Monday’s blog was depressing, wasn’t it, folks?
Well good news – we’re about to change all that!
Because I have personally decided, in a naive and fruitless attempt, to change the real estate industry, one day at a time.
I’m about the least religious person you’ll ever meet, but I truly believe in “do unto others, as you would have them do unto you…”
What do you think is the biggest problem with how offers are reviewed in the 2017 Toronto real estate market?
I know, I know – where do we start.
In order of importance?
Start with the most audacious?
In Monday’s blog, I detailed how bully offers are running rampant, and many agents aren’t informing other buyer agents of the existence of a bully offer, and in some cases, not updating MLS or other agents for days, as they continue to show the property.
I also touched on the “old way” of reviewing offers, which I’ll get into in a moment.
But the way I see it, there are seven major problems with how multiple offers are reviewed in 2017:
1) Bully offers
2) Not keeping agents informed as to number of offers
3) Timing of presentations
4) No defined “rules”
5) Multiple rounds of bidding
7) Respect for other buyer agents
I’ve had six listings so far in 2017 that have gone into multiple offers (they all do, these days…), and starting in January, I decided that while the bar in organized real estate continues to plummet, I would seek to raise my own bar to a higher level.
So first and foremost, and this is important, I have noted on all my listings, “Sellers Will Not Consider Pre-Emptive Offers.”
Now before you anoint me, let me be honest and say that this isn’t entirely selfless. I firmly do believe that you always, or at least 90% of the time, do better on offer night. The idea that the buyer, submitting the bully offer, “won’t come back” on offer night is an empty threat. Sure, they might buy something else in the next 5-6 days before offer night, but in this market – it’s not like they’re flooded with options!
But in the spirit of respecting my colleagues, their time, their efforts, and trying to reduce the mania involved in real estate, I really do think that if you write, “Offers Reviewed On February 21st, 2017 At 7:00pm,” you should actually review offers on February 21st, 2017, at 7:00pm.
It’s madness out there, folks.
You just can’t trust the listing when it says there’s an “offer date.”
And many of you reading this, right now, can personally attest to this.
Bully offers are wrecking havoc in the industry, and so I’m putting my foot down.
There will be no bully offers on my listings.
I will honour the set “offer night,” as I respect the time and effort that other buyer agents put into their clients’ search, but more importantly, I feel for the buyers out there that, God forbid, want to wait 24 hours to see the new listing, but find out the next day that it sold.
Now the rest of my points above, #2 through #6, can be explained through the following.
On the morning of my “offer night,” I send out an email to every agent who has booked a showing on the property.
I “BCC” all the agents, and email them the following:
Thank you for showing 175 Homewood Avenue, #2404.
If your client is not interested in this property, simply delete this email, and all the best in the spring market!
For those with clients interested, here are the particulars:
- There are currently zero offers registered.
- Offers will be reviewed tonight at 7:00pm, by email to email@example.com
- Please register your offer by 6:00pm.
- Bosley requires a deposit cheque to be submitted herewith; please provide a scan or photo of the cheque with your offer.
- It will be a “one shot deal,” highest and best offer will be accepted, no second rounds, do not hold anything back.
- The Status Certificate is available – please email for a copy.
- Seller’s desired closing date is March 31st
- Front desk will have an updated number of offers throughout the day, or email firstname.lastname@example.org
Any questions, please let me know!
Is that really so hard?
I talk a lot about “the bar being lowered,” but honestly, folks – you guys reading this blog are savvy, but you’re also logical, practical, and rational.
Why would any agent not send out an email like this?
In reality, this happens for maybe one out of one-hundred “offer nights.”
That email above clearly explains everything that the buyer agents need to know, and answers all the questions that buyer agents ask, all day, throughout the whole day.
When are offers?
Where are offers?
What closing date does your client want?
How will you be reviewing offers? Is there a second round?
Can I check in with your office during the day to see how many offers there are?
And so on.
