I’ve done a lot of preaching on this subject over the years, but I’m usually left disappointed.
Last week, I had the pleasure of dealing with an agent who was fair and honest in his dealings, and it made it easier for everybody involved…
Hey, the market is red-hot again!
Who knew?
For all that predicting and posturing we did back in the summer, it seems like we were way off base.
Maybe it was wishful thinking, or maybe it was a genuine belief that the market was going to finally cool. Whatever it was, we were dead wrong, at least if the first three weeks of September are any indication.
I know you’ve all been waiting for the “eventual cooling,” but it’s just not happening right now.
It’s the same old story: supply and demand.
There’s not enough supply to satisfy the plethora of active buyers out there, and until the day when we see twenty houses for sale in Riverdale instead of one, I don’t see it changing.
Case in point: I’m sitting here at my desk on Tuesday afternoon about to enter the frenzy for a house in Riverdale this evening.
There are five offers registered at the time of this writing, and I’m sure there will be more. I told my clients from the beginning, “Expect 6-8 offers, and it could go 10-12. But either way, the price will end up around the same spot.”
I’m anxious about presenting the offer tonight, not only because I think this house is perfect for my clients and I want them to get it, but also because the sellers have requested/demanded all offers by fax, and I’m insisting on presenting.
The tone that has been set by the listing side isn’t what I’d call adversarial, but it’s certainly from a point of leverage. In this market, you can ask for whatever you want. If you want offers by fax, at a certain time, and according to a certain set of regulations, you can have them – you need merely ask.
But how the offers are presented is only one half of the story. The other half is how they are reviewed.
As I’ve said before on countless occasions: there is no one identifiable method or procedure for reviewing multiple offers, and ultimately for determining who to sell to, ie. which offer is the “winner.” The ultimate winner could be the person who had the 4th highest offer, that is, until you grind them down for an hour and send them back to improve their offer six times.
This may be an exaggeration, but these situations happen, and they’re not fun.
You never know how the listing agent is going to proceed. Sometimes, they truly will take the highest offer, and call it a day. Then sometimes, if there are eleven offers, they’ll send ALL eleven buyers back to improve their offers.
You just never know.
The hope is always the same from the perspective of the buyer’s agent: you hope that you have the best offer and it’s accepted.
But you also hope that you don’t get jerked around, and this happens probably more often than not.
Last week, I represented a buyer who was looking to purchase a house in the west end.
The house was listed at $998,000, and we offered $1,100,000.
The house might have been under-priced, who knows. It’s debatable, depending on who you ask, but there are people out there that might suggest $998,000 was too much to begin with!
In any event, my buyers put their best foot forward, and left nothing on the table. I always tell my buyers, “Don’t assume there is going to be some sort of ’round two’ or that there’s automatically going to be a send-back. Put your best foot forward.”
We did, and we were not successful.
But it was how the listing agent handled the process that helped restore my faith in the multiple offer game.
For starters, he was polite, professional, and very friendly.
And after I presented my offer, he came outside to chat.
“David, thanks for your offer,” he said, which of course is not a formality, is not cliché, and should always be said to somebody who takes the time and effort to bring an offer to the table – especially in multiples!
“Here’s the situation,” he started. “We’ve got eight offers, as you know, and there’s, well, there’s like ‘three tiers.'”
This was something I hadn’t really heard before.
“There’s three offers in the bottom tier, three offers – including yours, in the middle, and then there are two offers that are just – like, wow, up there!”
He motioned with his hand when he said, “up there,” and as if his words weren’t enough, I got a very good picture of just how high those offers were! The listing agent was a large man – about 6’4″ I’d bet, and I’m only 5’11” so the point was very dramatic.
I said, “So they’re really up there then, eh?”
“Yeah, David, they are,” he said.
And with that, the listing agent saved my clients and I a lot of time and aggravation, but he did it in a way that enabled us to feel as if we made the decision.
He left the door open for us to come back and improve our offer, which, of course, it made no sense to do.
