers would be accepted by email on August 31 at 5 p.m. and included a notation that the “seller reserves rights to review pre-emptive offers.” The seller’s agent did not have written instruction or direction from the seller about delaying offers, nor about how pre-emptive offers would be navigated.

A pre-emptive offer was submitted through a buyer’s brokerage on August 26, which was presented to the seller but not accepted. The seller’s agent did not inform any other parties who had expressed interest in the property.

The seller’s agent then showed the property to a prospective buyer who was also represented by the seller’s agent. This happened after the first pre-emptive offer had expired. The listing agent’s buyer made a pre-emptive offer, which was accepted.

The listing agent again did not inform any parties who had expressed an interest in the property (including the buyer who made the first pre-emptive offer) that another pre-emptive offer was being presented. Additionally, the record-keeping and representation paperwork for the accepted transaction had errors and contradictions.

The seller’s agent was referred to discipline to consider the following allegations:

  • Failure to put in writing any instructions or direction from the seller that there would be a delayed offer presentation date, and a failure to put in writing any instructions on how pre-emptive offers would be handled if received, contrary to sections 3 and 4 of the Code of Ethics.
  • Failure to treat all interested buyers fairly and to promote the best interest of the seller client by not informing all interested buyers that pre-emptive offers had been received and were being presented to the seller, contrary to sections 3, 4, 38 and 39 of the Code of Ethics.
  • Failure to properly document agreements relating to trading in real estate, contrary to sections 4 and 5 of the Code of Ethics.

Discipline

The listing agent was found in violation of the Code of Ethics sections 3, 4, 5, 38, and 39, ordered to pay a fine of $14,000, and required to take RECO’s MCE ethics courses.

Learning opportunity

For seller agents, fair handling of any offer process is essential, and should be approached with extreme care when multiple representation arises or when there is a delayed offer strategy. Seller agents are to take steps to inform all interested parties when the seller changes offer-handling instructions, including changes to the offer date and the handling of pre-emptive offers and updating any applicable real estate board or online selling-platform listing notes. This is done in the seller’s best interest and to be fair to those who have expressed interest in the property.

 

 


 

Wow.

What a scumbag.

What a complete and total scumbag, and yet this individual is gainfully employed in our industry and represents a small, but not insignificant, portion of agents out there.

In this case, the agent “double-ended” the sale, in case that wasn’t obvious.

That answers our question above with respect to why agents do this.  Is it ignorance, laziness, or self-interest?  In this case, it was clearly self-interest.  The agent double-ended the deal and did so in the worst way possible: by bullying his own listing!

Reputable agents would never do this, but more importantly, they would never even think of doing this.  Not just because it’s wrong but because of the reputational risk and damage.

Reputable agents go above and beyond to ensure they’re not demonstrating poor ethics and business practices that would make their 72,000 colleagues think less of them, not to mention, the general public.

And yet, there are agents out there that almost seem to make this behaviour a business model.

Think about it: perhaps the verbiage “reserves the right to accept pre-emptive offers without notice” accompanies a listing for which many cold calls are expected.  Perhaps the listing agent believes there’s an opportunity for a double-ender, and is getting out ahead of that.

But what I can’t figure out is why these agents feel the need to advertise in advance of breaking a rule that they reserve the right to break a rule?

If you were passing through the on-ramp to Highway 401 and there was a police officer there, do you think if you said, “Officer, just so you know, I plan to obliterate the posted speed limit about five minutes from now”?

No, you wouldn’t.

So why do agents think that disclosing they plan to break a real estate rule makes it acceptable?

Here’s a good one:

Oh, okay.

The agent his selling his or her own property and is going to “accept offers without notice.”

Now there’s truly nobody to blame.

While I realize that Toronto MLS is run by the Toronto Regional Real Estate Board and complaints, ethics, and discipline is handled by the Real Estate Council of Ontario, I can’t figure out why TRREB allows this behaviour.

TRREB will routinely email (they faxed until a couple of years ago…) if we have a listing with a condition expiry on May 17th, and it’s May 24th, giving us 48 hours to update the listing.

TRREB will also routinely email us if and when we put a URL in the “Remarks For Clients,” which is against TRREB rules, again, giving us 48 hours to comply.

The way that multiple offers and pre-emptive offers are reviewed and handled is not the responsibility of TRREB, but rather RECO, and yet I can’t help but wonder why TRREB won’t step in and right a wrong.

So in the end, it’s up to us to file a complaint only after a wrong-doing, which can’t be undone, has been done.

That sentence is equally as confusing as the question of why this behaviour is allowed in the first place…

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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8 Comments

  1. Jenn

    at 9:11 am

    Soooooo who didn’t you room with in 1st year uni, David??

  2. Libertarian

    at 10:32 am

    You’re right David, that agent getting disciplined was a real scumbag. I wonder who was so pissed off (the initial buyer or the seller) to go after the person with a complaint. That seller got royally screwed! So my guess is the seller complained. I wonder whether they also sued the agent.

    1. David Fleming

      at 9:11 am

      @ Libertarian

      The complaint was undoubtedly filed by agent(s) who had interested buyers but were burned by the listing agent’s actions.

      I suppose the buyers themselvers could have filed complaints as well, but buyers rarely do.

      Sadly, it likely wasn’t the seller, since the seller trusted the listing agent and had no idea what was really happening. Sellers often defend their agents to justify hiring them in the first place. Denial ain’t just a river in Egypt…

  3. Ace Goodheart

    at 2:27 pm

    Once viewed a house (with a long line of other people – double and triple booked viewing time slots) that was already sold.

    House sold unconditionally the night before to a bully.

    But they left the showing booking process open and didn’t tell anyone.

    When our Agent made an inquiry about the property in preparation for what we had thought would be “offer night” we learned the house had been sold the night before we viewed it.

    So they were booking showings on a house that was already sold on a firm unconditional APS.

  4. Steve

    at 10:57 am

    “The listing agent was found in violation of the Code of Ethics sections 3, 4, 5, 38, and 39, ordered to pay a fine of $14,000, and required to take RECO’s MCE ethics courses.”

    That’ll show ’em, fining them likely significantly less than they made off this one transaction that they got caught on.

    1. Jordan

      at 1:59 pm

      Really two transactions! At 5%, i’m guessing this was more than $280,000 sale. Jeez RECO at least hit them for their entire commission on both sales and warn that if they are convicted again they lose their license. Is that within RECO’s ability David or other agents?

      Feels like there should be a 2, maybe 3 strikes and you’re out rule with meaningful violations like this. I guess that reduces the number of members paying dues…

  5. GinaTO

    at 11:04 am

    Why are names not revealed in discipline decisions? They are when it comes to teachers and pharmacists, to cite the two examples I am familiar with. I know that those two examples related to colleges reprimanding their members, not just some association, but still, they all relate to breaches of conduct in their field…

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