Every Realtor runs his or her business differently, and every Realtor brings different pros (and often cons) to the table.
But I’m going to call out some poor business practices that I do NOT believe are part of any Realtor’s “job”…
“I bet 25-plus bids. I thought if I didn’t break 20, I wasn’t doing my job.”
What a complete ass.
I’m putting myself in a tough spot here, because I’m going to speak out against business practices that frustrate me, as both a Realtor and a consumer, and have frustrated every single buyer in the real estate market over the last decade.
RECO rules prohibit me from doing and saying certain things, but that doesn’t always stop me. Sometimes I speak in hypotheticals, change names, dates, places.
So how about this – let’s call this entire blog post “hypothetical,” and I’ll tell you that I’m speaking generally and prefacing everything I say with “If this were true.” That way, I can keep out of trouble for calling out something and somebody who should be in trouble for his or her actions anyways. Oh, the irony!
The above quote was said by the listing agent of a property that gained headlines for receiving thirty-one offers and selling for $200,000 over asking.
As I said at the onset, every Realtor is different, and every Realtor takes a different approach to the business.
But it should never be a Realtor’s “job” do get twenty-five offers on a property. That’s just ridiculous, and it’s meaningless.
The job is to sell the property for the maximum amount possible, in the shortest amount of time, with the least inconvenience to the client. But clearly – getting the most money for the property is the main goal.
This does not, however, mean that a Realtor needs to involve countless parties who needn’t be involved, embarrass the hell out of dozens of people, waste a lot of people’s time, and make the entire process into a circus.
My colleague, Mark McLean, is one of the best-known Toronto Realtors on Twitter, and has his own blog called “Realty Lab” where he weighs the pros and cons of a situation like the one we’re discussing right now. With respect to the 31-offer, $200,000 over-asking debacle, Mark was the first one to shine a light on the ethics (or lack thereof) involved:
Let’s face it, an agent lists a house grossly undervalued to drum up multiple offers and that process is nothing short of inconsiderate, underhanded and unprofessional. Of course, the neighbours talk, perhaps the media pick up on it, and the agent sends out just sold cards exclaiming “look at me, I’m so great because my listing sold for 140% of asking price”. We are not doing ourselves any favours people. When you have 15 people at the offer table, 14 of them have given up time with their families because the agent has given them a glimmer of hope that a particular house is within their financial reach. Perhaps the flyer should say “Hire me; I don’t know how to price a house so I guarantee a line-up of buyers”.
I couldn’t have said it better myself, Mark. Mark’s Twitter handle is @mark_mclean
I once wrote about the idea of “people giving up time with their families,” and I was called out on this blog by 1-2 people that said, “Oh boo-hoo, you wanna go home to your family? Stop complaining, you make too much money,” etc. But those people missed my point entirely.
The point is that some Realtors don’t respect anyone, or anything. Some Realtors don’t respect the very industry they work in! They don’t respect their colleagues, or the time they put into their business; they don’t respect buyers and sellers – neither those who “win” properties during multiple offers, or those that go home and feel like crap for days on end.
Under-pricing a house to solicit a bidding war, as Mark points out, may be disguising an even bigger problem in real estate: that some Realtor’s can’t effectively do their jobs! Some Realtors can’t price a property, and take the easy way out by under-pricing.
Maybe the house in this completely hypothetical situation we’re talking about was worth $490,000. Maybe it was worth $525,000. Maybe it was worth $440,000. And maybe, just maybe, the Realtor who sold the property had absolutely no clue what the property was worth, and took the path of least resistance by listing it at $379,000. In the process, this Realtor brought dozens of people into the fray that otherwise would never have been involved.
I used the word “embarrassing” above, and I can’t think of a better word to describe these antics.
On the one hand, the Realtor who listed the property should be embarrassed for his actions.
On the other hand, the buyers who submitted offers of $420,000 and got absolutely crushed by $150K are also embarrassed and likely still sore about it.
The entire situation stinks, and it’s needless, in my opinion.
Let me draw a comparison to a football game, since we now have to wait seven months to see Eli Manning and Tom Brady again.
The Realtor in this hypothetical situation said: “I bet 25-plus bids. I thought if I didn’t break 20, I wasn’t doing my job.”
In football, the objective is to win the game. But if you take the above logic into the equation, it’s like a coach saying:
“I don’t just want to win the game. I want to: 1) win the game, 2) win because we started out with an artificial 14-0 lead, 3) embarrass the other team, 4) celebrate like we won the Superbowl even though it’s the pre-season, 5) hurt a few opposing players in the process.”
If a coach said that, you would all agree that he’s an ass. Can you really brag about winning the game when you started with a 14-0 lead?
Isn’t this the same thing that’s going on in the real estate story above?
The house was-under listed by $100,000 – $200,000, and the Realtor set a silly “goal” of bringing 20 useless bids to the table, which were only put forth because of the misleading pricing. And in the process, everybody was embarrassed (except for the Realtor who for some reason went to the newspapers and asked for a story to be done about his great “work.”)
This is why the general public hates Realtors.
This makes me embarrassed to be part of this profession.
I love my job, and I love the company that I work for. I truly think that our brokerage and our agents have among the highest ethical standards in the business, and we separate ourselves from the rest of the industry every single day.
There are lots of other brokerages like us, and thousands of agents who do what we do.
