If I’ve said it once, I’ve probably said this a few dozen times: there is no one, identifiable set of rules regarding how a listing agent deals with multiple offers.

In fact, there’s not even a “generally accepted practice.”

Every agent in Toronto who has a listing, and has set an offer date, may proceed according to his or her own set of rules, but also his or her own set of ethics, principles, agenda, and any other mindset that might be present.

Let’s go through the most common methods in which listing agents will review multiple offers.

The when, the what, the where – you don’t really care about all that.

The “when” is 6-8 days after the listing.

The “where” is either at the property, or at the listing brokerage, and I prefer the brokerage as there is a photocopier, scanner, fax machine, access to email, parking – all the things that make it easier for buyer agents, and their clients.

The “how” is what you want to know.

How does a listing agent review multiple offers on a property?

No, you don’t care how quickly, whether he or she reads the copy aloud to the sellers, or whether he or she uses a yellow highlighter or a pink one.

You care about what they’ll do with the two, five, or twenty offers on the property, and how they’ll decide on the “winner.”

Once all the offers have been presented, the listing agent and the sellers will do something.  That something is what you, the buyer, care about.  Will they take an offer?  Or will they keep going?

The way I see it, there are seven ways in which a listing agent will review, and decide on multiple offers:

1) Highest Offer Takes It

This is a pretty simple concept, but in practice, it always gets complicated.

The listing agent will tell buyer agents, “We’re going to take the highest offer, no matter what.  No second round, bring your best.”

That’s all well and good until a buyer agent walks into the room, presents his or her offer, and then says, “…..but I think I can get more money.”

What do you do if you’re the listing agent?

Do you give that agent more time?  Do you give them another “shot?”

Hate the game, and hate the players, if you want to.  But tell me that the sellers aren’t going to say, “Ummmm…..we’ll take more money.”  You probably would too.

I’ve seen this a lot in practice, and it’s great when it holds true.

I sold a house in Wychwood earlier this year, and the listing agent said, “Highest offer takes it, bring your best.”

I brought my best, and I got it.

And as I was in the conference room at the listing brokerage, signing the papers with the seller, I could hear the agent with the second-highest offer screaming, “But I’ll get you more money!”

True, they always say that – after the fact; after they’ve lost.

And it takes a professional to say “no” and stick to his or her word.

A lot of people say it’s a “one shot deal, bring your best,” but few in this market actually stick to it.

2) Highest Offer Takes It…..Unless There’s A “Virtual Tie”

This is most common in this market.

Actually, wait.  Let me rephrase.

I mean to say, this is what most agents say in this market, although much of the time, it’s anything goes as soon as those words come out of their mouth.

The highest offer takes it, unless there’s a virtual tie.  And that’s not being facetious – a “virtual tie” is possible, considering that it’s not just about price.  What if there are two offers – one at $700,000 with a $75,000 deposit, June 7th closing, and they want the BBQ, and the other offer is at $703,000, $20,000 deposit, June 31st closing, and no additional chattels and fixtures?

And in this market, $3,000 is negligible – that’s less than half of one-percent of the purchase price in this case, so you might say the two offers virtually tied.

The two buyers and their agents are never going to know who was in the lead after the initial round of offers, so both of them are always happy to hear “There were nine offers, but we’re now working with two, and you’re one of them.  Feel free to improve your offer, we’ll make a decision at 9pm.”

Two is better than nine.  And thus the “highest offer….virtual tie” method is easy to sell to the buyer agents.

3) Highest Offer Takes It…..Until We Work With The “Top Two”

This is a hybrid of #2 and #4.

The listing agent knows they’re sending people back for more money, but he or she just doesn’t want to say it.

They’ll still say “bring your best,” but they won’t get into the whole “virtual tie” thing, because they know that’s not their intent.

They know, no matter what, there’s going to be a second round.

They know, before any offers have been presented, that they’re going to get more than what was initially offered.  They know they’re going to send back the top two offers, but they still play that whole “bring your best” game when buyer agents ask about it.

4) Working With the “Top Group”

Any buyer agent, when talking to the listing agent on the night of offers, has to ask, “How are you handling offers?”

The listing agent will usually provide an answer, and as I alluded to above, they often say something about “bringing your best” or “working with the highest.”

Then sometimes, as you might assume we move our way down this list, the agent will tell you in advance, “We’re going to review the offers, and then probably work with the top group.”

I hate that.

I hate the idea of a pre-determined strategy, since it makes the entire “first round” pointless.

I hate the idea that before an agent has even seen the offers, they’re already talking about sending people back for more money.

“I don’t know what you’re offering, but I assure you, it’s not enough.”

