“I don’t quite understand the whole ‘bully offer thing,’ sooooo…..if you could just help me, that would be grrrrreat.”
I had so many thoughts running through my head.
One of them, of course, was, “I”m going to blog about this for sure.”
But I also wondered why somebody would demonstrate just how little they knew about real estate, specifically when this person was a licensed real estate agent.
Wait. Let me back up…
I brought out a few listings this week, and if the response is any indication, they’re going to do very well on “offer night.”
Yes, I am holding an offer night for one house, and one condo, but it’s out of necessity.
I always muse that “most agents are 3-6 months behind the market,” and that’s why you see agents pricing low and holding back offers for properties that don’t warrant it, and then taking offers any time when they really should be holding an offer night.
Out there in the market right now, we’re seeing red-hot, hot, warm, lukewarm, mild, and even cold.
One of my freehold listings received over 30 appointment requests in the first 24 hours. One of the condos received over 15 in the same time period. The first is red-hot, the second his hot, but all the while, I do have a couple of cold listings as well.
This is why it’s so incredibly important to implement the right listing/pricing strategy. No longer can a bum listing agent simply let the market do the work for them.
We are still seeing bully offers out there, and at the same time, we’re seeing lot of properties failing on “offer night” and being re-listed.
With just about every hot listing that hits the market, there are going to be calls from agents asking about bully offers. Have there been any bully offers yet? Would the sellers consider a bully offer? Will you keep me in the loop with any bully offers? And so on.
The first question is a valid one, but the next two have pre-determined answers. All listings must detail whether or not the seller would consider a pre-emptive offer, and there’s now a form for sellers to sign to that effect. And agents must notify any interested parties when a pre-emptive offer is registered, contrary to what was written in a listing in my recent “Real Estate Pet Peeves” blog post.
As for other questions, many are valid. Many more, however, are not.
I don’t recall a listing with as many naive questions about bully offers, as this one. And that’s having written so many blogs on this very topic before!
Here are a choice few from the last couple of days.
“What’s their bully offer price?”
A simple question, right? Innocent enough. Asked nicely.
But why even ask? There’s no way this question is going to be answered.
I realize that with every question I put up here today, readers can argue why I should answer it, and how. Just keep in mind that I do this for a living. If there’s a way to spin something, or to use it to my advantage, I will.
The problem with this question, is that when I told the gentleman on the other end of the line, “That’s not exactly how this works,” he said, “Oh yeah, enlighten me.”
He was rude right off the get-go, and the conversation demonstrated that he didn’t know how to operate in a market where he didn’t have complete control, where things didn’t go his way, and perhaps where the sellers have the leverage.
“If you would like to prepare a pre-emptive offer for your clients, have them sign it, and submit it to me, I will discuss it with my clients,” I told him.
He then said, “Yeah, I get all that, but I need to know what number they would accept, otherwise I’m wasting my time.”
That’s the key there, folks. Wasting his time.
It’s like a baseball player saying, “I’m batting .300 on the year, so I know that 70% of the time, I’m going to make an out. So why bother even going up to the plate?”
We talked about entitlement in the comments section of Wednesday’s blog, so paint this guy entitled!
Any agent who doesn’t want to “waste his time” selling a $1.5M home is in the wrong business.
Now you might ask me, “Why wouldn’t you just tell him a really high number, and if he bites, then you get a wicked deal, and if he doesn’t, then who cares?” The problem with that is: I don’t like to give away any information when I don’t have to.
Case in point: why would you detail what closing date you want on a listing?
If you specify that your sellers want May 31st, and the buyers want May 31st, then you’re a great match, right?
Right. But then you’re just giving that negotiable point of the deal away.
I would rather have the buyers come to me with a May 31st closing, tell their agent that we really wanted an April 30th closing, and then score points when I faux-concede their desired closing date. If I can score points when I’m the one winning, then the negotiation is really going my way.
So in the case where I have a hot listing, with a lot of showings, likely a good number of offers, why would I play my hand with respect to price when I don’t have to?
So I didn’t.
I simply told the gentleman, “I can’t control how you spend your time, and whether or not you think you’re using it effectively. But I’m happy to discuss the terms of your offer with my clients, if and when you submit one.”
Another agent called me this week and asked about bully offers, but then sort of asked-told me the following:
Can I just give this to you verbally? We’ll just do this verbally.
Do what verbally, exactly?
Submit offers? Negotiate? Because I don’t do either verbally.
If you watch Million Dollar Listing you’ll note that all of their negotiations are verbal, over speakerphone, as they dine at a fancy-dancy restaurant. This, of course, is because the show is fake. In reality, verbal offers are generally non-binding, and for the purposes of the TV show they always negotiate on the phone, do a back-and-forth with lots of tense pauses and theme music, and then when they reach an agreement, one of them says, “I’ll send you the paperwork.”
