My 2nd Rant of the Day!! Why I Hate Preemptive or Bully Offers!!

White rhinocerosA preemptive war is a war that is commenced in an attempt to repel or defeat a perceived offensive or invasion, or to gain a strategic advantage in an impending (allegedly unavoidable) war before that threat materializes. ….Wikipedia…

A week ago I was out with one of my favourite clients looking for a new home. We saw one that we both liked for the Family and at the same time had a sense that the house was at least  $100,000 under market value. On the listing however it said that offers would not be reviewed till after the weekend, Tuesday evening to be exact, giving us at least Monday and Tuesday during the day to complete some proper due diligence, including financing and certified funds.

The restriction on offers was written on the listing for agents to see and both I and my client believed that would be the case. Just to be sure, I emailed the listing agent to make them aware that my client intended to offer on the Tuesday evening.

Holding off offers has become commonplace in the Toronto marketplace. Our market has been so strong that it was hard to gauge the true value of the home until it was fully exposed to the Buyers circling it. I have suggested holding offers off when I was concerned that the Seller needed to be assured that no money was being left on the table. A listing agent’s worst fear is selling a property and having the Seller being unhappy with the price that they got. This way the Seller could hopefully rest assured that all potential Buyers have been through the home. I have always known that happy clients tell few people but unhappy clients tell everyone…being in a “word of mouth” business, it is something I always keep in mind…

Back to the story: On Monday morning when I had not heard back from the Agent, I decided to call direct and was told that contrary to what was stated on the listing, there was an offer in play and my client would have until noon to make han offer and it would have to be over asking, no conditions with a certified cheque. Banks being closed over the weekend and financial people just back to work early a 9 AM that morning, there was not time to get all our ducks in a row. Totally my fault in that I believed what had been written on the listing for all to see: “NO OFFERS TILL TUESDAY EVENING”.

If the Sellers decided to look at an offer before the date for offers, that is definitely their right to do so, but, after having waited 4 days would another day and a half be a problem? Now we have a listing that was under priced sell for over $100,000 over the asking price. If properly priced it still would have sold for the same amount of more but the Seller will never know.

So back to my story  (I digress, a lot). The house sold, my client was angry as I am sure were others who lost out…. strangely the agent who sold the house was from the same Company and now the Company can go a talk about how they and their agents sold a house for over $100,000 over asking. However, one week later, I am out on an offer again and the seller who just came to the market, has the expectation that their house should sell $100,000 over asking even though it is not the same house, price or location.

The original listing agent has done no one any favours…did his client get the best price for their house? We will never know. Now expectations have been raised because a house in the neighborhood sold for over $100,000 over asking…even though it was knowingly under priced. The other selling agents look bad because maybe they should have jumped the gun, or they were showing their clients out of their market and the Realtor Community looks bad because the advertising on the MLS was not to be believed. Who benefited?

And that is why I hate preemptive or Bully Offers!

This story has a very happy ending! My client bought a great home in a wonderful location for them. All is good, they are happy and that is what matters in the end.

 

 

12 Responses

  1. DAVID PYLYP

    The Listing Agent; IF they are looking at offers early, prior to the posted time, they should have contacted each agent that showed interest in the house and made them aware of the change. Whether they updated the MLS listing and Front Desk instructions is just poor manners.

    I have had agents ask If I had my own offer [on my own listing] in the multiple offer line up. Now that is a meaningful question.

    KARMA

    David Pylyp
    Living in Toronto

  2. Richard Silver Post author

    Don’t get me wrong. Nothing illegal was done. Had I not called to double check the notice would have been given at 11 AM that the offer was acceptable to the Seller and would be accepted by 11:59 AM if no one else could top it. Totally my fault that my client has a job and all the ducks were not in a row for them.

  3. Tony Azzopardi

    Being in a similar situation last year…I encouraged my client to do their own home inspection and register well before the offer date… as per the listing…in the event that the Seller decides to entertain offers earlier…This way they are protected and in the game.

    Not sure why agents representing their clients wait till the 11th hour to register their offers…when they can always withdraw.

    Tony Azzopardi
    Right at Home Realty Inc., Brokerage

  4. Sean Routbard

    In my opinion, this is something TREB should regulate, but choose not to. At the early stages of this holding off offers practice (I’m guessing 6-8 yrs ago), same thing happened to me & I found out the agent sold the house himself over the weekend. TREB said nothing illegal was done & shame on me for not registering an offer immediately. On one hand I get it..it’s the owners house and they are free do what they want with it. On the other hand, we as agents have a rule that says (to paraphrase) we will treat each other fairly. Is it fair then for real estate agents to “tell” other agents & more importantly the buying public, the sellers will be looking at offers on day X then sell it prior to that? The simple answer is no. How can TREB say to sellers if you want to use the MLS system you must list it for a minimum of 60 days, but they can’t say if you choose to hold offers on a certain day, in order to use the MLS system, you must abide with that decision? We worry about protecting sellers but we should worry about buyers too as we now provide agency to both sides.