He wasn’t saying, “You suck, goodbye,” either.
But he was basically telling us what was going on, without telling us.
He was essentially saying, “You’d have to come up $100,000 to be in the ballpark,” and since we weren’t going to do that (he knew as well as I did), he was allowing us to exit the process by our own accord, and not waste any more time than we needed to.
Many agents will send ALL the buyers back – and you all know how I feel about this!
Other agents will send back the top offers, including those in the “middle,” which they fail to distinguish from the rest.
There’s no transparency, but at the same time, I see how many agents don’t want to play their hands. However, sending back a buyer who has no hope in hell of coming up to the eventual selling price is just plain cruel, and agents do it every single day.
In this case, the listing agent told us a lot by not telling us much – he said we were in the “middle tier,” and that the top tier was in a whole other league.
That was all the information we needed to:
a) make an informed decision
b) walk away at the right time
c) feel good knowing that the selling price was something we would have never entertained.
And you know what? Despite that old adage, “A property is worth what somebody is willing to pay for it,” we felt in this case that the selling price was way beyond anything that we would ever consider. Good for the person that bought it for $1,225,000, and I hope they’re going to build a family home that they’ll be in for twenty years! But it just wasn’t for my clients, and thus we passed.
Imagine if the situation had been different, ie. ‘normal.’ Imagine if a different listing agent simply said, “We’re going to give you the opportunity to improve your offer, yadda, yadda,” and we moved from $1,100,000 to $1,120,000, spent two more hours on it, and then found out we lost by $105,000.
I understand that some listing agents don’t like to divulge the “secrets” behind the offer process, but have some consideration! Let people exit “the game,” as one listing agent so aptly put it today, when it’s obvious that they’re no longer playing.
Bottom Tier
Middle Tier
Wow, Up There!
That’s a fair way of handling multiple offers.
Nobody who is told that their offer is in the “middle tier” is going to waste any more time once they hear about the competition.
It allows the buyer to decide for him or herself to pass, and save some dignity.
I only wish more listing agents had as much courtesy.
Paully
at 8:11 am
Have you ever seen or heard about a situation where the vendor sent all of the offers back for improvement, and all of the potential purchasers decided not to come back to the table?
David Fleming
at 10:37 am
@ Paully
Unfortunately, never.
Even worse, however, is a situation where the seller sends all offers back for improvement, and then rejects them all and takes the property off the market or re-lists the next day at a higher price. What a waste of everybody’s time.
Vlad
at 9:19 am
My wife is an agent. She always says up front “Best offer wins.” And she sticks to it. Only in the case of a dead heat would she even consider sending buyers back. We’ve been in the buyers’ shoes ourselves and it’s not fun getting jerked around. Last summer we drove out to a sketchy tow truck yard and sweated it out with other agents and buyers for an entire evening only to lose out to an eleventh-hour offer that came in by fax. No, not fun.
MM3
at 12:46 pm
Now that EBay bidding is thoroughly familiar to everyone, I’m still boggled as to why the multiple offer process isn’t more transparent. Why do agents not disclose to all bidders what the offers were? Then people can make an informed decision on how much to bid. 8 years after having successfully purchased my house, I still remember very clearly how aggravating it was to be told:
(a) There will be a single “best offer wins” bid.
(b) On second thought, all bidders are getting the chance to improve their offers. And no, we can’t tell you whether you are already the highest bidder.
We ended up submitting a 2nd bid, and got the house. But I’m still struck by how sleazy the process felt.
Ralph Cramdown
at 2:56 pm
“Why do agents not disclose to all bidders what the offers were? Then people can make an informed decision on how much to bid.”
I think you answered your own question. It is in realtors’ interest to make the process of buying and selling real estate appear as frustrating, opaque and difficult as possible, and to leave buyers and sellers in the dark at every turn. Otherwise, who’d pay $25,000 for the “service”?
