When I get home late at night after a long day, and look to join my wife in front of the television, there’s one thing, and one thing only that I don’t want to watch.
It should be fairly obvious, no?
If it’s Saturday night, and I’ve just put the kids down, poured myself a drink, and want to relax on the couch, there is one type of show that I simply can’t stomach watching.
Shows about real estate.
It’s a by-product of my occupation, no doubt, since these shows are so damn popular, I seem to be in the minority. Whether it’s shows about moronic first-time buyers that don’t like the paint colour on the kitchen wall, or shows about real estate agents themselves, I simply can’t stand them.
The main reason actually isn’t because I do this for a living and want to escape it at night, but rather because I know how fake the shows are.
There’s another reality television show that I don’t love, but I can tolerate it: Shark Tank.
It’s fun to watch, even though it’s fake too.
Oh, what’s that, you don’t believe me? You love this show, and you know that Kevin Hart or Maria Sharapova actually did invest in that environmentally-friendly soap company?
It’s a television show. It’s “reality television,” and we all know that very little is real when it comes to reality television.
Back in 2016, Forbes conducted a survey and interviewed 237 business owners who had accepted on-air deals in the first seven seasons of Shark Tank and found that 73% did not get the exact deal they made on TV. Furthermore, 43% of these business owners said that the deals they made on the show were not ratified thereafter, mainly because the sharks wanted to change the agreed-upon terms, or simply pulled out of the deal entirely!
Why would this come as a surprise?
Did Robert Herjavec or Kevin O’Leary get to where they are today by investing millions of dollars in companies after a three-minute pitch, without vetting any of the information therein, or looking at companies’ finances or contracts?
I think, not.
On Saturday night, I watched an episode of Shark Tank that taught viewers a very, very good lesson!
A young entrepreneur pitched a food product that was gaining traction, having been accepted into forty Whole Foods locations already. She was an impressive young woman, so said all the Sharks. But they all bowed out one-by-one, for various reasons, namely none of them could see themselves in that product market.
Robert, however, was so impressed with the young woman that he came back, and made her an offer.
She wanted $300,000 for 10% of her company.
Robert offered her $300,000 for 15%, and said very candidly, and very politely, “I”m not negotiating here. This is the deal.”
She thanked him, smiled, and thought about it.
“Would you do $300,000 for 12.5%?” she asked.
He smiled back, told her that he had already said it was his best and final offer, and that there was no negotiation. He was firm on this.
“How about $300,000 for 10% of the company, and 5% in managing shares?” she asked.
Again, he said “No.”
Amazingly, she then burst into joy and said, “Okay, let’s do it! I’ll take your original offer! $300,000 for 15%!”
Cue the music? Drop the balloons and streamers?
“Sorry,” he said. “But I’m out. I gave you my best offer, and you gave me not one but two counter-offers. I’m out.”
It was incredible.
I felt bad for her, but she didn’t actually need the money. She had already raised $1,000,000, and the Sharks even said, “You’ll be fine.” I felt bad because she embarrassed herself. She failed to read the room. She failed to read Robert, or trust him, for that matter. She didn’t know when to stop pushing, and she ultimately failed to realize the value of getting a Shark on board would massively outweigh that extra 5% of the shares she’d be giving up.
She also failed to understand basic contract law, notably “offer and acceptance.”
I know that it’s a television show, but in theory, the moment that she provided a counter-offer to Robert, his original offer was null and void, therefore she couldn’t accept it two minutes later. So when she said, “I’ll accept your original offer,” she actually couldn’t do so, legally, unless Robert put it back on the table.
This week, I encountered this same situation with two agents who were completely out of their league, and who, sadly, demonstrate the lack of knowledge of what real estate agents “do for a living,” beyond opening doors to properties.
I’m currently liquidating a portfolio for a client with 24 properties. We have been successful thus far and now find ourselves in the home stretch. We have yet to sell a single property for under the list price, even the ones that sit on the market for a month, or two, or three. I simply tell agents who call, or who submit offers, “We’re not coming down a penny,” and those who balk, may walk.
One of our listings has been on the market now for over one month, and I get a call on it every other day. I tell all the agents that we won’t take less than the list price, however, if they wanted a parking space, we could probably sell one for $15,000 and they’re “worth” more; maybe double.