That is not how negotiations take place in real estate. Not even close.
It’s like when I watched Law & Order as a teenager with my father – a trial lawyer, who after seeing Ben Stone or Jack McCoy give a stirring 3-minute jury address would tell me, “In reality, this would take me two full days.”
So despite what you see on TV, real estate agents do not come to verbal agreements very often.
In the case of a bully offer, you would never expect a listing agent to accept or comment on a verbal offer.
This verbal offer would really only be about the price too, as though the deposit, closing date, inclusions/exclusions, clauses, and conditions have zero bearing on the transaction.
And while I’ll concede that price is the determining factor here, it still doesn’t mean the listing agent his going to give up his or her leverage when they don’t need to.
What if that agent said, “My clients will go to $1,500,000,” and I said, “That will work.” Then what? The buyer agent, knowing this was likely an acceptable number, could simply offer $1,450,000 and claim, “They couldn’t quite get to the number we talked about,” and effectively enter the listing agent into a negotiation.
And what if the number was low, and I said, “That won’t do it,” then what? Then I lose a potential bidder for the property on offer night, and have one fewer offer.
Whenever an agent wants to talk numbers on the phone, I tell them, “I don’t negotiate verbally.” Some agents get mad, many don’t understand, but it’s how the situation should be played out each and every time you’ve got a listing where you have the leverage.
If I have a listing that isn’t moving, absolutely I’ll discuss price. But I’m still not “negotiating” as much as I’m talking shop with the buyer agent, trying to entice he or she to offer, trying to get a sense of where they are on price, etc.
Here was an absolute beauty:
Can we get in for an inspection tomorrow morning? We’re going to send you a bully offer but we need to do an inspection tomorrow.
You can do an inspection, sure. I have a Carson Dunlop pre-inspection sitting on the dining room there, but if you want your own inspection, have at it.
Oh, but wait. That’s not what he meant, as many of you have already read into this.
“We’ll send you a bully tonight, we want to do this now, we don’t want to wait. But we’ll need a two-day condition on inspection because their parents want to see it, and they need to make sure there’s nothing wrong with the house, you know?”
Despite how I come off in these overly-cynical blogs, I don’t ask rhetorical and snide comments of agents very often. But in this case, I simply asked the agent, “Do you think that we would forego another five days’ of showings, the weekend open house, and potentially an offer night with one, two, or twenty offers, to accept a conditional offer?”
Like I said, rhetorical, right?
He didn’t see it that way.
“Yeah, well we’re not going to buy a house without protecting ourselves, you know?”
And again, you see the recurring theme here: agents refuse to accept market conditions. They want things on their terms, and that’s fine – tell me that they’re protecting their clients. But they’re out of touch with the market, and they’re leading their buyers down a path that leads nowhere.
If and when the market turns, and this particular house, in this particular area, isn’t red-hot, then they can make a conditional offer and “tie up” the property to their heart’s content. But how in the world could a buyer agent take this line of thinking for this house, today?
Last but not least:
We might want to submit a bully offer, but we want to be the only offer. So if we submit with a 1-hour irrevocable, can your sellers work with it?
That agent was basically answering her own question, whether she knew it or not.
First of all, this isn’t how a bully offer process works.
I think it’s fair to say that every buyer would like to represent the sole offer, but you can’t manoeuver your way into that position.
The rules are the rules, and more importantly, I have a reputation to uphold. I’m not going to sell the property out from 50 other agents, both because I’m not allowed to, and because I don’t want to.
If a pre-emptive offer is registered and the seller is going to move up their “offer review date” and consider the offer immediately, then all parties who have expressed interest in the property must be notified. So not only does 1-hour not provide that amount of time, but you can’t dictate that you want to be the only offer. You can’t control it. If subsequent offers come in, they come in.
There is a brokerage in the city that is very well-known, with some shady folks who pull shady stunts. They’re known for submitting bully offers on their own listings, while giving very little time for other agents to mobilize. I’ve told this story before, so stop me if you’ve heard it – but a few summers ago, I happened to be in the office on an otherwise slow July day, when a fax came in for me. A fax! That was how the listing brokerage decided to “notify” agents that they were presenting a bully offer on one of their listings. Hey, if the agent doesn’t get the fax in time, then that’s their problem, right? But the notification was made!
I don’t run my operation like that, and if an agent tells me they’re bringing a bully offer with a 1-hour irrevocable, I tell them not to proceed.
You catch more flies with honey, and that will never change.
So please accept my apologies if this is too much cynicism for a sunny and welcome Friday, but I was just really caught off guard this week by all the questions! And we didn’t even address that first question, from the young lady who said she didn’t know much about this “bully offer thing” and wanted me to explain the process to her – which I did.
It takes all kinds in this business, and boy, does it ever make for a never-ending series of stories. Well, maybe not never-ending. But at least three per week for the foreseeable future…