It’s so simple, and yet here I am, patting myself on the back for doing it.
It’s also worth noting that I specifically explain: “It will be a “one shot deal,” highest and best offer will be accepted, no second rounds, do not hold anything back.”
Most agents won’t tell you this. They’ll hmmm and hawww about how they’re planning to handle offers.
The reason I do this is twofold:
1) I think it’s fair, especially with 15 offers.
2) I think when you make it explicitly clear that there’s “no second chance,” you always get one person who throws the boat.
I don’t want prospective sellers reading this blog to think I won’t work on their behalf if I say, “I won’t send people back to improve,” but trust me when I say that this method nets you the same, sometimes more.
And above all, folks, I put my money where my mouth is.
Last week, I had eight offers on a listing, and we took the highest offer of $501,000, when there was a $500,000 offer behind it.
Sure, a lot of agents would have sent them both back.
But I couldn’t.
Because I said, in advance, explicitly, that I wouldn’t.
And reputation is so important in this business, although most of the new agents, and the fly-by-night agents, and the 905 agents, don’t realize this.
If you screw somebody in this business, they’ll remember it.
And what goes around, comes around. You’ll see these agents again, and again, and vengeance in this business does not come in simply “getting even,” but rather it lasts forever.
Of course, the agent who had that $500,000 offer called me the next day to give me an earful, but I told her that not only was her offer conditional, and the higher offer wasn’t, but that she should have read my email – specifically the part where I said, “no second rounds, do not hold anything back.”
Now, what I do throughout the day with respect to registered offers, is something I think every agent should do: I keep people informed.
Every time an offer is registered, I email in BCC all the agents with registered offers, very simply: 175 Homewood Avenue, #2404 – 6 Registered Offers.
And when the next one comes in, I email the seven agents: 175 Homewood Avenue, #2404 – 7 Registered Offers.
And so on, and so on.
Why put the onus on them to call into the office every hour for an update?
Why not keep them updated, which in turn helps to show them how much interest is in the property, and thus how much their buyers should offer?
Now, as for how I review, and accept offers in 2017, I’ve made things as simple, and respectful as possible
I take offers by email.
Sure, you might be one of the very few people who think this is “impersonal,” but it’s also practical, expedient, and efficient.
Imagine when a listing agent has 20 offers on a listing, and insists on an in-person presentation.
Agents sit outside in their cards for 4-5 hours, waiting. So do their clients.
Do you know how many offer nights turn into offer mornings?
It’s absolutely needless.
And I find much of the time, it’s because the listing agent is a sadist who enjoys the process, and is looking for a massive ego-boost. He or she takes pleasure in submissive buyer agents trolling through, with a sad rain-cloud over their heads, and presenting their offers in succession.
I see no point in that.
I don’t need the ego boost. And personally, I’d rather be home earlier, or out working on something else.
Last Monday, I took offers on two listings on the same night, both via email, at 7:00pm. I had 8 offers on one listing, and 5 offers on the other.
By 7:45pm, both properties were sold firm, paperwork signed, cheques in hand.
I worked in my office for another two hours, and then went home.
At 11:00pm, I was sitting in a rocking chair, trying desperately to get my daughter to sleep, and my colleague called.
“I’m sitting in my goddam car here, out on the street in front of the house,” he told me. “There were 18 offers, and they’re sending back the top TEN to improve their price. TEN! It’s insane! There’s probably a $200,000 gap between #1 and #10. What’s the point?”
Hey, that’s the market. That’s how it works.
I set two new price records in two different buildings hours earlier, reviewing offers in an efficient, streamlined, and respectful manner.
And my colleague, who went on to increase his offer by $8,000, only to lose by $75,000, continued to sit in his car until past midnight.
There’s a word you don’t hear that often.
It should go hand-in-hand with professionalism.
The last part to my offer process is perhaps the most simple. After my clients have signed the accepted offer, I take the time to call or email every agent who had an offer, to thank them for their efforts, and give them an idea on where they stand.