As another example, take realtors’ standard advice to submit or accept an offer and then take it to your lawyer. Once you’ve signed an offer, your lawyer can do nothing to advise you as to whether the terms are fair or advisable, all he can do is execute the deal at the land office. And that’s just how realtors like it.
jeff316
at 10:06 am
Let’s say you’re taking quotes for work on your house.
Do you tell the guys what price you’re willing to pay before hand? Do you tell the second guy to arrive what the first one quoted you?
Why is that? Are you just trying to make the work world frustrating for tradesmen? Of course not!
I’m really not trying to pick on you but you’re fixated on specific a tool that is not only inconsistent with how we regulate transactions, but also doesn’t solve the often legitimate problems you identify.
George
at 3:37 pm
It’s a sellers’s market. If demand was a lot lower, buyers would hold more power. Sellers would then need to accept any offer they could get, not reject every offer and demand more money from all involved.
If eBay was as closed in its bidding, buyers would find another marketplace where the process was more balanced.
jeff316
at 5:25 am
There is a reason that eBay structures the auctions in the manner that they do. eBay is an example of a system that is set up to the sole benefit of the seller.
jeff316
at 8:47 pm
What’s sleazy about that process, though? Whether you are highest or lowest bidder is not relevant. Do your research, pick a number you can afford that you think is reflective of the value, and stick to it. If you don’t want to end up in multiple bids, don’t bid. If you don’t want to improve, don’t do it.
I can understand that buying a home is a stressful, emotional process but at some point we just have to be grown-ups about it.
Ralph Cramdown
at 7:57 am
Compare the ‘process’ to a fine art auction: Big numbers, stressful (I imagine), but everybody in the room knows the rules and they’re the same for every auction. Or a sealed-bid tender process run by a government for a construction process: Big numbers, stressful, but the rules are published and, if not adhered to, there’s very often litigation.
Compare to the cattle call that is a Toronto multiple offer scenario. Will there be 30 offers because the agent priced unrealistically low and started a pool on how many bids he’d get? Will the top offers be sent back? All of them? None of them? Will the seller’s agent represent the existence of a phantom offer to get the only legitimate buyer bidding against himself? Will bidders be told the auction will be handled one way, then that the rules have changed halfway through? Will the seller’s agent also have a buyer in her pocket, who magically ends up winning the house by $1,000 over the 2nd highest bidder?
Much of the stress and emotion seems to be generated, in some cases, by the actions of the listing agent. Who’s not being a grown-up? If you don’t see what’s sleazy about that process, you’ve been in the business too long.
jeff316
at 8:12 am
Your second paragraph is irrelevant to the issue we’re discussing – codifying the multiple offer process. Regulating multiple offer rules does not solve any of the issues you identify in that paragraph.
But I’ll address them anyway. Because I’m not in the real estate industry, but I was once in the art world so I know that a lot of the same complaints you have about real estate are common to patrons of art auctions.
Art auctions often have offer prices well-below market value to generate interest from people to help drive up the price with their bidding. They also have sometimes unpublished reserves, not unlike our real estate situation. It is not uncommon for a bidder to bid on a single piece, only to find out post-auction they didn’t meet the reserve – possibly wasting their chance to have bid on something else. There may also be other conditions of sale, including contractual obligations associated with the piece that may not suit the seller. Auction houses often line up interested parties in advance, many of them not in the room, bidding by phone or fax. And, to top it all off, as Kyle has noted the buyer is paying the whole premium despite all of the potential shenanigans!
RFPs are often sent back and sometimes only a select few are given that opportunity. RFP bidders don’t officially know who they are bidding against, nor do their know what price other bidders have submitted – and for good reason. It’s confidential commercial information that could erode one’s competitive advantage.
Plus, phantom offers can happen in either of those scenarios.
Like you said, in those two scenarios a frustrated buyer can litigate. So can someone involved in a multiple offer real estate process that is unhappy with the outcome and feels that something nefarious happened.