But then there are Realtors that give us ALL a bad name, and it’s stories like the one in the Toronto Star about rampant under-pricing and 31-bids that make the public say, “All Realtors are scum, and they’re not better than used-car salesmen.”
Having read the article in the Toronto Star, and seen the quotes – I can’t disagree.
And if I get in trouble for writing this post, then I’ll deal with the repercussions.
It just had to be said…Back To Top Back To Comments
at 8:20 am
Good post. On the subject of twitter, you need to promote yours more.
Ontario Mortgage Broker
at 8:42 am
What is so wrong with listing a home at 0 and having it be auctioned up? If this strategy is what it takes to get top dollar, shouldn’t it be employed?
at 10:09 am
lol. post of the year for missing the point.
at 10:29 am
What was the point I missed? Come on – don’t leave me hanging here! Your comments are always the most astute – so please share!
at 4:53 pm
@Dave F, no I wasn’t replying to you. I was replying to the OMB (who I presume was not being sarcastic?)
ps. Most astute? You charmer! Now I know how you snagged your fiance’!
at 10:16 am
I think the problem is that a real estate transaction is far more complex for all parties involved than most other transactions. Unlike buying a small item off of eBay, buying a home requires a lot of legal documents, time, and money, and thus it does not translate as well to an auction setting.
at 1:25 pm
Hey, they’re auctioning off the tallest tower in the SW United States on the courthouse steps in Atlanta this afternoon.
at 3:22 pm
A multiple-offer situation is a form of auction in itself, isn’t it?
at 8:15 pm
Not necessarily, since in an auction the unit goes to highest bidder and for houses there are many other factors that go into the final decision other than price – inspection, conditions, possession date, upgrades/repair, etc.
at 10:11 pm
That’s absolutely true, but in today’s market, many of those factors are moot anyway. I would be interested in hearing David’s take on how often a multiple-offer situation ends up going to someone other than the highest bidder.
at 4:11 pm
Auction theory is an incredible complex field, but I too often wonder why properties aren’t just put up for auction.
You could pre-qualify bidders to eliminate other variables that may be a concern to the seller (essentially, you want to be sure that your winning bidder will be able to come up with the money). Of course, this is somewhat easier said than done – it no longer allows for, for example, buyers that are willing to offer a little more to negotiate an earlier closing date in return.
at 9:05 am
Even if the agent in question had no compunctions about leading around a couple of dozen potential buyers, one would think he would be at least be concerned about wasting other agents’ time. Just think of how many ultimately unproductive person-hours of work went into that transaction.
at 10:18 am
I too hate the practice of intentionally under-pricing property to attract bidding wars.. but I have to ask.
Where are the buyer agents in this situation? Shouldn’t they be able to figure out what it would really take to make an honest bid on the property? Shouldn’t they be advising their clients that bidding 420K is waste of time?
On the other hand, if the potential buyers didn’t go in with an agent, then hopefully this was a learning experience for them.
at 10:28 am
I agree, and I also question what the buyer agents are telling their clients.
I’ve been in this situation before many times, and I tell my clients the truth – “You’ve got to be well over $500K to have a shot.” But many buyers say things like, “Well I just want to throw my hat into the ring, and hope for the best.” I tell my clients that “hope” is a four-letter-word, and is as bad as “want” or “need” when you’re selling. I once lost a client over this. He wanted to offer under-asking when there were six offers on the table, and I refused. I told him to find another agent, and he did. The point was that he had ZERO chance of being successful, and he was simply helping to artificially boost up the eventual sale price by throwing in a dummy offer. He wasn’t listening to my advice, and ultimately he and I were not a good fit for each other.
I agree with you in that half the blame here can be put on the buyer agents for not doing their homework and advising their clients that this was a $500,000++ property that was listed at $379,000 for some stupid reason. Some agents have no clue what they’re doing, and others are just letting their clients call the shot. Then there are those that just want to use the offer as an excuse to signs their clients to a Buyer Agency Agreement.
It’s a mad, mad world…
at 12:34 pm
You should do a post on the BRA, if you haven’t already.
at 8:28 pm
Agreed. A BRA post would be interesting. When we were house hunting, we came across a house that had been listed at notorious price levels before being reduced to a price that was very attractive for the generous size and amenities of the house, particularly for the area. The catch was, upon visiting it became obvious that the house was flipped very poorly. Just so so bad. Finishes were falling apart and windows and flooring had shifted even though no-one had ever lived in it since it’s reno. It’s was so bad you wondered if the place was safe.
Our agent obviously advised against buying the house due to it’s terrible quality, but as an aside told us that as our representative subject to the BRA we had signed a while back if we wanted to make an offer he it could be argued that he was legally compelled to do so on our behalf, even though he felt it was his professional and personal obligation to do the exact opposite and refuse. Is that true? And if so, that’s nuts.
at 5:45 pm
Yup. Let’s add to the list of the dis-serviced. The Seller who admittedly gets away with it most of the time in a hot market but probably has no idea of the risks he is also taking.
Then we have all the losing buyers who — no matter how much they “know” otherwise — now have a picture of this house in their mind that they compare to every true $379k house they look at. Which means we add their agents to the dis-serviced — their job just got needlessly harder.
And the next listing agent trying to price a similar house: what WAS the true market value? Did the winner pay market or lose their mind?
And so on.