I had 15 offers on a listing on Tuesday night this week.
After we had reviewed all 15, which was about 7:30pm, I called the person with the second-highest offer, and I personally broke that bad news to her.
Do you know how a lot of agents handle this?
1) Text message, “u didn’t get it”
2) Have their assistant call you
3) Do nothing, wait for them to call/email you at midnight, then say, “Oh, yeah, sorry, we took another offer.”
I chatted with the agent who had the second-highest offer for 5-6 minutes, just about the market, and how offers are shaking out. We commiserated a little, she thanked me for how I handled the process, I told her I wish she had got it because I really liked her, and then we went on about our nights.
Then I called the agent with the third-highest offer, who I could have swore was going to be “the big winner” when I saw his offer, and spent some time talking to him as well. I couldn’t believe that not one, but two offers beat his. It was just shocking.
I called the agent with the fourth highest offer, and then I got practical.
I emailed agents 5 through 15 with the following:
Thank you very much for your offer this evening, but we will be moving forward with a higher offer.
For your clients’ information – there were 15 offers on the property, and theirs was the 6th highest.
The sale price will be published on MLS tomorrow.
Thank you again for the interest, and good luck with the buyer!
Do you know how many agents do that?
And why not?
Why don’t we let people know where their offer stood?
What’s with the cloak-and-dagger?
I think it’s helpful. Tell the agent – “Bob, there were 9 offers, and yours was the 8th highest.” It’s not condescending, it’s helpful. Maybe Bob has no clue what’s going on in the market, and this might help him move forward both with his client, and with his own business.
If a property sells for $650,000, and you offered $600,000, how do you have ANY idea whether you were 2nd place, or whether there were six offers clustered between yours and the winner, and you were actually 8th place?
I’ve never understood the secrecy.
I told the agent with the $625,000 offer the other night, “Yeah behind the $663,000 winner, there were offers of $655,000 and $651,000.”
At least he can take that back to his clients.
What the HELL is wrong with that?
So there you have it, folks.
That’s how I’m handling offers in 2017.
No Bully offers.
Email instructions on the morning of offers.
Keep agents informed on registered offers throughout the day.
Offers by email.
One-shot deal, highest offer takes it.
Communicate with your colleagues.
Respect their time and efforts.
I’m not an idealist, but there’s something about doing business in this way that makes me think if only a few people like, and respect, what I’m doing, then perhaps they will follow suit. And a few more after that, and then several others from there, and who knows – maybe we’ll get somewhere…
at 9:31 am
Only if all agents were conducted business like you David.
at 10:31 am
As much as I respect your professionalism in handling the process for your seller customer in this market , and you are doing good onto your profession , i think for most sellers , myself included, they want the absolute highest price they can get . Sure you are upholding your reputation and 2.5% commission on an extra $10k to you is not not worth the work for you , but if I were selling , I want the absolute highest price I can get . If this means multiple stages , then that is what I want. This is where it gets tricky and why it may be difficult for some agents to follow through (“no bully offers, only one stage of bidding turns into multiple stages , etc) ….You are my agent amd whilst I appreciate you have a reputation to uphold , I am selling my house which is my biggest asset . I probably sell my principal residence 3 times in my lifetime and I want the highest price every time .
at 11:56 am
I think you missed the part where David said that 90% of the time, the “one shot deal” method gets more money in the end.
at 12:38 pm
On the other hand, a lot of other agents obviously believe that sending offers back for improvement gets more money in the end. Given the nature of the product, the process and the current market, it would be difficult to guess who’s right. But even Elise Kalles has been known to send back multiple offers for improvement.
at 2:19 pm
Agree with Samantha here.
I suppose the threat of no second chances makes people do much crazier things.