MM3 described a scenario in which he bid on a house, was asked if he wanted to bid again, chose to do so, and won the house.
I can only speculate, but it sounds like he could have chosen not to bid at all, and could have then chosen again to withdraw or maintain his existing bid. He didn’t, and again it is speculation, but I assume he’s comfy with the price he paid and happy to have won the house he now owns. And someday, I again speculate, he’ll be a seller. So, what’s the problem then? Sometimes emotion gets the better of all of us so yes, sometimes we need to grow-up.
jeff316
at 8:54 am
Your second paragraph is irrelevant to the issue we’re discussing – codifying the multiple offer process. Regulating multiple offer rules does not solve any of the issues you identify in that paragraph.
But I’ll address them anyway. Because I’m not in the real estate industry, but I was once in the art world so I know that a lot of the same complaints you have about real estate are common to patrons of art auctions. Art auctions are a bad example of a straightforward sales process.
Art auctions almost always have offer prices well-below market value to generate interest from people to help drive up the price with their bidding. They also have sometimes unpublished reserves, not unlike our real estate situation. It is not uncommon for a bidder to bid on a single piece, only to find out post-auction they didn’t meet the reserve – possibly wasting their chance to have bid on another piece. There may also be other conditions of sale, including seller-specified contractual obligations associated with the piece that may not suit the buyer and may result in either one of them abandoning the sale. Auction houses often line up interested parties in advance, many of them not in the room bidding by phone or fax at the last moment. And, to top it all off, as Kyle has noted the buyer is paying the premium despite all of the potential shenanigans!
RFPs are often sent back and sometimes only a select few are given that opportunity. RFP bidders don’t officially know who they are bidding against, nor do their know what price other bidders have submitted – and for good reason. It’s confidential commercial information that could erode one’s competitive advantage, both in the current process and future ones.
Plus, phantom offers can happen in either of those scenarios.
Like you said, in those two scenarios a frustrated buyer can litigate. So can someone involved in a multiple offer real estate process that is unhappy with the outcome and feels that something nefarious happened.
So why no outcry from the participants in those processes? Experience, education, and entitlement. Those participants are knowledgeable about the industry, the processes and the pitfalls. And experience and education result, in general, in them understanding that they are not entitled to a process that always goes their way. That’s the difference.
MM3’s described a scenario in which he bid on a house, was asked if he wanted to bid again, chose to do so, and won the house.
I can only speculate, but it sounds like he could have chosen not to bid at all, and could have then chosen again to withdraw or maintain his existing bid. He didn’t. Again it is speculation, but I assume he’s comfy with the price he paid and happy to have won the house he now owns. And someday, I again speculate, he’ll be a seller. So, what’s the problem then?
Sometimes emotion gets the better of all of us so yes, sometimes we need to grow-up.
Joe Q.
at 11:02 am
The sleazy aspect comes from the lack of consistency. “I know we said ‘best offer wins’, but we actually just changed our minds and are sending you all back so that you can offer us more money.”
Multiple-offer situations look a lot like auctions, and people implicitly expect that there are rules that will be followed. When the auctioneer changes the rules in the middle of the action, people get upset.
Kyle
at 9:22 am
“Multiple-offer situations look a lot like auctions, and people implicitly expect that there are rules that will be followed.”
There is an enormous difference between multiple offers and art auctions. Unlike art auctions were the buyer pays the whole premium, in real estate the seller foots the entire commission, including the portion that goes to the buyer’s agent, who ironically is acting against him/her. So as a buyer your expectations should actually reflect what it actually costs you for the opportunity to bid (i.e. nothing). Expecting anything more is actually pure entitlement.
Joe Q.
at 9:40 am
I never mentioned anything about art auctions in my post.
Ralph Cramdown
at 10:43 am
I see you’ve been lured into the trap. How, pray tell, does it matter who pays the commission? Losing bidders and failed sellers pay nothing, whether at auction or a house bidding war. House sellers have to accept 7-8% less than buyers are willing to pay, or you could say buyers have to pay 7-8% more than sellers are willing to net — this covers RE commission, LTT and other closing costs.
