A storey on Moneyville broke last Thursday about a buyer that paid $90,000 over the asking price when there were no other offers.
I was on Global TV on Thursday with my response, and now I’d like to explore things even further…
(Bonus Points if you can name the quarterback pictured above. Biggest bust in NFL draft history…)
Last Thursday, a story broke on Moneyville about a buyer who submitted an offer that was $90,000 over asking, when there were ZERO competing bids.
A few of my blog readers commented on the story, and then it hit Facebook.
After it hit Facebook and Twitter – the thing went viral, at least among the real estate community.
You can read the story HERE.
You can see my response on Global TV HERE.
I felt bad for the agent involved because most people blamed her right off the bat, and really – we don’t have all the facts.
As the story goes, the buyer offered $90,000 over the asking price in a situation where the house was “expected” or “should” have sold in multiple offers, but it was only upon accepting the buyer’s offer that the listing agent disclosed that there were no other offers.
Consider that one of two things happened here:
1) The buyer’s agent was TOLD that there were three competing offers.
2) The buyer’s agent was under the IMPRESSION that there were three competing offers.
In the first situation, the listing agent should lose his or her licence. You can’t tell people that there are three offers when, in fact, there are not, and there’s nothing the buyer’s agent could have done to stop this from happening.
In the second situation, unfortunately, I think the buyer’s agent made a major faux pas. I’ve seen conflicting accounts of exactly what happened, so I don’t want to pass judgement in this situation.
Let me just talk about a hypothetical situation whereby that #2 event actually transpired, irrespective of the actual situation that made headlines last week.
Ladies and gentlemen, boys and girls. When you are entering into a multiple offer scenario, you have to find out exactly how many REGISTERED offers there are before you submit your offer. We’re not talking potential here – we’re talking registered, tangible, real offers!
Then, you have to go in with a strategy.
In any multiple offer scenario, I have my clients sign the offer with a blank price.
You might think I’m crazy to ask my clients to sign a blank offer when I could, in theory, write in “Ten Billion Dollars,” but that’s the best way to have flexibility and be able to act at a moment’s notice.
If I go to present my offer for 7pm, but my clients sign the offer at 4pm, there might be zero registered offers at the time when my offer is signed!
By 7pm, there might be six offers.
That’s why I have them sign a blank offer, and then one minute before I go to present, I ask the listing agent how many REGISTERED offers there are, and then I call my buyer to advise on the offer price.
When I present my offer, the ink is still wet.
When I’m accepting multiple offers on my own listing, I’ve noticed the offer price is almost always written in by hand. Most agents use this tactic, although some don’t.
But you have to distinguish between REGISTERED offers, and all the other banter and BS.
Here are some BS things the listing agent could say:
“There’s a lot of interest in the property.”
“I’m expecting multiple offers.”
“We could have as many as a dozen offers.”
“There are five very interested parties.”
“I’m certain that six agents are bringing offers.”
“I would bet money that we have at least nine offers; maybe a tenth.”
None of this matters.
Only one thing matters: How many registered offers are there?
The listing agent has to tell you this. They HAVE TO. I hate using CAPS LOCK when I write, but I’m trying to get this point across!
At most reputable brokerages, the front desk will keep track of registered offers. You can call and ask, “How many registered offers are there on 112 George Street?”
But many brokerages are not reputable. Many of them have no front desk! Oh – you want to do business with that one-man-shop – the guy that runs a brokerage out of his condo on Front Street? The one who outsources calls to a call-centre in South Carolina? Think again, but that’s another story…
If you’re offering on a property that is listed by a questionable outfit, you MUST obtain, in writing, how many registered offers there are.
I ask the listing agent to email this to me before I present.
If a listing agent emails me, “Hi David, there are now six registered offers on 112 George Street,” and I present my offer and find out that I was the only offer and there was no competition, then that agent is in big trouble, and the offer could be nullified.
The problem in our industry is that we don’t have any identifiable process for dealing with multiple offers. Every brokerage; every agent deals with the situation in a different way.
For years, I’ve been saying that we need some sort off “Offer Registry System.”
We need something better than the front desk at a brokerage to keep track of offers, and there needs to be severe consequences for listing agents who “accidentally” say there are six offers when there are four.
But how do we do this when every brokerage has a different business model? Some brokerages are ONE guy sitting in his living room, with no front desk, and no way of keeping accurate track of offers.
Should we ask TREB or CREA to get involved?
What about a Registry System on TREB’s website for Realtors to use when they’re making an offer? That way any Realtor can log on and see how many offers there are, and who has registered.
Of course, that idea is a long shot, and I don’t think TREB would be interested.