  5. Richard Silver Post author

    TREB has brought this to RECO as it is their domain. That is one of the reasons that I am running for RECO now that my term at TREB is over in June.

  6. Frank Petriglia

    I too had a similar problem with a bully offer, being the listing agent. The buyers agent called and registered an offer so not to compete with others, wanting to be fair to all parties, every agent that viewed the property was informed and asked to present. The home inspection was done in advance so no surprises there. The seller received the highest price and the bully lost the bid. Everything was transparent the way transactions should be.

  7. Joe LoVecchio

    I have been selling in central Toronto since 1987 and have been in bidding wars, off and on, since that date, hard to believe, but true. Bully bids become common, when buyers get fed up of losing too many times in bidding wars. Buyers and their agents waste hours, time and money chasing bidding war listings. It is so sad to work so hard and get no deal.

    In regards to protcol/TREB bylaws….Preemptive or Bully Offers (or as I like to call it “Premature Offers”)-

    I believe the ruling is that the listing brokerage/agent has an OBLIGATION to ONLY inform those agents that have FORMALLY REGISTERED A SIGNED OFFER with the listing brokerage/agent — that a Bully Bid has arrived and is willing to be entertained by the Sellers. True?

    I further understand that there is NO OBLIGATION for the listing brokerage/agent to inform any other agents that have shown the property or have even asked to be kept uptodate if any BULLY BID offers come in. Only agents that have formally registered offers are to be kept updated. True?

    However, some realtors forget that we are in a business where we compete with each other, but also cooperate with each other – on almost every deal. Cooperating Realtors don’t easily forget when they feel unfairly treated by Listing Realtors in competing situations – they carry it with them and rant their story EVERYWHERE. And when the listing agent and cooperating agent roles are reversed – WE REMEMBER!!

    So the most ethical and fairest approach — is that the listing agent FORMALLY CONTACT ALL AGENTS THAT HAVE REGISTERED AN OFFER, HAVE SHOWN THE PROPERTY, OR HAVE INFORMED THE LISTING AGENT OF WANTING TO BE UPDATED (difficult when the agent asking this has not shown the property or their buyer client has seen the property through an open house and there is no record of an agent to contact/update).

    Lastly, many of our buyers today go to open houses and we are unaware that they have done so…. until they call us. And if your buyer is told at these open houses that the seller is holding back offers and has an offer date in the future, and your buyer thinks they have plenty of time to react if they are interested – beware. Encourage your buyers to call you immediately as Bully Bids change the landscape and can sour client relationships in a hurry. Our clients expect us to know everything that is happening in our marketplace — having an interested buyer not being able to bid on a “hold back offer date listing”, is very embarrassing for the cooperating agent.

    As always thanks for sharing Richard. In the end the good guys win!!

    Cheers
    Joe LoVecchio
    Not Your Average Joe
    RLP Signature

  8. Robert Ede

    So sad, so off-putting and so non-professional … but it happens
    Very hard to circumvent Co-op Broker’s Buyer’s “greed/opportunism” with TREB rules or regs and/or compel the LBO to follow the already established TREB on full communication-with-prior-showing-members AFTER THE FACT.
    My best idea against being “pre-empted” is to have Buyer sign an quickly hand-written, imperfect and likely wholly-inadequate AP&S (ie in addition to verbally informing LBO of your probable intention to “be there” on offer day)and register your offer –
    1) I think a registered offer is much harder for LBO to ignore in the event of a pre-emptive bidder
    and
    2) your (patiently-waiting)registered offer might just discourage a member/buyer from attempting to pre-empt

  9. John Iskra

    Richard, certainly agree with you. And it’s practices like this that make it understandable why some people have rather negative perceptions of real estate agents. Short-term gain trumps long-term reputation.

  10. Richard Silver Post author

    Thanks John and All,
    A lot of us are very hard working and dedicated to doing things with the client at the center. I think if you post, no offer till a date, then you must stay with that…it boils down to credibility.

  11. anne

    well I’m jumping into this 103 responses late and may be repeating someone earlier but if you are showing a property during an open house insist on making that appointment through the office so the agent has that record if and will advise you of a bully .If my client shows any strong interest we discuss registering an offer asap so that we can at least be notified of a bully especially with those agents/brokerages who seem to have a reputation for not making it to listing date.

  12. Robert Ede

    Further to previous

    One other angle to approach the bully/pre-emptive scenario is to change the “Standard Practice” regarding Registration of Offers thru LBO

    I’ve been recommending (with no success) that the process of “Offer Registration” become(fax or electronic)transmittal of the acknowledged-by-buyer Confirmation of Co-op and Rep form to the LBO/LA.

    AND a similarly transmitted communication of receipt by LBO or LA

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