Most of these condos are small, entry-level units, so buyers don’t want parking. As a result, we now have about five or six units left but double the parking! So if my client doesn’t want to get stuck holding one condo and eight parking spaces, I’ve got to get creative.
Our property is listed for $565,000 and last week, an agent called me to ask about price flexibility.
“Zero,” I told him. “We won’t sell for less than list,” I added, after he began to grovel and cite comparable sales, average prices in the building, et al.
All of the units he was referencing were ones I had sold. I had all the leverage, and considering these clients truly didn’t “need” to sell, I could stand atop a mountain and shout down at him, without the risk of blowing up a deal.
“What I can do for you,” I explained, “Is sell you a parking space for $15,000. Bring me an offer for $580,000, including parking, and I’ll get that done.”
The agent thought this was a big win. Parking is “worth” $30,000 here, right? Or is it?
These spaces aren’t worth much to us, but if we can get rid of one, and sell this condo, and sell it for over the list price (or so it would appear on MLS), then we’re ahead of the game.
I told the agent, “Listen, I’m giving you something that’s not available over the counter. I’m offering you a parking space that’s not listed, and doesn’t come with the unit. I’m a straight-shooter, okay? I’m sure you’ve heard that before, but I don’t have time to bullshit, so when I tell you that $580,000 is the price, I mean that’s the price at which we’ll do a deal here. We’ve already had four offers on this condo, so I’m telling you how we can make a deal. Just don’t come in at a lower price or we simply won’t respond.”
He said that he understood and that he would talk to his client.
Two days later, his partner sent me an offer for $560,000, including parking.
Let’s call her “Jane” and him “Jim.”
I called Jane and said, “I had a lengthy discussion with Jim about this property last week, and I gave him very specific instructions on the price.”
“Instructions?” she asked. “My client is negotiating,” she said. “My client isn’t just going to do what you said. She needs to see for herself.”
I told her that I wasn’t going to sign back the offer simply because I had already explained this to Jim, and because the clients are quite specific about their price. And before you accuse me of being lazy, or cavalier, or unhelpful, let me add that I was hired by this seller for specifically this reason: because they want me to represent them. I have carte blanche here. Not only that, this form of negotiation works, trust me. We’ve sold almost twenty of these, after all.
As the day went on, she began to realize I was serious. She begged me to sign the offer back at the “agreed upon” price of $580,000, saying that her client simply needed to see for herself that we wouldn’t take less, and then she would accept our counter-offer.
So I did.
I had my client provide a counter-offer of $580,000, and I called the agent to say, “I need you to understand that the only way this deal gets done is if your client accepts this offer. No sign-backs, no negotiating, is that clear?”
“Also, the offer is good until 11:00am tomorrow, after which I will not be reachable, nor will the sellers.”
She said that she understood.
So is this where the story ends?
Not even close.
The next morning around 10:40am, she sent me a sign-back for $570,000.
I called her and said, directly but politely, “I appreciate the efforts, but the seller is not going to work with this offer, nor provide a sign-back. I wish you guys the best of luck out there, I hope you find something!”
She then launched into a rehearsed argument about the buyer’s perspective on price, and the buyer’s father’s involvement, and I interrupted her and said, “Listen, respectfully, I don’t care.”
She continued talking, and again I said, “I don’t care. Seriously, I’m sorry, that’s so rude of me, but you’re not listening, and we’ve been at this for three days. This deal is dead. You signed back our offer, the seller has rejected, it’s over. I don’t need to know the what, when, why of your buyer.”
“But our closing date is so good, and the buyer is pre-approved….”
She went on, and on.
And I know what some of you are thinking: that she’s doing her job, and that I’m not playing ball. But this deal was so simple, or at least, it could have been. There’s a point at which you’re not doing your job, but rather getting in your own way – and the way of your buyer. We’ll see how that worked out shortly…
I finished the call by saying, “I told you I would not be available after 11:00am, and it’s just before eleven now. Your counter-offer has been rejected. We no longer have an offer in play. We don’t have anything else to discuss, however, if your buyer wants to re-submit an offer of $580,000 at a later date, I am happy to present that to my seller.”
That was that.