“So as a buyer your expectations should actually reflect what it actually costs you for the opportunity to bid (i.e. nothing).”
I see you put a lower value on your time than do most of the rest of us.
landlords rule
at 10:58 pm
Not sure how much you think your time is worth, but the seller of an average house in this city pays anywhere between 13-27K in commission (i’m guessing you don’t make that much in one evening), while the buyer pays squat. So for frustrated buyers to go around saying that sellers owe them some level of transparency or some level of decorum, because that’s how eBay does it, is just plain ridiculous. The seller pays for the game and therefore gets to set the rules, as a buyer if you don’t like the rules then don’t play the game. I personally don’t condone pricing games, but having been on both sides of the multiple offer table on many occasions, i also roll my eyes at those bitter buyers crying over the injustices that sellers and their agents supposedly foist upon them.
jeff316
at 9:42 am
Maybe we should regulate roller coaster line-ups, maximum on-hold phone waits, free hamburgers if Wendy’s doesn’t have the product you want in stock and windbag grandparent “uphill both ways” stories while we’re at it. Because I know I’ve wasted much more of my time in those situations than I have in multiple-bidding situations. Don’t want to risk wasting your time? Don’t leave the house and certainly don’t pick up the phone. 🙂
Ralph Cramdown
at 1:52 pm
You should probably re-read the post you replied to. In most transactions, only one party brings money to the closing table.
Now, about those rules:
“A realtor shall promote and protect the interests of his client. This primary obligation does not relieve the realtor of the responsibility of dealing fairly with all parties to the transaction. […] Dealing fairly means acting honestly and professionally.” (CREA Code)
“A registrant shall treat every person the registrant deals with in the course of a trade in real estate fairly, honestly and with integrity.” (REBBA)
“A registrant shall not knowingly make an inaccurate representation in respect of a trade in real estate.” (REBBA)
“A registrant shall use the registrant’s best efforts to prevent error, misrepresentation, fraud or any unethical practice in respect of a trade in real estate.” (REBBA)
“A registrant shall not, in the course of trading in real estate, engage in any act or omission that, having regard to all of the circumstances, would reasonably be regarded as disgraceful, dishonourable, unprofessional or unbecoming a registrant.” (REBBA)
Now if you think an agent telling competing buyers that there will only be one round of bidding and subsequently sending offers back for a second round (as mentioned by MM3 above), or David’s more general observation that, currently, buyers in multiple offer situations “get jerked around, probably more often than not” doesn’t violate the above, we’ll have to agree to disagree. In addition, you can go to Craigslist or Kijiji or newspaper classifieds, look at the FSBO section and find agents advertising properties without disclosing their status or brokerage any day of the week — just google the phone numbers in the ads. This is also a clear violation of the law.
jeff316
at 9:26 am
Yes, when the rules change mid-auction buyers do get upset.
In these instances, it is up to each individual to choose whether or not to continue in the process. And, like in most multiple offer situations, the majority of them keep on bidding despite their reservations. And, similar to real estate, it’s only in the exceptional cases where the stakes/monies are highest that anything is taken to the courts.
Auctions are just as inconsistent as real estate sales, just as open to the problems people like Ralph have with our current system. But it’s a smaller crowd participating in them so we don’t hear about it as often.
Joe Q.
at 9:41 am
Absolutely — people will continue with the process, but the perception of sleaze doesn’t go away. There is a reason why the industry has the reputation that it does.
jeff316
at 11:01 am
And that’s fair. To each their own.
But it’s not a reason to single out only one type of transaction for extensive and potentially rights-infringing regulation that won’t really do anything to remove those aspects that some people perceive as “sleazy”.
And those regulations or rules or whathaveyou may end up driving listings and transactions into more private, less public venues where the whole process may get even “sleazier”.
