The topic of multiple offers in Real Estate is often a heated discussion with several different viewpoints. I’ve been involved in several multiple offers representing both buyers and sellers over my 15 years as a Realtor, most are exciting or devistating depending on your perspective.
The issue with multiple offers is transparency. Some multiple offers may have more than five separate buyers vying for one property. Each Buyer needs to be informed of all other offers; not the content of the offers but the number of offers they will be facing in competition. To complicate things further, the Listing Agent may be representing one of the Buyers through a multiple representation agreement. In this case, the Listing Agent must disclose to the other Buyers involved if he/she will be discounting their commission and the exact amount.
How does a Listing Agent make this process “fair” to all parties involved when they also represent a Buyer in the same transaction? I was involved in a multiple offer situation a few years ago representing a Buyer when this exact situation arose. There was 8 offers on the property and the Listing agent also had a Buyer involved. The Listing agent said that her Broker of Record was going to help out by representing the Seller during the viewing of the offers and the agent was going to represent the Buyer. Long story short, the Listing agent won the bid against 8 other buyers and they outbid my offer by $1000. Needless to say I was pissed as was my client.
What followed was a long discussion with that Listing agent, the Broker of Record and my Broker. Technically they followed the rules but what happened behind the scenes? Don’t tell me for one second that the Broker of Record didn’t want both ends of this deal to go through their office. Think about how easy it would be for these two colleagues to communicate without any of the other agents involved having the faintest idea…a simple text message.
More recently I represented a Seller and we obtained 5 offers on their property. At the last minute before offer presentation I had a request to show my listing. These Buyers looked through the house and they expressed interest in making an offer. They explained to me that they wanted to make the offer with my representation so that I would get them a break on the commission and have a better chance of winning a bid. I quickly explained to them that I would NOT cut my commission in a multiple bid situation. They were dumbfounded and explained that another Agent had helped them in the same manner. I explained to them that we had no relationship and I had no idea if they could even afford the house. The last thing I wanted was to have this Buyer win the bid and then not qualify for the house. The reality is that they wanted the commission break, they asked again and I said absolutely no for a second time.
There are many ways a Seller can deal with multiple offers. They have several options to send back offers for improvement, hold onto offers etc… however, with 5 Offers we decided to proceed with a one-time bid. I explained to each Buying agent that they should bring their best offers to the table. The only time we would consider sending anyone back for improvement was if two or more offers were very close. We accepted a very good offer and my clients were very happy. Here’s the last catch to this story…
Two of the agents who lost in their bid thanked me outside the house. Most agents working with buyers in today’s market have been faced with these multiple bids on several occasions, often with the same Buyer. These agents thanked me for making the bid fair and straightforward with no nonsense. These two agents both had their Buyer’s with them in their car as well. When the Listing agent starts sending bids back for improvement things can get confusing… Buyer agents and the actual Buyer start to question what is happening when people start going back and forth from the house, wondering if someone else is having a chance to improve their offer or get an unfair advantage. David Fleming has a similar take on this issue in his Blog: Toronto Real Estate Blog
If you find yourself in a multiple offer situation as a Buyer I believe that you should always bring your best offer to the table. Don’t make the mistake in hoping that the owner sends back the offers for improvement and run the risk of losing the house. Decide with the help of your agent what is your best price and terms…then go for it!