Multiple Offers + Multiple Representation = Multiple Problems

Business

5 minute read

February 11, 2014

There’s a pretty simple equation!

Multiple Offers + Multiple Representation = Multiple Problems is almost as iron clad as 1+ 2 = 3.

In today’s fast-paced, often cut-throat Toronto real estate market, there are always disappointed parties when multiple offers are reviewed and decided upon.

How a listing brokerage reviews multiple offers can make a huge difference in the way things play out…

business teamwork competition

I’ve told this story before, but then again, my wife says I tell every story four or five times.  It’s only in the past little while that she’s stopped listening, to spare my feelings, and started saying, “Yeah – I heard this one before…..soo……”

About four years ago, there was a house for sale in North Toronto that my buyer-clients were interested in.

The house was under-listed, and as is most often the case, there was a set “offer date.”

The listing brokerage was very small, and had probably only 2-3 agents, plus a broker of record, which all companies have.  I can’t say that I’m suspicious of ALL small brokerages, as that would be pretty unfair.  But I will say that more often than not, it is the small brokerages (ie. that guy who has been in business for five years, has written his broker’s exam, and now runs a “brokerage” out of his basement apartment), the discount brokerages, and the brokerages outside the GTA that cause the most problems in dealing with cooperating agents.

In the case of this North Toronto home, I was a bit frustrated to hear that the listing agent had is own offer on the property, and thus he would be acting on behalf of the seller, and a buyer – in competition.

There were four or five offers on the property, one of which belonged to the listing agent.

I recall walking in to the house, down the hall, and into the kitchen, to find the listing agent and his seller, alone, at the table.

There was no other agent there.

There was no manager.

There was no broker.

It was just the listing agent, and his seller, and I asked him, “Who is presenting your buyer’s offer?”

“I am,” he said.  “I’ll present last.”

I knew my offer had no shot, so I sulked a bit, and “presented” it, and then walked out.

Sure enough, this agent “won” the bidding process, and “double-ended” the listing – providing buyer and seller, that is.

I can’t say with 100% certainty that he cheated, but let’s read between the lines.

He presented the offer, from his buyer, to his seller, with nobody else in the room.

That is NOT how multiple offers should be handled, in multiple representation (dual agency), in organized real estate in 2014.

We should all hold ourselves to higher standards, as the public is demanding that our industry become more professional, and put the needs of the consumers first.

Yesterday, during our weekly Monday-morning meeting, our office manager said, “I want to talk today about multiple offers in multiple representation.”

He cited the case of one of our agents’ listings last week, that had multiple offers, and whereby the listing agent had a buyer interested in the property.  The buyer wanted to make an offer, in competition, through the listing agent, and this is where Bosley Real Estate tries to lead by example.

Here is our company’s own internal policy regarding multiple representation in multiple offers:

“Where Bosley Real Estate Ltd. is the Listing Broker and the Listing Bosley Sales Representative or Independent Contractor secures an offer on that listing that will be in competition with other offers, it shall be company policy that:

A member of the management team, or (if unavailable) broker, shall attend and present all offers, thereby representing the Vendor on behalf of the company, thus ensuring the Vendor shall receive the full benefit of the competition from all parties.”

Isn’t that the way ALL brokerages should do it?

Last week, when our agent was representing the buyer and the seller, in competition, our manager stepped in, and worked with the buyer.

It was the only way to ensure that there was no conflict of interest, and that every buyer was on a level playing field.

The seller received the best possible service from the brokerage, and most likely obtained the highest price possible, as everything was handled in the most efficient, and transparent manner.  All the while, no ethical guidelines were breached, and every party to the transaction (including those buyers and cooperating agents who did not have the successful offers) was left satisfied with the process.

Am I putting too rosy a glow on this?

Maybe it sounds that way, but I’ve been in way, way too many multiple offer situations that went badly to not appreciate how my company handles the process.

In fact, I’m proud to say that I work where I do, because of policy like this one.