I then called Jim back and explained the call I just had with Jane. I told him that I appreciated his efforts, I reiterated what I said to Jane, and while he attempted to grovel a little, he understood. He said, “It’s the buyer, it’s their fault. They want to play games.” I told him I understood, but that I would sell this condo to somebody, either tomorrow or a month from now, for either $565,000, or $580,000 with parking. My job is simple, as is my process from here.
And that was that.
So is this where the story ends?
Not even close. In fact, that’s barely even the warm-up…
Around 1:00pm, I took my phone out of my pocket, and here’s what I found:
5 Missed Calls
7 Text Messages
1 Office Page
All from Jane and Jim.
Even though I told them, and had been telling them for twenty-four hours, that neither myself nor the sellers would be available after 11:00am, they called me at 11:05am, 11:25am, and on, and on, over the next ninety minutes.
People just don’t listen.
The messages started out with, “Please call us back,” and escalated to, “We think we have a solution here,” and then eventually to, “Our clients are willing to work on this,” and finally it culminated with, “Our buyers will accept the deal!”
The problem was: there’s no deal to accept.
They offered $560,000.
We countered at $580,000, rendering the $560,000 offer null and void.
They countered at $570,000, rendering the $580,000 offer null and void.
What in the world were they going to accept?
The last email I had received was around 12:30pm and the subject line, all caps, said, “ACCEPTED AGREEMENT.”
These rocket scientists had taken the $580,000 counter-offer and had their clients “accept” it, even though that offer was null and void.
Not only that, the offer expired at 11:00am, and they signed at 12:30pm, but back-dated the time.
That latter point is moot, to be honest. It’s illegal, but not as illegal as the previous point.
Do they not teach basic contract law over there at Humber Real Estate College or whatever the hell it’s called?
When you take out a proverbial pen, cross out the terms and conditions of an offer, and then counter with an offer of your own, that original offer is void.
How can an agent not know this?
You may ask, “David, what’s the problem? Don’t you want to sell this condo? You won! They caved! They took your price!”
But there’s a right way and wrong way to do things.
I need to follow the letter of the law. I can’t risk the buyer saying later on, “This contract isn’t valid,” or having a lawyer question the timing, the offer/counter/offer, etc.
The end can’t justify the means, especially if the means can put an end, to the end. You follow?
I emailed Jane that afternoon and explained that, as I had instructed earlier, I would be happy to present a new, valid offer from the buyer, to my sellers, but she vehemently disagreed with my stance.
She questioned my “view” on contract law, and told me that she had already congratulated her buyer on the purchase.
She sent me a timeline of events, explaining that when I rejected her sign-back, she had her client “sign back” the offer to us………….and accept it.
It was bizarre. And disappointing. And kind of depressing because this is who’s out there, folks. These are the agents representing buyers and sellers in the largest transactions of their lives.
I spoke to Jim as well, and he was lost too.
“How do we explain this to the buyer? We already had them sign this morning!”
Umm, I think that sounds like a you problem, Jim. Like the agent who called me on the weekend to say, “My buyers thought they could re-finish the floors in this condo, and now they’re upset.”
Why is that my problem?
Does anybody take responsibility for their actions and decisions anymore?
I sent Jane a link to Investopedia, hoping she would read it and understand basic contract law, and while she did email back to say they would prepare a new offer, she couldn’t help but add “to make you feel comfortable.”
So the buyer will get the condo, the seller will secure a sale. All will be well in the world once again, but the process to get here was frightening.
At least one person is reading this, shaking his or her head, saying, “David took the more difficult road here, this is stupid.” And that’s what scares me the most.
The pace of real estate in this city is maddening, and in the process, corners are cut. Some are worse than others, of course. But basic contract law cannot be ignored, or chaos will ensue.
Basic contract law is also not being taught at Humber, by the way, just to answer my own rhetorical question from earlier, which is obviously not rhetorical anymore.
If real estate agents, buyers, and sellers, are going to start making their own rules with what constitutes an offer and acceptance, then we’re going to see a lot of disputes out there!
As much as I want to think this situation was a one-off, it can’t be. These agents, both of them, thinking what they did was legal and valid, can only mean they have done this before, with other agents, and likely have had the support of colleagues, or managers, or even a broker.
Rome wasn’t built in a day, but it burned in one…