With the knowledge that you can always add more money, why would anybody lead with their best foot forward?
at 5:16 pm
My point is David is telling everyone “one shot deal” and following through on the statement. What I am saying is if my agent said “one shot deal” and after the first round of bidding , we asked for more from the top 3 bidders , then the price I would get is improved . As the seller, another $25-50k means more to me than my realtor’s reputation
at 9:23 pm
But what David is saying about his reputation isn’t personal, it ties into the process. Tell people “it’s a one shot deal” and then go back on your word and send them back, and how long until buyer agents think your a dirty liar and either don’t want to offer on your properties, or do, but come in with lower starter offers?
at 5:05 am
Understand the point you’re making . I guess what I’ve learned is that when it comes time for me to sell , one question I will ask before deciding on a realtor is : ” is $25k more on my sale price more important or holding your reputation more important ?” 🙂
at 11:59 am
And this is why we need legislative processes in place to tame the wild west of Toronto real estate.
at 1:00 pm
at 1:49 pm
Why? because the seller eventually becomes the buyer. The only entity that benefits from inflated prices is the real estate brokerage. The crazy real estate market has been created and nurtured by greedy brokerages taking advantage of buyers emotions
at 2:27 pm
Sellers do not always become buyers.
The statement that only brokerages profit from high sale prices is bogus.
The statement that it is the sales process that has created this market is beyond dubious.
So, let’s try this again. Why?
at 3:23 pm
I think that Lawrence is implying that the selling price is higher using multiple rounds of bidding wars instead of “one shot only.” Each round raises the price more and more, not because the house is worth it, but because of the competition between buyers. Even David has written a post in the past stating buyers have to raise their bids for each round. On the other hand, “one shot only” means the top bid takes it, so their wouldn’t be a second round where everybody raises their bid.
Using “one shot only” keeps prices lower, which keeps housing affordable for more people, etc., etc. Multiple rounds inflates prices, making realtors richer, buyers poorer, housing less affordable, etc., etc. Lawrence thinks the former benefits us as a society more than the latter.
As the other comments are pointing out, it’s debatable which strategy gets the highest price for the seller. David is sure his way does. Me, I would think multiple rounds would work because it takes logic out of the equation and gets people emotional. People do stupid things when they’re emotional.
at 1:43 pm
I have to agree with Steve. 100%
at 12:28 am
Completely agree with Steve. “No Bully Offers” and “One Shot Deals” may be YOUR suggested rules of engagement (among others) but as my Agent, you work for me in my best interest. And while you may THINK that approach offers the best chance to uphold my best interests, 2017 is so wildely unpredictable, that you can’t be that rigid. But if you insist, there’s the door…keep walking and say hi to Kramer on the way out.
at 11:37 am
It’s great ti have rules and stick to them! Do you have your clients go into your office and sit with you, or do they stay at home and you call them to discuss the top offers?
at 12:33 pm
David, I love this approach.
However, even while having stated upfront that “Sellers Will Not Consider Pre-Emptive Offers,” the fact is that you as the selling agent are still obligated to present any and all offers to your client, whether they come in before the offer date or not. And buying agents know this. So your personal preference does not trump the fact that a bully offer might still come in. And a sweet enough offer could force your client’s hand, regardless of its impact on your reputation.
at 1:55 pm
Transparency in any business transaction is a good thing. The issue with real estate agents is that real estate is a very entrepreneurial environment where several agents will have differing opinions on what the best process is. While it is great to have a process, said process cannot be thrust upon other agents no matter how much you think it’s the best process and how badly you want them to use it.
If there is one thing I have learned in business it that you cannot control other’s actions which means you can certainly set an example with your high, self-proclaimed standards, you cannot force others to adopt them. Even if other agents agree with you and chose to use the same process, it is not because you have made them use your process but rather because they think similarly and have arrived at the same conclusion as you.
