There’s a lot of public perception out there that listing agents will often grind down buyers and their buyer-agents for every last dollar when in competition.
Here is an actual situation that happened on the weekend, and I’d like to know how each of you would have handled it…
I often complain about greedy sellers and their overzealous agents when it comes to the handling of multiple offer scenarios, but today I want to turn things around and look at it from a listing agent’s perspective.
I know that a listing agent has to work for his or her seller and get the most money for the property, but there are professional, ethical, and respectful ways to go about this.
Then, there are the ways that many listing agents conduct themselves in mulitples.
I’m not a fan of a listing agent sending EVERY buyer and their agent back for more money, when they could really work with, say, two of the offers, and let everybody else go home. It bothers me when a property is listed at $799,000, and six agents have offers in the low-$800’s, and two agents have offers in the high-$800’s, but the listing agent sends ALL eight agents back for more money. Does the guy who offered $805,000 really need to get his clients up to $815,000 when he’s going to get blown out of the water by the guy at $910,000?
I often tell the listing agent, “Tell me to either go back to my clients for more money, or tell me to go home for the night and save my clients the embarrassment of getting creamed by $100,000. But take some time and think before you tell me.”
I’d like to think that a listing agent will send you home and spare your buyers’ dignity when you’re going to lose by $100,000, but some agents don’t care. Some have no respect for anybody, and some are sadists who think it’s fun.
I hate when agents waste other people’s time, and when they take other people’s time and effort for granted.
So now that I’ve explained what I don’t like about how some agents handle multiple offers, let me give you an entirely different situation.
A colleague of mine had a property listed for $399,000, which she thought was a very fair price, and somewhat optimistic.
The real estate market being what it is, of course, responded kindly with a full-priced offer two days into the listing.
The sellers were unavailable on the day the offer was received, so the buyer extended the irrevocable period for another 12 hours.
As luck would have it, the next morning, a second offer came in.
Both offers were identical – $399,000 – the asking price. But neither buyer was aware of a competing offer. The first buyer made the offer before the second offer even came in, and the second buyer made the offer without checking to see if any offers had already been registered.
My colleague asked me, “What should I do?”
I gave her advice, based on the following:
1) Work for your seller. There are two offers on the table now, and you can work this in your favour to get over the asking price. It goes without saying that you should get a few thousand more for the condo.
2) Be as fair and respectful as possible. Just because you’re going back for more money doesn’t make you a bad person, so long as it’s done right.
I told her to tell each buyer’s agent the following:
“Thanks for your offer. We have TWO offers at the moment, and both offers were made without the knowledge of a competing offer. The only fair thing to do now is allow both buyers to improve their offers, but only this once. We will not come back again, and again for more money – please let your buyer know that this is a one-shot deal, and please allow us until this evening to review it.”
And that’s what she did.
Both agents went back to their buyers, and both came back.
The problem is – they both came back at the same number: $405,000.
My colleague said to me, “What the hell do I do now? Both offers are $405,000, and both have a $20,000 deposit. WTF?”
So once again, I gave her multiple options…
1) Send them back again.
This option sucks, for several reasons.
First of all, it just sucks to send people back again. I think almost every offer situation should be a “best shot deal,” but to send people back over and over is malicious.
Secondly, it sucks when you’ve already said, “I promise we won’t send you back again.” You’re a liar, plain and simple. Sure, you can use the obvious excuse, “What am I supposed to do? There’s two offers, both the same price, and both the deposits are identical as well!”
2) Make a friend.
I’m not going to lie – this is what I would do.
I would choose to “award” the property to whichever agent I wanted to bank a favour from.
If one agent worked downtown/midtown, was from a reputable brokerage, and was somebody I had not only heard of (because that’s becoming a rarity…) but also somebody I had done a deal with before, or knew I’d run into again, then I’d give the deal to that person.
I’m not doing anything wrong, am I? Both offers are the same, and the only truly “fair” option here would be an actual coin-flip.
So I’d make a friend, and bank a favour. At some point down the line, that agent would remember this situation, and I’d get the wink or the tip of the cap, and I’d help my then-client by having made friends along the way.
Believe me, there’s nothing I hate more than the “wink, wink, nudge, nudge” side of this business, and it doesn’t happen nearly as often as people think. But in a case like this, it’s harmless, and something’s gotta give.
3) Let your seller decide.
Okay, fine, this is the option I should likely take, but most sellers are going to ask you, “What should I do?”
A few things could play into this.
The seller might decide his or her own version of what is “fair,” such as the first person to have made an offer.
Or the seller might look at the names on the offer and say, “John and Jane Smith? Are they a lovely young couple? That’s terrrr-iffic! Who is 1048549 Ontario Inc?” Maybe the seller would rather give the property to the couple with a baby on the way than to the investor with a numbered corporation.
Or maybe the seller wants to look beyond the price and the deposit to the closing date and the fact that buyer number-two wanted the bird-feeder. Maybe the less significant negotiable points make all the difference to the seller.
In the end, my colleague used option #3.
She let the seller decide, and the seller chose the first offer.
The seller felt that the first buyer was “the first person to show interest,” and she said she’d actually feel guilty if they went back for more money. “And what happens if they both come back at $410,000? Where does it end?” She asked.
It’s funny, because my colleague said she didn’t really like the agent representing the second buyer, so she felt it was somewhat fitting. Not that she would ever make a decision based on the professionalism and friendliness of the agent she was working with, but if she did – this young lady would not have been the winner that day!
There are those people out there that will say, “I would keep sending people back over and over until I had every single penny in my pocket. Why wouldn’t I?” I can’t disagree with that. Everybody is different.
But on a long enough time horizon, people remember these sort of actions.
Another colleague of mine encouraged his clients not to offer on a house the other day because of the listing agent for the property (who in-turn double-ended the property, to nobody’s surprise…). As time goes on, this listing agent might find that people aren’t making offers on her listings, because they know her reputation!
Call me old-fashioned, but I think if you tell somebody “bring your best offer; we’re taking the highest,” you should honor that pledge.