I fear that nobody wants to tackle this problem, and those in charge will say things like, “These instances are few and far between, and when something like this happens, it’s blown out of proportion by the media.”
At the risk of getting in hot water with “those in charge,” I’ll go on record and say that this happens more than people think.
This is why the general public hates Realtors.
I hate Realtors!
The top 20% of Realtors are professionals in every sense of the word, and they’re worth their 5%.
But the rest are giving us all a bad name. They’re inexperienced, lazy, corrupt, and they don’t work hard enough to keep up with the goings-on in the industry. They’ll lie and cheat to make an extra dollar, and there’s no fear of consequences, because there aren’t any.
I said one thing in the Global TV interview that I wished had aired: “You have two major assets in this business: your reputation, and your real estate licence. Many Realtors aren’t afraid of losing either.”
I fear that with every post I write like this, I edge closer and closer to pissing off the people that could take my licence away for being a “whistleblower” of sorts.
I’ve always prided myself on speaking the truth, and I’ve always called for change.
But is it ever going to happen?
How many buyers have to get screwed for us to see a change?
We need tighter regulations in this industry, and it starts from the top down – the biggest issues should be dealt with first, and the fact that we don’t have an effective method to deal with multiple offers has to be one of the largest issues at hand.
Of course, we could also start from the bottom, and create greater barriers to entry for new Realtors, who at this point need a pulse, a cheque for a few thousand dollars, and a calculator to pass a grade-nine math exam in order to get licensed. But that’s a topic for another day as well…
I’m glad to see the agent in the Moneyville story speak out against “phantom bids,” which I honestly dont’ think are prevalent, but it shines a light on the lack of respect that sellers and listing agents have for the buyer pool and the cooperating agents.
What goes around comes around, and my advice to buyers and sellers alike is this: remember what you hated when you were buying or selling, and when you find yourself on the other side of the equation, try and lead by example…
CraigB
at 8:13 am
LaMarcus Russell 🙁
moonbeam!
at 8:31 am
I give up… who is the player in the photo?
Ralph Cramdown
at 9:45 am
[…] and find out that I was the only offer and there was no competition, then that agent is in big trouble, and the offer could be nullified.
Any case law on an offer being declared voidable in a situation like this? I’d doubt it, for the two reasons that the offer was made under seal and the agent’s lie wasn’t a lie about the property itself. A smart lawyer would liken the facts to using shills at an auction, but multiple offer sales, as conducted in Toronto, don’t resemble auctions: Buyers do, apparently, pay $90,000 more than the next highest offer in situations where there ARE multiple legitimate bidders.
Judge: “You mean to say you were perfectly willing to pay $90k over, but only as long as a few perfect strangers were also submitting offers?”
The strangest part of the story is one you didn’t mention: Apparently they agreed on $45k over, AFTER the $90k over offer had been accepted! Here’s a case of the selling agent either admitting that he’d screwed the buyer, or screwing his own seller. It’d be the funniest lawsuit in history if BOTH parties sued him for the $45 they lost, and they both won. Not inconceivable.
ScottRP
at 9:46 am
But I thought Andre Ware played for Houston?
Nick
at 9:48 am
Jamarcus Russell…. Between this and the Carson Palmer trade, I almost feel bad for Raiders fans… Actually no, not really!
Anyways David, I’m a long-time reader, but first time poster. There’s always an interesting read on here. Keep up the good work!
jeff316
at 11:32 am
What about Todd Marinovich? That guy was a pretty huge bust too.
ScottRP
at 9:02 pm
Ryan Leaf, too. And Akili Smith. Those guys are on par with JaMarcus.
JC
at 10:10 am
David, “phantom” bids are (or up until recently), were fairly prevalent. Strange that some listing agents were frequently saying that they had an offer that had been faxed in. On every listing. Agents that like to think they have a great reputation.
Don’t worry about the powers that be taking away your license. You pretty much have to be convicted of fraud, money laundering or big time crime before they’ll even look at you. They don’t want to miss out on collecting their fees from anyone… no matter how corrupt they are.
This industry needs more whistle-blowers. I could be a full-time “DISer” with all the inaccuracies these “professionals” list. You’d think for several thousand dollars that they could post a photo of the correct building. There’s a building in Toronto with 4 listings in it at the moment… 2 of them have the building next door pictured.
Pen
at 10:10 am
Very good post David. You do come close in other posts to “pissing off” the powers that be and risk finding yourself up for violations but I think this one is safe.
I agree with all the statements that a seller’s rep may make, as long as they are truthful, the buyer has to beware on procedure.
