Here’s another quick tale from the trenches as I continue to work with clients at my new real estate firm, this time from the rough-and-tumble market of South King County. Yup, it’s tough everywhere…
My client identified a home in Kent for purchase. It had been on the market for 200 days, with a couple of failed contracts in the meantime (one due to “buyer remorse” and one to failed financing) and nary a price drop. The listing showed an Agent and a Co-agent (both from the same office). I promptly reached out to the Agent, who told me they had no offers and none expected. Within a day or two we submitted our offer at $10k off list. Having heard nothing in response, I followed up with a call two days later. Her voicemail told me she was the managing broker for the office. Good, I’m dealing with the boss…
The Agent called back and explained that the sellers were having health issues and thus the delay in responding. I asked about other offers and was assured there were none. I noted that our offer amount was predicated on us being the only offer, and if another offer appeared to please let us know. In that event, obviously we would take a different tack in the negotiations. I also said that we had no problem at all being patient with the sellers given their health issues, assuming they were indeed acting in good faith and negotiating only with us. The Agent assured me that was the case. Yeah. She said that the Co-agent was trying to meet with the sellers and they would get back to us in a day or two. She said the sellers were likely to counter at $4k off list. Riiiiiight.
The next day, I got a call from the Co-agent. With “the bad news.” Sellers had received a full-priced offer, so they accepted it. Another “WTF?!?” moment. Although signed, it had yet to be returned to the buyers, leaving me a tiny bit of room to maneuver. So I tried to salvage the situation, and the Co-agent at least pretended to be sympathetic. I called the client and got authority to draft a new offer at $1k OVER list – thus beating the offer in hand – but the sellers had made their decision and had no interest in giving me or my clients the time of day.
When the smoke cleared, and the rage had subsided, I though about the lesson to be learned. Always go with full list in this market if it’s within shouting distance of fair? That seems extreme and not consistent with my professional obligations to my client. Recognize that assurances of “good faith” are rendered meaningless the moment a new offer comes in? Yeah, but that’s a little obvious, this is after all real estate. 🙂 Then it hit me: Know who is really “the agent.” You know, the person with the seller’s ear who is actually driving the ship. It may be the “Agent” or it may be the “Co-agent,” assume nothing based on title (even if the “Agent” is also the managing broker!). Listen for clues. When the Agent says, “Oh, the Co-agent will be meeting with the sellers tomorrow,” immediately hang up and call the Co-agent. Don’t waste your breath talking to anyone else. It is a waste of time that will not be helpful going forward.
Another lesson learned. And confirmation that the Quill model strikes the right balance between protecting the client (by keeping an attorney on board and behind the scenes) and getting a deal done (by allowing the Quill agent to take the lead when negotiating a contract).
Why didn’t you have an escalator clause just in case they shopped your offer? Not uncommon for a listing agent to call everyone who showed the property recently to tell them they have an offer in hand. An offer in hand, no matter how long the property has been on market, often begets another. No answer is an answer. It means “maybe…if we can’t find something better”.
An escalator clause in an offer, where it’s the only offer? Aren’t you telegraphing – to say the least – your top dollar for the property? That seems like a terrible negotiating tactic, and merely sets up the client for a very aggressive counter.
And I didn’t get “no answer” here. Rather, I was specifically told the delay was due to the sellers’ health issues, and that sellers would be negotiating with my clients once they felt better, and that if another offer appeared we’d be informed. Like a couple of suckers, we trusted the not-in-charge agent who told me as much.
It’s a balance, Craig. The listing agent has to make a call as to whether or not to reveal that there are other offers. Rule of thumb was if you had two offers the strategy was to reveal that to one and not the other, which is likely what happened in your case. Once you have 3 or more in hand, the liklihood of losing them all by revealing that there are other offers is smaller.
Also and most recently agents have been submitting offers with out any advance talk or indication of what will be in the offer and sometimes with a short fuse to cut down on the chance it will be shopped. Once a second offer comes in at full price, it is usually just accepted when the circumstances are as you presented, which is what happened. Only exception would be if the first offer was lower but from a more qualified buyer.
