Well I certainly didn’t intend for this to become a theme week, but let’s continue the discussion about multiple offer situations, and look at when the listing agent has his or her own offer, what happens, and what, if anything, you can do as a competing buyer.
It’s hard enough to “win” in competition in the 2016 Toronto real estate market, but when the listing agent has his or her own offer, there’s always a chance that their offer magically trumps all the competing offers, and in hindsight, there was never anything you could have done.
It doesn’t always work like that, however. Let me explain…
The very first question I ask a listing agent, on the night of offers, is quite simply: “Do you have your own offer?”
If they do, then I temper my expectations.
If they don’t, then I ask, “Does anybody in your office have an offer?”
If somebody in their office has an offer, I ask who that agent is, and then I search around – on Google, on MLS, and through any medium, to see if that “person in their office” works with the listing agent, and if there’s a chance it’s just the listing agent’s own offer being presented by a colleague, in order to give the illusion of impartiality.
Like it or not, there’s nothing to stop a listing agent from pushing his or her offer to the top.
There are no rules that prohibit it.
There’s ethics. And reputation. And a conscience.
But if a listing agent has a buyer for his or her own listing, and there are eight competing offers, would it surprise you to see that the listing agent magically pulled the right number from the hat, and “won” against those other eight offers?
It happens all the time, but more often than not, it’s the same handful of agents and/or brokerages that are known throughout the real estate community.
Some of them have no shame about it. Some of them flaunt it. Some of them advertise it. Go to their open house and they’ll openly explain, “The only shot you have of getting this property on offer night is by making an offer through me.”
Don’t worry if you’re an active buyer in this market. As I said, it’s rare. And personally, I know of two agents whose listings I simply do not show, because they always seem to magically double-end their own listings.
What’s the point of playing if the game is rigged?
For the most part, “multiple representation” is done on the up-and-up.
At my brokerage, any agent who has an offer on his or her own property will either present his/her offer first, before anybody else, or have a manager work with the buyer.
I lost an offer on my own listing once.
I had my colleague work with the buyer, and their offer was low. A competing agent from another brokerage had the highest offer, and that was that.
You might ask me, “David, why wouldn’t you ‘cheat’ if there are no rules against it, and if you could have made twice the commission?”
Call me naive, but I have a very good standing in this business. I have a great reputation among my 44,000 industry colleagues, and one deal isn’t worth putting all that in jeopardy.
I beat an agent earlier this year who had a listing on her own offer. She worked the open house, found a buyer, and submitted an offer on her listing among a dozen others. But my offer was the highest, and my buyers got the property.
I beat another agent last year in the same situation – a Homelife agent. I honestly thought I had no chance in hell. He said his offer was “presented first,” and I was cynical. My offer and his offer were the “top two” out of six, and we were sent back to improve. I thought it was all posturing for the illusion of fairness. But in the end, I was told by the broker/manager, who was overseeing the process, that my offer was the highest, and my client got the property.
I was stunned.
It’s not that I was judging a book by its cover, it’s just that……wait……no, that’s exactly what it was…
I was just so certain that this agent, at this brokerage, in this part of the city wasn’t going to play fair, and boy was I ever wrong. It was one of the most ethical, professional offer presentations I’ve ever witnessed.
But sometimes, you just know the agent is going to rig the game.
And that’s when you have to rise to the top, and figure out a way to win regardless…
Late last year, a condo townhouse was listed for sale in the west end, and it was the type that I had buyer clients waiting for. And I don’t mean that in the cliché sense of the phrase, but rather we were specifically waiting for this very model, in this very complex, to hit the market, and we had been waiting for about two months.
We knew right away that we wanted it; that was never in doubt. After seeing the unit, we decided to proceed with an offer the next morning, and that’s when the situation got interesting.
The unit was listed by a Realtor who I knew had a day-job. He never called me before 5pm, and he was incredibly difficult to reach. I would find out later on that he was, in fact, a part-time agent, as his new brokerage gave me his “work number” to track him down.
The morning after our viewing, I told him that we had an offer for him, and he said, “Well we’re going to review all the offers after the open house on Sunday.”
