“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?
I wouldn’t.
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.
Huh?
Come again?
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…
Housing Bear
at 10:42 am
With stories like these I wonder what has been harder in the past 5 years, getting a mortgage loan or getting your real estate license?
Feel like a pulse and signature is the bar for either
Jennifer
at 1:23 pm
This whole blog post explains why the process of selling houses has to change immediately. Disgusting and ridiculous, from both sides. Everyone has a duty to act honestly. Telling them you want a faux closing date is wrong. And there should be nothing against doing this verbally – hot or cold properties. Some buyers have been at this for more than one bid, so it’s understandable they dont want to waste even more time …. all so that the vendor can then use their useless low bid to artificially inflate the price on potentially another offer, “Hi, we got another offer in [that’s $100,000 less than yours]. Would you like to improve yours?” Agents are the main reason for the affordability issue, period.
Housing Bear
at 2:33 pm
I’d rank interest rates as the number one factor. Cheap money encourages borrowing, and an environment of continuously falling interest rates allows households to maintain the same monthly payment but carry larger and larger total debt loads which then translate into higher and higher prices. When the masses see that house prices have been increasing for an extended period of time with an increasing rate of appreciation they all start to pile on which creates a feedback loop of higher prices and more demand until it eventually hits a wall and corrects/crash.
Also, when you have bond yields and treasuries offering basically nothing the global wealthy are incentivised to look for better “safe” assets to park their money into as well. This just further amplifies the factors mentioned above.
Once you have an environment of rapid gains and stupid money chasing those gains, the snake oil salesmen of the world will inevitably draw in to make a quick buck. Crypto was a prime example of this. The number of GTA RE agents have almost tripled in the last decade.
Housing Bear
at 2:35 pm
There are many good agents out there though, but yes I am sure a lot of the more recent ones are absolute scum.
Condodweller
at 1:45 pm
On behalf of every new agent, no I am not one, I must object to this statement. Not having experience and proper training does not make more recent agents scum. I appreciate that David is using his blog to promote himself and he has an ax to grind, both rightfully so, I still can’t help but feel that venting here rather than lobbying the right organizations for change amounts to whining.
Jennifer
at 4:25 pm
Interest rates have been low for quite some time and did have an affect, I agree. But if there wasn’t this blind bidding, i’ll-say-anything-do-anything-bring-in-low-useless-offers process used by selling agents to up the price (in other words, if there was more transparency and more negotiating in good faith), and on the flip side if buying agents did their jobs instead of telling buyers to pay their max without consideration to whether the house warrants that price (look at some stupid prices in the east end lately), house prices would be lower, absolutely no question.
Jimbo
at 5:24 pm
I disagree with the majority of what you are saying. The average buyer is not that stupid to be easily duped. What David purposes, get the offer in writing is a best business practice as it will be their best honest offer. David also stated he would do his best to force the offer to be long enough so he can notify other interested buyers.
I do agree that all offers should be transparent at the end. This would allow a buyer an opportunity to see if they were treated in bad faith and if the sum is large enough they could take legal action against the offender. I wouldn’t put much weight into an inspection that the agent gets done ahead of time but I doubt many inspectors would risk their career lying in their inspection or hiding obvious issues…..
Just my 2 cents
Condodweller
at 1:36 pm
I actually agree with most of what she is saying. Don’t underestimate human potential for stupidity when FOMO is at play. Low interest rates definitely had a play in increasing housing prices however agents playing on client’s FOMO accelerated the process.
Don’t believe me, look at rental prices. Notice how rental prices have skyrocketed in recent years once agents got involved. 10 years ago most agents would not even consider touching a lease listing, never mind on a “buyer” side.
For those of you how are thinking of jumping in and stating the obvious that it’s lack of supply that’s caused the runup, again, just like low interest rates, it had an effect but agents applied the same scare tactics and encouraged their renters to bid higher than the asking price in order to secure the place which IMHO made thing worse and accelerated the price increase. I don’t have numbers to backup my theory I am simply going by experience over the past 10+ years.
Not Harold
at 1:39 pm
Condodweller – you’re really not familiar with the state of the market 10 years ago.
Agents were absolutely doing leases then and rentals were on MLS. Yes agents were working for buyers on leases!
Major driver is condos vs apartment buildings. Small landlord will manage leasing themselves. Large buildings will have a leasing office. They’ll use Viewit and other advertising to get traffic. Owners of condos will use agents to handle viewings since it’s not their main occupation and aren’t likely to live close to a unit and may have units in different buildings across the city.
There’s no scare tactics – 30 people are attending showings and units will be listed and rented within a day. People are unable to even schedule showings on a new listing thanks to how fast rentals are being scooped up. That gets people to make the decision to get aggressive themselves with no help from an agent.
Derek
at 2:43 pm
Is there no mentoring system in the RE profession when new agents sign on with a broker?