In a situation like this, the listing agent is basically saying that he or she will draw a line by the number of offers (like making the “cut” at a PGA golf event), and send the bulk home, while working with the “top group.”

That group can be anything – could be two, three, four – it all depends on the number of offers.

5) Sending Back Everybody Over “X”

This is the other side of the coin for #4.

You might have a house listed at $599,900, and you decide, “We’ll send back everybody over $700,000.”  That could be two buyers, or six buyers, who knows.

I find this odd, however, to do before you’ve seen the offers.

What if you had ten offers, and seven were above $700,000?  Would you still send all seven back?

It makes a whole lot more sense to look at your ten offers, realize that there are offers at $755K, $751K, $750K, and send back those three, but let the guy at $740K, $737K, and the others below, go home.

6) Sending Back Everybody

“You’re an asshole, you know that?”

That’s what I told the last guy who said, “We’re sending everybody back.”

There were 19 offers on a house, and with a $629,900 list price, you know there was probably a $200,000 spread between highest and lowest.  The damn thing sold for over $850,000.

The listing agent called me to say, “We’re sending everybody back,” and I couldn’t believe it.

“All of them?” I asked.  “Not the top two or three, or not the ones in a ‘group’ at the top, but all of them?”

He didn’t care.

“What about the two people that offered the list price, conditional on the sale of their cottage?  You gonna send them back too?”

He loved it.

“So you’ve probably got somebody who is $200,000 lower than somebody else, and they’re going to waste the next hour of their life, running around, to get another $7,000 on paper, when all the while, you could save them from that?”

“Let me know what your clients want to do,” he told me.

He really, truly did not care about anybody’s time, and I think he got a kick out of the fact that he was playing God.

I told him what I thought, that he was an asshole, because he was.

It’s very rare that we see this, but when we do, I think it’s awful.

And it’s not what you might think – that the agent is new, or inexperienced, or afraid, or unsure of what to do.  It’s always some total jerk, who takes pleasure in the misgivings of others.

7) A Sadist’s Breakfast

Honestly, there are a lot of different kinds of people in this business, and some of them are just awful humans.

A colleague told me of a story once where she and one other buyer’s agent had offers.

They both presented, and then he sent her back.  She didn’t see the other agent, or know what the plan was, but she improved her offer, and handed it to him on the front porch of the house.

She then watched as the other agent walked up to the front porch ten minutes later, and handed him a folder.

He then called her back, and asked her to improve again.

So she did, and she walked back up to the front porch, as she had done before.

And as the other agent had done before, she walked up ten minutes later, again, and handed him yet another improved offer.

My colleague finally asked, “How long are you going to do this?”

“Until somebody drops out,” he said.

She left right then and there, and it was, in fact, over.

He told her, “I never said I would take the highest.  I never said when I sent you back that you would get it if you were higher.  I never said I wouldn’t send you back again.  I never did anything that I said I wouldn’t.”

True, but it was still pretty grimy.

It was shrewd though.  He always had one live offer in his hands, and he controlled the entire process.

But both of those agents should have asked more questions before, and during, the process.

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So which method do I think is the most fair?

I don’t think that can be answered.

Fair to who?

The buyers?  The sellers?  The two sets of agents?  Everybody involved?

“Fair” to the sellers would be to keep the buyers there all night, and into the morning!  And if you’re the listing agent, isn’t it your job to get them the most money?

In theory, yes.  In practice, sometimes you catch more flies with honey.

Personally, I think multiple rounds of bidding is greedy, and it’s cruel.  It’s unnecessary, and I don’t believe that it always results in more money.

When you tell somebody, “Bring your absolute best offer,” they often offer more than they would have if you told them some wishy-washy version of “We’re not sure…..we’ll see…..we’ll play it by ear…..we’ll see how many offers there are…”

But I will be honest and say that if I have an offer of $1,000,000 and another at $1,002,000, I’ll tell both agents they’re “virtually identical,” and ask them if they want me to choose.

One of them often says, “My clients will want to improve,” and thus the decision is usually made.

I never price gouge.

But in this market, with the stakes as high as they are, with the amount of uncertainty that exists on offer night, and with two offers that close, you have to give them the chance to decide.

Damned if you do, damned if you don’t.

You tell people to bring their best, and that you’ll take the highest.  And you hope that there is clear winner so you don’t have to ask your sellers, or those two agents, to make a tough decision.

Well, I mean that I hope there’s a clear winner.  As I said, there are some sadists out there that want to see people cry…

So if you’re a buyer out there, make sure your agent asks the listing agent, “How are you going to handle the offers?”

Your strategy often depends on it…