Last week, I wrote the blog “How Many Hats Can You Wear?” where I detailed a listing agent, who was the seller of the property, trying to solicit a buyer – to present an offer in competition.

Do you think for a single second that this listing agent/seller would have a manager present during the offer process?  Or a broker of record?

Many agents don’t even know who their broker of record is…

A few weeks back, I received an email from a young girl currently writing her phase-three real estate exam at the OREA college, who asked me a slew of questions about getting started in the business.

I told her what I always tell young agents: “Don’t worry about the commission split; find a brokerage with a good brand, an established foothold in the industry, with ample training, experienced management and company executives, who run a full-service brokerage with a full-time manager.”

She emailed back and said, “What does the manager of a real estate office do?  Why would I need a manager?”

Maybe it was a lost cause.

Many new agents get into the business and the first and only thing they care about is their commission split.  60/40, 70/30, 80/20, 90/10 – hell, I bet you can find a brokerage with a 100/0 split who just wants a pack of gum for every transaction you complete.

But how do you know what to do, where to go, who to talk to, and how to actually conduct yourself in the industry if you work in a “virtual office,” with no leadership, no actual work space, no colleagues, no training, and no management?

This is why our industry has problems.

A good portion of the general public thinks that discount brokerages are the way of the future, and that saving a few bucks on a listing (I’d beg to differ – but that’s a topic for another day…) is worth opening the door to agents who are scratching and clawing to stay afloat in the business.

But it’s often these agents who have no clue what they’re doing, since there’s no real brokerage, with no manager to oversee them.

And when the public feels scorned, having lost a house in shady circumstances, or to an agent who double-ends the listing, they often fail to identify that the agent, brokerage, or both are fly-by-nighters.

I wish that every brokerage in the city would adopt my brokerage’s policy for multiple representation when in competition, but that’s never going to happen.

Remember – the Competition Bureau doesn’t want any sort of “set ways” in organized real estate, and although that includes things like set pricing, it also includes any sort of structure that can help the industry move forward, and protect consumers.

Every week in this city, some poor buyer gets screwed because a listing agent pulls a shady move, and double-ends a listing, when other buyers would have been happy to bid on the house, pay more than the eventual buyer, or both.

Most cases heard in front of RECO Ethics involve agents who double-end properties in competition.  You can go to RECO’s website and see all the disciplinary action; they actually publish regular “reports.”

If every brokerage in the city was instructed to have a manager, or broker, oversee all multiple offer situations where multiple representation (dual agency) was taking place, I have to think our industry would be better off…

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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13 Comments

  1. Joe Q.

    at 9:13 am

    David — I agree with what you’ve written (as you can surmise from my previous comments). I just wonder to what extent legislation can correct some of these shady practices — i.e., don’t wait for brokerages to police themselves, but establish particular processes in law.

  2. Pete

    at 10:06 am

    I’m curious what the reaction is off the sellers who are seeing their own agen also presenting an offer. Wouldn’t alarm bells be ringing that he’s not necessarily acting in their best interests anymore if he’s representing both sides? Sure, rules would help. But I think if the buyers and sellers put their foot down with their own agents, we might see some change?

    1. ScottyP

      at 2:39 pm

      I completely agree with this sentiment.

      I’ve always wondered what song and dance double-ending agents give their seller-clients (“It’ll simplify the process!”) when they entertain the clear conflict of interest inherent in representing both buyer and seller without any oversight or guidelines.

  3. Kyle

    at 12:26 pm

    @ Joe Q

    There isn’t any evidence that shady practices actually happened in the example, and certainly nothing that warrants legislation on how offer presentations “must be done”. Bosley’s process removes much of the possibility and appearance that shady things are happening (which i fully support), but anytime multiple agents from the same office are presenting, there is always a chance for some form of collusion, information sharing or pre arrangement.

    Also it is not uncommon, for selling agents to reduce their commission if they bring a buyer, so it’s not always the case that an agent who double ends, has screwed the seller.