It was odd. There was nothing in the listing about an “offer date” and I didn’t know he was “holding back” offers.
But perhaps neither did he? Maybe he was flying by the seat of his pants?
The unit was listed on a Thursday, we saw it on Thursday night and had an offer for Friday morning, and now he was saying they would review offers on Sunday after the open house.
Then he went on to say, “We’re going to review all the offers, and then send the top three back for a second round of bidding.”
It was bizarre. It was completely out of context, but it was also odd to just blurt that out to begin with. This goes back to Wednesday’s blog post about how listing agents handle multiple offers, and when there’s a “second round.” Here we had this joker, telling me he was going to send back the top three, when he had exactly zero offers to begin with.
In any event, the day of the open house, my clients signed the offer, got the deposit cheque from their bank, and I showed up at 6pm to present my offer.
There was one other registered offer on the property, and it belonged to a buyer that the listing agent himself was representing.
As we say in the business, he “pulled a buyer from the open house.” Somebody came through the open house and decided to make an offer through the listing agent.
So it was me against him, and the cards were clearly stacked against me.
Some listing agents will “cheat” in multiple offers when they have their own offer, and some don’t. But you can guarantee that a fledgling, part-time agent is going to do everything in his power to “double-end” the deal, and make twice the commission. He has absolutely nothing to lose.
He told me he had presented his buyer’s offer to his seller first, but that didn’t matter. I figured he would review my offer, and then simply add $1,000 to his buyer’s offer, and tell me I lost.
So I had only one move, and that was to win over the seller directly.
The only thing I could think of that would give me an edge was my deposit cheque, and I figured that with most banks closing by 3pm on Sunday, there’s a good chance the competing buyer, who walked into the open house, did not get a deposit cheque.
I sat down at the dining room table and watched the seller – a late-20’s, investment-banker type, drink scotch on the rocks, and play with his Scotty Cameron putter.
I presented my offer, and then presented my $50,000 certified cheque from TD Bank, and said, “Here’s the cheque, obviously we’re not doing a deal without this little beauty tonight.”
The seller furrowed his brow and I could see he was thinking.
That was my ticket.
I knew right then and there that I was going to beat the listing agent, even though he had his own offer.
The seller held the cheque and studied it like it was ancient hieroglyphics. He was mulling over the proposition in his head, as I spoke.
“As you know, you need consideration for the deal,” I told him. “These,” I said, as I held up the pages of the Agreement of Purchase & Sale, “Are simply pieces of paper. They do form an agreement if signed by both buyer and seller, but without a cheque, they’re meaningless. The buyer can walk away and your only remedy is a lawsuit, which, of course, you would never follow through with.”
The seller was nodding along as I spoke.
“No seller in this market, in competition, signs an offer without a deposit cheque in hand.”
Then I sealed the deal by stroking his ego, and giving him no room to back up, by saying, “But I’m sure you already know all of this. Compared to your world (meaning finance) this little real estate game is like child’s play. I mean, an average Joe might f*** this up, but a guy in your position isn’t going to leave this to chance.”
I don’t know whether my offer was higher than the listing agent’s offer, or whether it was lower.
But in the end, it didn’t matter.
The listing agent called me back to say “congrats” and that they were going to accept my offer. As soon as I stepped back inside, he said, “I guess I should have brought a cheque to this party, huh?”
The seller clearly decided not to sell his property to somebody without a cheque, and the listing agent didn’t get a chance to “cheat” his offer to a higher price, if, of course, he was lower to begin with.
If that was a more experienced agent, he or she would have ensured the buyer brought a cheque. Or maybe he or she would have had the salesmanship to convince the seller to accept the offer without a cheque.
Or maybe I would have still won.
How often does a listing agent have his or her own offer, in multiple offers?
Throughout the city, I’d speculate maybe 1% of the time.
If we’re talking specifically in the red-hot, single-family, freehold, residential market? Maybe 5%, max.
It’s not common, but it does happen.
And as with the other topics we’ve covered this week, you simply have to be ready for anything in this market…