Ralph Cramdown
at 2:51 pm
Society singles out ALL KINDS of transactions for regulation. Doctors, lawyers, auto mechanics, taxi drivers, stockbrokers, restaurant owners (including hot dog stand owners)…
It isn’t like we need to blue sky about what the market might operate like with varying business models and levels of regulation — most models have been tried somewhere in the world, and we can read about them.
jeff316
at 9:40 am
Most of those examples we don’t regulate how the service is sold or the transaction occurs above and beyond the basic principles of consumer protection that apply to every industry.
We don’t tell doctors how they must sell and charge for their service. (We only tell them that if they’re going to charge the government for it, then they have to follow certain rules.) We don’t tell mechanics how they have to show cost on the bill. The law society does regulate how their members sell their service, but the government doesn’t and if you want to go pay anyone for legal advice the government is only interested in getting their 13% and nothing else about how the service is sold.
You may be getting mixed up with regulating the profession. We regulate the professionalism or safety of the service being provided. That’s a different beast.
And when we regulate those industries we regulate the whole kit and kaboodle. We don’t regulate only podiatrists and not GPs, we do all doctors. It’s blanket.
What we’re talking about on this page is setting up a bonafide must-follow set of rules for an auction…
…but only if you’re auctioning your house.
Not anything else that gets auctioned. Not art, not horses, not farm equipment, not furniture, not cars, etc.
That’s like regulating rules for how Tim Horton’s sells something but not Canadian Tire or the Brick or the Quickie Mart.
Regulating the transaction and regulating the profession are two very different beasts.
jeff316
at 10:00 am
…to add, since we do regulate the real estate profession (to some extent) we could specify rules on the transaction through professional rules and codes. Like the lawyers do. Absolutely.
We’ve already discussed the relatively negligible benefit of doing so. But what we haven’t discussed are the costs.
Those rules would only apply to real estate agents. What happens then? It would drive further nefariousness underground or into the burgeoning wild west of FSBO situations. Why go with an agent, a regulated professional, when you can do it yourself for less money with more flexibility and really minimal oversight? That’s a pretty massive loophole.
These things don’t happen in a vacuum.
jeff316
at 10:30 am
Not to beat a dead horse here, but think of it this way.
If you’re sick, you can go to a doctor. That doctor is regulated by professional codes. But you can just as soon come to me. I don’t have the same resources as a doctor (e.g. prescriptions, referrals, etc.) and I can’t call myself a certified doctor but there is nothing stopping you from letting me diagnose and treat you. Most people don’t choose that route, since the stakes are high.
Ditto on lawyers. I don’t have the same resources, and can’t call myself a certified lawyer, but I can represent you. You can represent yourself too. Most people don’t do this because it’s dumb.
For real estate agents, it’s also the same. You or me can sell your house on your own, though you don’t have the same resources as agents (e.g. MLS) and can’t call yourself or me an agent. But the difference here is that the stakes are low. No offense to any agents but it’s not a life and death service. Given the option of saving commission and having more flexibility to run my sale in any way I see fit, regulating the transaction only for agents is going to drive lots of business to the weak spot – the least regulated place in the market – and that’s doing it yourself or through a similarly unregulated person.
Electricians and taxi drivers are the opposite. And that’s because they provide services that have a significant health and safety component associated with the doing the job. I’d argue they may be over-regulated, wiring is not childplay but not brain surgery either, but their situation is very much different.
I do appreciate that you have succinct points you’re just off on this one Ralph. Regulating multiple bid situations doesn’t solve the problems you have. We can’t regulate integrity.
Ralph Cramdown
at 2:16 pm
Stunning. You can’t practice medicine without a license. It’s not about calling yourself a doctor, it’s about practicing medicine.
Likewise, you can’t represent me legally if you’re not a lawyer or a licensed paralegal.
You can’t charge me for a ride in your car unless you’ve got a livery license.
You can’t sell me a cooked meal unless you’ve got a restaurant license.