As with all articles, the real truth is often in what they don’t report, because it makes for sensationalism. The way it was reported I was left with the impression that the buyer’s rep was lax as to why as a pro, she did not confirm the number of registered offers before presenting and include a clause in the offer that it is made subject to there being no less than X offers and the buyer shall have the right to revise if there is not. As well, including in the confirmation of co-operation and representation a requirement to release the names of all bokerages and representatives placing offers. Any good seller’s rep will provide this without being asked but ask for it nonetheless.
The problem with registered offers is that they do not have to be presented if the buyer changes their mind. It is the ethical duty of fairness that the seller’s rep should at least disclose that offer number 1 did not (yet) materialize to the others in line.
Two or three years ago when phantom bids was big news, I think it was OREA which did a survey asking for input, many including myself recommended an online registry at the MLS level, the majority said no and it was poo pooed with lame excuses.
I suspect this one will make its way to court and to RECO with 3 defendants.
Joe Q.
at 10:47 am
Great article, David. I think TREB would get involved if they were pushed hard enough. I know there is at least one committee looking into this at TREB. I just wish TREB spent less time cheerleading the RE market and more time cracking down on the BS that tarnishes their entire industry.
Vlad
at 10:59 am
We can all agree that greater transparency is warranted. However, an experienced agent like the agent in this story failed Multiple Offers 101 and ran to the media complaining about ‘a broken system.’ That’s the real story here. Funny that she wasn’t crying out for a fix when her clients were on the selling side in these situations.
jeff316
at 2:11 pm
Exactly.
Exactly.
Exactly.
Thank you.
(Exactly.)
Vlad
at 11:06 am
BTW Ryan Leaf called from his meth lab to say that Jamarcus Russell never wore #11 at LSU.
ScottRP
at 9:04 pm
Very true! Vlad, you’re on a roll….
Craig
at 12:23 pm
wonder how many hole in ones Jamarcus Russell has had that no one saw?
David Fleming
at 2:04 pm
@ Craig
I have THREE witnesses!
I never should have said “there’s an asterisk.” I just set myself up for ridicule, didn’t I?
Ed
at 3:58 pm
You made a hole in one? Details!
Irene
at 2:30 pm
Funny we have a clause at RLP in Guelph that says if there is no competing offer the buyer must be informed and have an opportunity to revise their offer if they so choose. I had been told this clause was added because of the type of situation you mentioned above in Toronto. I would think Toronto would be using this clause.
Irene Szabo
Bill
at 8:16 pm
QB is Ryan Perrilloux,huge college bust
Joe Q.
at 8:56 pm
Via the FMListings website comes this gem:
http://www.realtor.ca/propertyDetails.aspx?propertyId=12132700&PidKey=286875431
I was wondering when someone would try to pull that trick in Toronto!
Joe Q.
at 9:21 am
Oops, priced now raised from the initial $1 to $1,000,000. What’s six orders of magnitude, between friends?
Market Bull
at 1:05 pm
A blank offer that is signed by a buyer is an offer for zero dollars. An offer that has the price amended after the signature has been affixed thereto and is not initialed subsequently by the buyer is voidable.
monday morning qb
at 8:41 pm
That is Ryan Perrilloux NOT Jarmarcus Russell. Stick to selling houses.
David Fleming
at 9:41 pm
I don’t believe I ever said “JaMarcus Russell.”
But it looks like every single one of my readers did!
Matt
at 6:13 am
No one would ever call Ryan Perrilloux the “Biggest bust in NFL draft history…”. He wasn’t even drafted.
Anonymous
at 5:04 pm
Funny that you wrote about this. When I was looking to rent, I found a listing on MLS and phoned the agent to ask if it was still listed. He said it was. The price was a bit high for that building but the unit was a penthouse so it may perhaps have been worth the price. The agent assured me that the unit was in exceptional condition and was very large and bright. When I went to see the unit, it was indeed on the penthouse level but it was rather dank and dreary and smelled like used shoes (perhaps because there were a number of rather dirty running shoes scattered throughout the unit). In addition to that, the agent informed me that there was one registered offer already on the place and that he was just waiting for the potential tenant to sign some paperwork; however, if we were to bid close to the asking price or a bit higher, the owner would certainly accept our offer. He was obviously trying to drum-up some kind of bidding war on a rental unit but we were definitely not interested (in the unit or the bidding war). We kept looking and a month later the condo was still on the market.
David Fleming
at 5:12 pm
@ Chryselle
Forgive the plug for Realtors, but if you don’t have an agent, then the listing agent can lie to your face and get away with it.
If you had a Realtor, and he called the listing brokerage and asked, “How many registered offers are there on XX Property,” it would have revealed that there was no offer.