    1. Joe Q.

      at 10:29 am

      I’m just going on David’s statement that “[e]very week in this city, some poor buyer gets screwed because a listing agent pulls a shady move, and double-ends a listing, when other buyers would have been happy to bid on the house, pay more than the eventual buyer, or both. Most cases heard in front of RECO Ethics involve agents who double-end properties in competition.”

      If this is such a significant ethical issue or gray area that most of our provincial real-estate council’s disciplinary actions revolve around it, it would suggest to me that legislation may be needed.

  4. joel

    at 6:17 pm

    In cases like this wouldn’t the seller be happy as the agent is presenting last and simply adding a few hundred to the best offer and the buyer happy as they got the house?
    The only time I would see a problem is in an agent presented an offer for their own buyer client before offer date and encouraged their seller client to take it, even if it might not be the highest possible.

    1. Joe Q.

      at 10:33 am

      There was a case where an double-ending agent bullied his own listing. I posted a comment about it a few months ago, if memory serves. It was somewhere in Haliburton or Muskoka IIRC. The agent was brought before RECO’s disciplinary committee and was fined several tens of thousands of dollars.

  5. Kyle

    at 12:25 pm

    That’s exactly what the hearings are for to handle cases where fiduciary obligations have not been met and that’s where they belong, not in a court of law.

    The fact there are a lot of complaints in that area, does not suggest anything. It would be like saying it should be illegal for:

    – banks to charge service fees, because that generates lots of complaints

    – restaurants to have slow service, because that generates a lot of complaints

    – doctors to have waiting rooms, cause that generates lots of complaints

    – or more generally any transaction where someone might not be satisfied.

    1. Joe Q.

      at 10:43 am

      I don’t think your analogies work well — unless there are already laws about restaurant service or waiting rooms that I’m not aware of. In the case of RECO, their hearings are actually enforcing provincial laws anyway — correct? If the majority of hearings deal with the same issue then something must be wrong — the laws are not clear (and need to be amended) and / or Realtors are not getting the message.

  6. Kyle

    at 2:23 pm

    Nope i do’t think you’re correct. At least not based on the attached picture. What we are talking about are fiduciary duties (e.g. Conflicts of Interest and disclosing conflicts, not misusing confidential information, etc), which are governed by codes not laws. There are of course laws as well that govern the profession but those are different.

    http://www.oreablog.com/2013/01/recap-duties-to-clients-and-customers/

  7. Kyle

    at 2:35 pm

    You may have a point with my restaurant analogy, but banks and doctors also have fiduciary duties to their clients, so those examples would be appropriate. I’m not saying nothing ever can go wrong when an agent represents both sides, i am saying there isn’t enough wrong to create laws, which will limit the ability for how things can be done (including many perfectly non-shady deals).

    To be frank, to me the idea of creating new laws, smacks of the myopia of someone who has only ever been a frustrated buyer, and just wants the Government to come in to make all the bad stuff go away, but has yet to ever be on the other side of the table.

  8. Jim

    at 10:21 am

    I would like to see TRANSPARENCY. Meaning, every time a multiple bidding situation occurs (as soon as #2 bid is submitted) it automatically makes all bids transparent. The problem seems to be that because additional bids are blind, it creates mistrust and potential for big fraud. If I go to a sport’s auction, and bid on a Gretzky rookie card, I know exactly what the other bidders are offering. If I want to overpay, I know exactly what the other bidders are bidding and it’s my choice. With the current blind real estate bidding process, I may overpay and I have absolutely no idea on what the other bidders are. Please comment how making the bidding process transparent would not work? Currently, it’s a win, win & lose situation (the agent wins with a fast sale, the seller wins with getting asking or above asking, and the bidder (who overpays) feels screwed that they paid to much (and of course the other losing bidders really feel like they lost). If the blind bids all of a sudden became transparent, a Win, Win, Win occurs.

  9. Pingback: The price is unfair! |

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