Or is that an oxymoron?
Believe it or not, there are rules for how to proceed when a bully offer is made, but it’s the “grey area” that drive agents (and buyers!) absolutely crazy…
In yesterday’s blog, we talked about “bully offers” and how some buyers get aggressive and submit an offer on a property before the scheduled “offer day.” The seller might choose to review and accept the bully offer, or simply wait until the scheduled day and time as outlined in the MLS listing.
A big thanks to one of my regular blog readers, “Joe Q”, for providing me with not only the subject matter for today’s blog, but also a RECO case that concluded just this past January.
The question was asked during yesterday’s blog about bully offers:
“My understanding is that if a bully offer is received for a property, the listing agent is required to contact those who have previously expressed an interest, such as agents who have already shown the property to their clients, etc. I seem to remember that failure to inform other buyers is considered a major breach.”
This is correct.
This is also where a lot of situations go south…
Bully offers, while a tactic for buyers and often a way for sellers to get top dollar for their properties (although according to yesterday’s blog, I clearly don’t agree with the latter), can ruffle a lot of feathers, and upset buyers and their agents alike.
Consider that when an offer date is set – say, April 9th, at 7:00pm, buyers and their agents plan accordingly. They might have a pre home inspection booked for April 8th, or maybe have hired a babysitter for the night of offers. But more importantly, they believe, according to the MLS listing and the listing agent, that they know exactly where and when offers for this property are being reviewed, and when it will sell.
When a bully offer is accepted, all that goes out the window, and buyers and their agents get upset. Rightfully so, wouldn’t you say?
The tough-luck capitalists out there will say, “Too bad, so sad. If you were waiting around for the offer date, than you weren’t being aggressive.” I understand with that logic, but I also think that there has to be some rhyme or reason to the madness, via an identifiable set of rules and regulations for reviewing offers.
That brings me to the even more pressing question: what are the rules and regulations for dealing with BULLY offers?
As Joe Q. wrote at the top, the listing agent is required to contact those agents who have previously expressed an interest in the property.
The key phrase there is “expressed an interest,” and this is exceptionally vague.
What does that mean to you?
What do you consider an expression of interest?
Personally, I think that any agent who has booked a viewing through the listing brokerage and made an appointment, has “expressed interest.”
But what about those agents who attended the 11:30am “Agent Open House?” Didn’t they “express an interest?”
A cynic (like me) might argue that most of the agents who attend “agent open houses” are just there for the free sandwiches, and often to convince themselves that they’re working a full 40-hour work week. So if push comes to shove, a listing agent that pulls the trigger on a bully offer could use this methodology, and neglect to contact agents who attended the open house.
But what about an agent that calls the listing agent and says, “Please keep me in the loop as my clients are very interested, and above all – please let me know if there are any bully offers.”
Is THAT an expression of interest?
Don’t you think the listing agent should call THAT agent, given the agent specifically asked to be kept in the loop with bully offers?
Well, you’d be wrong, sorry to say.
According to the rules, the only time a listing agent MUST notify other agents about a bully offer is if those agents had registered an offer.
Again – this is a grey area. I think a few of my colleagues might jump on here and say, “No, the agent has to contact all the agents who have shown the property.” But sadly, that’s incorrect.
It’s a logical way of thinking, and the listing agent would be insane NOT to notify all the agents who have shown the property (to try and drum up more business, since that agent is supposed to be working in the seller’s best interest), but the listing agent doesn’t have to do so, according to the rules.
So what is the most insane, most ridiculous, most frustrating situation you can think of regarding bully offers?
I’ve got it for you.
A listing agent that submits a bully offer on his/her own property, and doesn’t notify any cooperating agents.
Wow, I thought I’d seen it all.
I don’t want to throw a fellow Realtor under the bus, so I’m going to refer to this RECO case somewhat vaguely, and despite the fact that this RECO case is a matter of public record, I hope that my readers respect my decision.
Here are the facts of the RECO case:
-On January 11th, 2010, a property was listed for $500,000.
-Offers were not going to be considered until January 17th at 6:00pm.
-On January 15th, a buyer, under contract to the listing agent, submitted an offer for $490,000 on the property.
-The offer was accepted on January 15th by the seller.
-On January 16th, a cooperating agent, representing a buyer under contract, phoned the listing agent to ask questions about the offer process, which was scheduled to take place the following evening, but was informed by the listing agent that the property had been sold.
-The MLS listing still detailed that offers would be reviewed on January 17th at 6:00pm.
Those are the facts of the case, as outlined in the RECO Discipline Decision.
So to summarize: a listing agent submitted a bully offer on his/her own listing, in dual agency/multiple representation, and sold the property before the scheduled offer date, for LESS than the asking price, without notifying any parties who had “expressed interest.”
Man, that’s cold!
But it’s worse than cold. In my opinion, it’s extremely unethical, and in a word: scummy.
And RECO agreed, and fined the listing agent $10,000, and made him/her complete additional courses through the Ontario Real Estate Association.
RECO determined that the listing agent had breached the following rules:
FAIRNESS, HONESTY, ETC.
3. A registrant shall treat every person the registrant deals with in the course of a trade in real estate fairly, honestly and with integrity.
CONSCIENTIOUS AND COMPETENT SERVICE, ETC.
5. A registrant shall provide conscientious service to the registrant’s clients and customers and shall demonstrate reasonable knowledge, skill, judgement and competence in providing those services.
37.(1) A registrant shall not knowingly make an inaccurate representation in respect of a trade in real estate.
ERROR, MISREPRESENTATION, FRAUD, ETC.
38. 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.
Bottom line: the seller sold the property for less than the asking price, to his/her own client, before the scheduled offer date, and never tried to drum up any other offers by contacting those parties who had “expressed interest.”
With an offer in hand, the listing agent could have started a bidding war, and worked for his/her seller-client the way a Realtor is supposed to.
I’m glad this Realtor got busted.
Imagine if you were a buyer for this house, ready and willing to offer, $525,000 on “offer night,” and you found out that:
a) the property sold before the offer date
b) the property sold for less than the asking price
c) the listing agent was also the buyer’s agent
Really, really scummy.
As I always say in times like this, “Please don’t paint all Realtors with the same brush.”
This situation is (I hope!) one in a million, and it’s only illustrated here to provide an example of what could happen, and to promote discussion about ways to better the industry.
So for all you active buyers out there, let this be a lesson: make sure your buyer-agent is in constant contact with the listing agent for a property you’re interested in.
Otherwise, you run the risk of not “expressing interest” as per the vague definition, and seeing the property sell out from under you…