I’m pretty sure you can’t hold a public auction unless you’re a licensed auctioneer (this may have been repealed, varies by jurisdiction).
And yes, we regulate how the service is sold. Lawyers couldn’t until recently charge contingency fees (“you don’t pay unless we win”) for example.
In many cases, the government has delegated regulation to exclusive professional organizations or municipalities, but it’s government enforced regulation nonetheless.
Real estate transactions already have specific regulations applying only to them — anti money laundering and non resident tax holdbacks, to name two.
As to beating a dead horse, I don’t believe that’s regulated. But if the horse is still alive, you’ll need a veterinarian’s license.
Ralph Cramdown
at 6:28 pm
“Most of those examples we don’t regulate how the service is sold or the transaction occurs […]”
Dang, forgot a primo example: You’d think you’d be able to structure a commission along the lines of “I’ll pay you $10,000 plus 10% of the price in excess of $350,000” but that’s outlawed.
“If the commission payable in respect of a trade in real estate is expressed as a percentage of the sale price or rental price, the percentage does not have to be fixed but may be expressed as a series of percentages that decrease at specified amounts as the sale price or rental price increases.” (REBBA)
jeff316
at 9:19 am
Stunning. You can’t practice medicine without a license. It’s not about calling yourself a doctor, it’s about practicing medicine.
— I can dispense advice and care on any issue – check out the traditional healers, homeo/naturo/psychopathic clinic, etc. You can operate outside the framework to dispense advice on health matters just not as a doctor.
Likewise, you can’t represent me legally if you’re not a lawyer or a licensed paralegal.
— anyone in court can appoint an agent to represent them on their behalf. They need not be a lawyer. Nor a paralegal. This happens in cases where the defendant is not eligible for state-funded representation but can’t afford a lawyer. The judge, however, reserves the right to throw that person out if they are incompetent or may ruin the defendant’s chance of a fair trial.
You can’t charge me for a ride in your car unless you’ve got a livery license.
— Yes, exactly. And I’ve addressed why (ps – it’s nothing to do with the transaction, it’s a health and safety issue. And a big municipal moneymarker, btu that’s another issue.) This is a very good example. In taxis, no one operates outside the system. But in real estate, LOTS of people do. You don’t need to be a regulated professional. E.g. your own sales, Property Guys, FSBO companies, etc. to be involved in real estate.
You can’t sell me a cooked meal unless you’ve got a restaurant license.
— See explanation on taxis.
I’m pretty sure you can’t hold a public auction unless you’re a licensed auctioneer (this may have been repealed, varies by jurisdiction).
— Yes, every auctioneer. Not just horse auctioneers. Not just car auctioneers. Every single one. That’s my point. We can’t just single out real estate transactions, UNLESS we regulate only agents and that leaves huge loopholes.
And yes, we regulate how the service is sold. Lawyers couldn’t until recently charge contingency fees (“you don’t pay unless we win”) for example.
— The transaction itself is not regulated, it is the conduct of the professional doing that transaction. Very big difference. Any advice, counsel, consulting etc. outside of the legal profession is not regulated to the same standards.
In many cases, the government has delegated regulation to exclusive professional organizations or municipalities, but it’s government enforced regulation nonetheless.
– Yes, again on the profession. And the conduct of the professional. The transaction itself is not regulated outside of that conduct. In real estate, lots of transactions occur outside the regulated profession.
Real estate transactions already have specific regulations applying only to them — anti money laundering and non resident tax holdbacks, to name two.
— Yes, and those regulations have strong rationales for the regulation. My problem with this issue isn’t that you or someone else wants to regulate the process. Go ahead. But you’re going to need a rationale that stands up in court. The rationales you and others have provided will not stand up in court because a) regulating the process doesn’t solve the “problems” you identify, b) those “problems” are part and parcel of a free-market capitalist system, c) the “threat” those “problems” pose to consumers is not massive nor are they illegal, and d) you’re discriminating by only regulating real estate and not other similar transactions which in theory should be facing the same problems, no?