Showing your hand is sometimes needed to get the house, and does not necessarily mean you end up paying more. For instance in multiple offers I always do a max affordability preapproval letter. The buyer can have a preapproval up to $650,000 and be buying a $400,000 house. The seller knowing how much a buyer can pay does not translate into what they will pay. But it does help them win in multiple offers as the seller has more assurance it won’t fall apart on financing than if the preapproval is at the offer price.
Lack of an answer is no answer. It is not uncommon for agents to give a “reason” why there is no answer while they are trying to scrounge up a better one, just in case they can’t find a better one. This is especially true if there was no answer by your offer deadline time. Did it run over the response time in your original offer? Was the offer invalid as to reply by date by the time they accepted the other offer?
Good stuff, Ardell! More nuances to my lesson learned the hard way.
I’m not tracking with your “no answer is an answer” though. Here, I got an answer as noted in my prior comment. And to answer your question: yes, the conversation took place before expiration of our offer.
4 of my 5 recent escrows were my client “winning” in multiple offers. The first had 7 offers, two had 3 offers and the most recent had 11 offers. I had to make some tough decisions, as in two of them we had clear instruction from the listing agent that I chose to ignore. I agree with you that it wasn’t “fair” as the other offers followed the listing agent’s instructions and my clients won in two instances by NOT paying any attention to those instructions.
Winning in multiple offers is an evolving set of “rules to win by” until the market calms down again and becomes balanced or a buyer’s market. As soon as you think you have it all down…someone like me will do something completely out of the box…which becomes more common-place until we think of some new “out of the box” idea to win.
I remember when adding an escalator clause was “out of the box” until everyone started doing it. 🙂 One house and 11 offers means you have to get a bit creative sometimes. I did feel a bit badly for the 2nd place offer, which of course I got to see. It was an unbelievably excellent offer, in many ways better than our winning offer, except for the few out of the box things I did. Here’s a good one for you. Instead of a Title Contingency or a Review of HOA docs on a single family on form 22D, get those ahead of time from your own Title people. Then you are not “waiving” those contingencies, you are doing them in advance, much like a pre-inspection. Noting that your buyer has already received and reviewed the CC&Rs and is approving them vs waiving the right on a single family vs condo can give you a leg up.
Deciding whether or not to adhere to what is being said, and listening very hard to what is not being said, is usually the difference between winning and losing. Often too much quiet means they are talking to someone else. Very often that is the case.
Let’s just say I have never heard of a seller being too sick or unavailable to respond to a great offer. 🙂 Your story reminded me of a client some years back who called in a panic. The seller actually verbally accepted the offer but couldn’t respond in writing yet for “x” reason. The buyer drove by the house and saw a car with a real estate company’s plate on it in the driveway. I told him what I told you. The seller is saying yes but he really means “maybe…if I can’t get something better quickly”. My client did get the house, but had to change it and the seller miraculously made a recovery to reply to the more acceptable offer.
Information is great. What to do with the information is an art.
If you think about it, adding an escalator clause is really not much different than saying ” I noted that our offer amount was predicated on us being the only offer, and if another offer appeared to please let us know.” Except the former has a better chance of winning than the latter. Every escalator clause is predicated on your offer NOT being the only offer, though I totally understand your hesitancy to include one. Fact of the matter is the seller can always counter at full price regardless. The only thing standing in the way of your client getting the house is another buyer, whether you have an escalator or not, unless the seller decides not to sell at all.
One of my offers noted above was extremely worrisome to me. There were no other offers. In fact it has been common in the hottest of areas for agents to be VERY quiet about submitting an offer and submitting it exactly at the deadline time, hoping that everyone will think there are none. We overshot the asking price by $10,000 and had a monster escalation clause, given the history of offers in that area (Fremont). Part of me was a nervous wreck that the offer was too strong, especially as to jumping the asking price. Turned out great. There were 2 other offers out of nowhere and we did not over shoot the price at all. Going with your gut can give you ulcers. 🙂 But sometimes you have to trust your instincts more than the available facts at hand.
Go to the source. Good advice here. In an office with multiple agents working to sell their group of listings, it is easy to cross paths and end up dealing with someone who is following the cart but not the one pulling it. Taking the time to go to the correct person may take a little more effort, but it could be the edge that gets your offer considered and accepted.
That’s a great lesson indeed. Thanks for sharing. It’s sad but this happens and kind of leaves a bad taste to first time home buyers.