The problem I see with a rigid process like this is that it may be a bit incompatible with a living, breathing, ever evolving, animal which is our real estate market. If a potential client wanted me to send back offers for a second round I would certainly accommodate them. It’s fine to have principles and a process, however, I would not be willing to die on my own sword due to my own inflexibility. There is nothing wrong with telling a client about your process and why you believe it’s the best and then tweaking it to accommodate the client.
at 2:29 pm
I think there is nothing wrong with an agent saying this is how I roll, as long as they are willing to release a client from their agreement. It’s their business, their name, their brand, their m.o. A rigid, legislated process is a whole different animal.
at 2:29 pm
I’m not seeing the whole falling-on-the-sword analogy here.
Isn’t this about HIS way to get the most money possible?
Kill em with kindness. Catch more flies with honey, etc.
at 2:43 pm
It’s not unlike people on here to read one thing, and conclude another!!!
at 3:26 pm
@Jeff316: good point, I would think any reasonable client will work out the rules of engagement prior to signing an agreement with the agent.
@Daniel: If I am unwilling to bend my rules to accommodate a potential client, that client will find another agent and I would lose the business. That’s what I meant by falling on my sword.
at 5:04 pm
So you play by your rules, but only on one side? Would you still place a bully offer on behalf of your own buyers?
Why NOT Bully?
at 9:24 pm
How could anybody be so stupid to ask a question like this?
These aren’t “make the world a better place” rules.
at 11:37 pm
This debate is ridiculous.
Some of you are suggesting that David is either accepting of, or even going out of his way to obtain a lower price for his sellers.
When In fact he’s merely offering a different way of negotiating, and one that he believes gets more money. He, being a top agent, who does this every day.
Yet many of you armchair real estate agents are saying that you know better for some reason or another.
And the comment below about the rules, and the two sides to the coin?
What an absolute mess. All the more reason to hire a guy like David, if he would have any of you.
at 10:03 am
LOL, many of the same people complaining about how opaque, unfair, and “wild west” the process is, now complaining that David’s very principled, transparent approach is too rigid.
Personally, i can say that if i were a buyer in this situation, i would definitely appreciate this approach and would find it down right refreshing compared to the “put in your bids and then after reviewing everyones’ offer we’ll decide how we want to proceed” approach. And If i were the seller i would have no issues with my home being sold in this manner.
at 10:43 am
I like the rules David, but could you foresee any exceptions to them? What if the top offer was not as high as what the sellers were hoping for? What if the sellers changed their minds and demanded to accept an overly attractive bully offer? I’m assuming there are circumstances where these ground rules might not apply? Do you let the sellers know what the offers are as they come in or just the number of offers throughout the day? Do buyers ever change their offer based on the number of offers that come in (probably not with your accepting the highest offer clause)? Do you think these rules have resulted in more offers as well as higher prices? Same thing? Or are more offers a direct result of the low supply?
at 10:19 am
I like these rules. Gives buyers enough structure and transparency around the process to come up with their best offer. Also think these rules go a long way to providing the Seller more comfort and transparency. When it is a “one-shot” deal with all offers being reviewed at a single sitting, you can erase a lot of the doubt that surrounds multiple representation by simply having any dual represented buyers email their offers in early.
at 11:24 pm
I only found this blog tonight. I’m a buyer who has had to sit through multiple rounds. Sometimes there just to make up numbers to squeeze more out of someone else.
2 weeks ago I was at a house that had 11 offers. 6 were taken back for a round 2. We raised our offer by 40K and was shot down immediately, it wasn’t enough to beat the top offer in round 1. My partner and my agent just put our hands in the air and left. What was the point in keeping us there. In the end, the house sold for 125K over our improved offer. What a crock.
The one-shot deal is the way to go. They would have had our best right from the start.
To the people in the comments that think multiple rounds is getting more money, they are wrong. People are coming in below their top value in round 1 because they know it will go to round 2. The spiel is the same every time: “We’ll take the top offer unless it’s close”. The catch being that ‘close’ is subjective.
This argument has a bit of a Spinal Tap feel to it. The people that think that multiple rounds get more money are suggesting that the amps should go up to 11. David is suggesting that we should just make 10 louder.