As to beating a dead horse, I don’t believe that’s regulated. But if the horse is still alive, you’ll need a veterinarian’s license.
— Again, I can come and shove a handful of sperm up your horses crotch without a veterinary license. That is not illegal. I just can’t call myself as a vet. And you have no professional recourse against me. It is just not advisable for you, your horse, or me to do so. 🙂 This shit goes down on farms all the time – vet visits are like 1000$ bucks for a big cow or horse, farmers don’t have that kind of money.
jeff316
at 9:36 am
Re: the REBBA example
1. It doesn’t infringe on anyone’s ability to structure the commission the way they wish to.
2. It’s about remuneration of the professional, not the individual’s ability to sell their personal property in the way they see fit. That’s what you’re going to have to argue in court – that the rationale is strong enough to override an individual’s right to sell their property in the manner they see fit. This sort of thing has gone to court before, and the government has lost. That’s why we have bills with multiple fees, non-inclusive billing, extra charges, etc. Issues you’ve brought up such as very competitive market, multiple offers, not so straightforward process, wasting time, agents lining up buyers, etc. are definitely annoying, I don’t disagree, but won’t cut the mustard in court.
jeff316
at 9:48 am
I just checked and actually I cannot shove sperm up your horses crotch, that is illegal. I guess that goes on illegally outside the framework. But you can call me over to ask my opinion and I sure can tell you to feed it a bunch of bay leaves and smoked fish to correct its cold, that is not.
jeff316
at 10:11 am
To sum up. because I think we’re getting away from the main point here, you have three options if you want to codify the multiple offer process.
1. Regulate professional conduct of agents with respect to sale
– this you could do no sweat I suspect, but it leaves big loopholes for non-agent sales
2. Regulate any and all real estate transactions
– this is harder, you’re going to need a rationales for a) why to infringe rights, b) why market intervention is necessary, c) how this solves problems you’re identifying, and and d) why real estate is different than every other multiple bid situation
3. Regulate all multiple offer processes
– Significant market intervention but possibly more likely to survive legal challenge because it is non discriminatory, maybe
4. Make the sale of real estate by non-agents illegal and do option 1
– we can both agree, a disaster! 🙂
I do appreciate the discussion you bring to this page. You’re rationale on this issue is emotionally and politically compelling, but economically and legally weak.
Ralph Cramdown
at 2:15 pm
Real estate is already different from any other transaction. The Statute of Frauds dates from 1677.
We don’t live in a free market capitalist society. The government can and does regulate all kinds of transactions on a discriminatory basis which Classical Liberalism would find repugnant. Here in Canada, all kinds of government behaviour which would otherwise offend the Charter of Rights and Freedoms is saved by Section 1, and upheld by the courts. But for the most eye popping example, we really have to defer to our neighbours to the South and their landmark decision in Wickard v. Filburn.
To clarify, I believe that a lot of the multiple offer behaviour which I find repugnant is already against various laws and regulations, but I find the various Boards’ and real estate associations’ will to clean up the industry completely lacking. The standard punishment for infractions seems to be the amount of commission the agent earned or less, and perhaps having to retake a real estate course. The highest fines are reserved for behaviour which would seem to do little damage to the public (e.g. contacting another agent’s client, offering to reduce your commission and not announcing that to all competing agents (the horror!)), and the lower fines are meted out for screwing the principal in a transaction (e.g. misrepresenting taxes or a parking spot). Read all about it at RECO.
Frank
at 1:08 pm
The entire multiple offer garbage is in part contributing to these un-sustainable gains.
Unless buyers know exactly what they are up against, there will always be room for misrepresentation and even fraud.
Make the entire process transparent. Right now the agents are driving this market with lies about real value, future value and competition.
Ron Agnew
at 11:16 am
good advice as we are in the process of selling.Thanks
Eusob ali
at 5:22 am
Good