Housing Bear
at 3:35 pm
https://www.youtube.com/watch?v=-Nc88_ZEfxg
David Fleming
at 9:55 pm
@ Derek
This all depends on the brokerage.
There are brokerages that provide rookie training courses lasting MONTHS, with continuing education, mentorship, and guidance.
Then there are brokerages that provide absolutely nothing. Some brokerages don’t even have a manager or broker you can ask questions to, let alone a physical office space in which to work.
How does a brand-new agent learn when they have no training?
I think we’re seeing that play out in front of our very eyes with each and every blog post I write like this one.
For what it’s worth, my brokerage has a training program, and I’m involved when called upon to be a part of panels, Q&A, or even do seminars now and again. I was taught the ropes in 2004 when I joined, and I had mentorship for years, with incredible management and hands-on ownership.
Not all brokerages are created equal.
It’s up to the agents to decide where they want to work.
Derek
at 10:31 am
I imagine that once you’ve passed your licensing exam, there is a desire to get straight to trying to earn some money. I’m sure it is not unique to the RE profession that the education to become an agent doesn’t teach you how to practice as an agent. Law school does not really prepare you to practice law, for example. You need to learn on the job and hope you have a good teacher.
A small point on the negotiations by RE agents is that (I believe) the information disclosed in any step in a negotiation can only be disclosed if the client authorizes it. There would be a professional obligation not to outright lie, but if the client does not permit disclosure of, for example, having no issue with a proposed closing date, then the agent can’t volunteer that there is no issue with the closing date and check the box. The requirement for a written offer to bind the potential purchaser without disclosing anything to them is, without a doubt, the best practice. As a seller, I would be hesitant to even disclose to my agent my preferred closing date, or my (desired) bottom line price, or my financial position, etc., before seeing offers. And I would certainly be unhappy if my agent negotiated with anyone without having a written offer in hand.
Not Harold
at 1:28 pm
Much of the training is by having junior agents handle rental listings.
It gets them a high volume of showings and negotiations, dealing with lots of different people, but with less money on the line for both the client and agent so less stress and less need for handholding. As a plus for Toronto it gets them incredibly familiar with all the buildings and neighbourhoods, since you’ll see far more rentals than sales in any given period for a building (well, hopefully).
As to disclosing information – I had a bad experience with an agent in a rural area. Agent disclosed to seller that I’d already bought another property so shouldn’t take me seriously vs one of his other clients!!! Lost out on a property and hurt my price negotiation ability when I’d bought a building lot and wanted to have a cottage for 3-5 years while we went through approvals and construction. Horrifically unethical and technically illegal, but small towns and hard to prove any substantial monetary loss.
Thomas
at 3:16 pm
Omg go hug a tree.
Cry-baby, woe-is-me, naive, simple-minded.
I’d love to see you negotiate with your kid. Damn child probably eats chocolate pudding for every meal.
Michael
at 7:11 pm
@ Jennifer
You lost any credibility that you may have had as soon as you said “Agents are the main reason for affordability issue. Period.”
You are choosing to ignore the most common and accepted drivers of a market, namely supply and demand, government regulation, and in this case, low interest rates. Your argument is based on emotion and that’s problematic.
Otherwise, you might find some sympathy among those who don’t like the current “system.” But I see no problem with David’s example of bargaining over a closing date. He’s merely doing the job better than the next person. Transparency in the process would benefit many but not all. And there is no magic solution that can be employed at the drop of the hat. Your call for “immediate change,” lacks solution, lays blame in the wrong spot, and ignores true root causes of the issue.
Condodweller
at 8:44 am
@Michael Whenever someone makes a negative comment about David the person is quickly labeled as a loser beginner agent. Your rosy and approving comments about David would pigeonhole you like what? His manager, perhaps even the owner of his brokerage? Just because people don’t like the current process and have additional insight which doesn’t align with the way the majority think doesn’t automatically make them wrong.
jeff316
at 1:26 pm
Of the four examples, I don’t find the request for inspection unreasonable. I don’t blame the agent for looking out for his clients or you for knocking it back. The other three are silly.
Libertarian
at 2:03 pm
Everybody wants to live on Degrassi!
Andrew
at 3:32 pm
David can I give you my two cents on all of this? Have you ever considered that since you are in the top quarter of 1% of all agents, everybody you interact with is bound to seem stupid on a relative basis? Many of your blogs about the inner workings of the real estate industry describe your day-to-day interactions with agents. If the industry is as bad as you make it out to be, then how would your interactions be any different? You have talked so much on your blogs about “expectations“ and yet I feel like your expectations for your interactions are completely unrealistic.
Dee
at 3:33 pm
I love your candid commentary, lots of interesting points 🙂
So often in this business, agents treat other agents as pure adversaries. Of course we represent our client’s interest, but our profession will benefit from us all showing common courtesy. Provide feedback after showings, don’t list ridiculously low listing prices that only degrade our data and confuse our clients. Help each other, that is the way to get respect for this profession.