“Offers to Be Considered on a Future Date”: Is This Really Fair to Buyers?

As I work my way back into the market following the launch of my real estate firm, I am learning just how difficult it is from a buyer’s perspective.  Specifically, I am trying to get a client into a $400-500k home in West Seattle.  It turns out there are only a few thousand other people looking for the exact same thing, and a few dozen homes that fit the description.  OK, I’m making these numbers up, but you get the drift.  It’s tough out there.

Until this week, I had a high degree of respect for sellers and their agents who noted in the listing that the seller would consider all offers on a particular date in the future.  This allows all interested buyers to really put their best foot forward, particularly by pre-inspecting so that the offer is not contingent on the inspection.  Particularly in older neighborhoods like West Seattle, where homes routinely approach or exceed the century mark in age, sellers appreciate knowing that there will be no renegotiation based on the condition of the home.

So on Wednesday afternoon, I met my client at the “target” home where we were awaiting the arrival of our inspector for a pre-inspection.  The seller was to consider offers on Friday morning.  Buyers and an agent were inside, I assumed simply touring the home.  Suddenly, the owner emerged from the house and announced she had just sold the house to the folks who were inside with her.  As the kids say, WTF???

It turns out that the seller had every right to accept this offer, notwithstanding the “offers to be considered” date as stated in the listing.  NWMLS rules specifically allow a selling agent to present an offer directly to the seller long before the stated “deadline.”  So it turns out my anger and frustration at the seller, the listing agent, and the selling agent who pulled the coup were all misplaced.  (I wouldn’t even rule out an apology, now that I know the rules.)

But it begs the question: Is that fair to buyers?  What if my client had completed the pre-inspection?  He would have been out-of-pocket money specifically in reliance on the seller’s and listing agent’s representation in the listing.  And even without that expense, it seems unfair that a stated “deadline” can be wholly circumscribed by one buyer at the expense of all others.  If it were up to me, the rules would be changed. But all I can do is continue working towards providing buyers with an improved home buying process.

Trying to Force the Seller’s Hand

[photopress:hand.jpg,thumb,alignright] If you are playing the game of “trying to force the seller’s hand”, you have to know how to play it right. It is not easy to force a seller to…anything. Regardless of who is right and who is wrong, if you can say there is a right and wrong to the situation, reality is what it is. If you want the house, and you are not the only one who wants the house, you have to stay “in PLAY”.

Two buyers have been “circling the wagon” for weeks. Offers have been presented to the seller, counters have gone back to the buyers. Back and forth, back and forth. Buyer Agent saying, “Did the seller look at the comps I gave you showing why the seller should?” “Well of course the seller has to fix this and fix that, remove this and add that”. Meanwhile the seller is just going about their business, day in and day out, waiting for the buyers to agree to their price and conditions.

Then along comes buyer number three. Buyer number one and buyer number two, who have had offers back and forth, know what the seller wants. So it seems only fair to tell buyer number three what the seller wants. Meanwhile buyer number two wants to submit an offer again, third time, for something less than they know the seller wants. I say, well you have two choices. You can bring an offer meeting the seller’s counter to you of a couple of weeks ago and beat buyer number three to the punch, OR you can hang back and wait to see what buyer number three does.

Buyer number two’s agent doesn’t want to bring an offer matching what the seller wants NOR wait until buyer number three makes their move on Saturday, so she brings an offer that she knows is LESS than what the seller wants and Tries To Force the Seller’s Hand”, by giving a very short response time. Bad move. You bring the seller an unacceptable offer and put a response time that is hours before buyer number three is scheduled to see the house. What happens. By trying to force the seller’s hand and make him respond before buyer number three sees the house, you are left out in the cold. Your offer is expired before the seller is going to respond. Buyer number three’s offer is accepted and your offer is a non-offer, because it expired before the seller was willing to look at it.

If you tell the seller they only have x amount of time to respond, and that timeframe does not match the seller’s schedule for some reason, your offer becomes invalid. Agent says “You COULD HAVE countered and just changed the date…” But why? Why would the seller risk countering an expired offer, when they have an acceptable and valid offer on the table? (agent’s answer is because she has worked long and hard and deserves…anytime the agent’s answer includes the agent in the picture…wrong answer – wrong thinking.)

If you are trying to force the seller’s hand by giving him a short wick, and putting a response time that is less than acceptable, you have to revise your offer and extend that date the second your response time passes. You have to keep your offer “in play”. By trying to force the seller’s hand…you can put yourself out of the game altogether, if you do not keep your dates running forward by submitting a new response time.

Buyers often think that the seller MUST respond, MUST counter. Not the case. No answer IS an answer. If you have no answer by the time your offer time expires…you have your answer. The answer is NO…try again.

When I was a teenager, my parents often didn’t want me to go to parties. So when I asked to go to a party, I didn’t demand an answer on the spot. I made my case for why I thought they should say yes, and then I left the room to give them time to talk it over and think about it. The fast answer was often no…I went to lots of parties 🙂

When you give the seller what he wants, you can try to demand a quick response. When you want the house for less than acceptable terms, you have to be willing to hang back, and you have to be willing to lose it, if the seller doesn’t meet your terms. You can’t bang your fist on the table and demand that you get the house for less. Presenting an unacceptable offer, and demanding a quick response, is like a kid throwing a tantrum…rarely works out for the best. And almost never works out for the best, when you know there are other interested buyers.

Time to get into 1st backup position.

My Favorite Real Estate Story

imagesA seller receives 23 offers on his property. All of the buyer agents want to present their offers in person and introduce the buyers to the seller.

There are 23 buyer agents and their buyer clients seated on folding chairs in a big room. Picture 50 or more people sitting on folding chairs with Offers to Purchase in their hands.

In a little conference room sits a seller and the seller’s agent preparing to review these 23 offers. The seller is not happy. All he wants is one, good and acceptable offer. He is overwhelmed by the prospect of having to review 23 offers and send 22 people home “empty handed”.

One by one the buyers and their agents “present their offer to the seller”. After about 8 of these “presentations”, the seller is totally confused and beside himself, as all of the offers seem about the same to him.

Along comes buyer number 9 and his agent. The savvy buyer’s agent can sense that the seller is completely fried and wants this over with. So he makes the seller an offer he can’t refuse, and the seller says to his agent “I’m going to take this one, get everyone else out of here.”

So the totally embarrassed seller’s agent goes out to the big room of many people in folding chairs and announces that the seller is DONE! He thanks them all for coming, but the seller is going to take offer #9 and they should all leave now.

AND THEN, AND THEN….ALONG COMES HANNAH!!! She jumps up from her chair, runs past the seller’s agent, kicks open the door to the little conference room, points at the buyer and buyer’s agent in the room and says “Whatever these guys have offered…we’ll go $100,000 over THAT!!

The seller’s eyes get as big as saucers. He realizes that it may be in his best interest to let everyone compete with one another and so he tells his agent to proceed as originally planned and “the game” proceeds until all 23 agents and their buyers have given their “Final and Best” offer.

I just love the picture in my mind of Hannah jumping from her chair, TACKLING THE LISTING AGENT, kicking down the door and refusing to be eradicated! I wonder why no one has ever made a movie of her valiant move! Her client must have been stunned, the whole room must have gasped in awe! I totally LOVE this story.

End result: Hannah’s client did NOT get the house. In fact Buyer #9 did, in the end, get the house for $400,000 more than his first acceptable offer. Buyer #9 got the house AND he sued Hannah’s company for making him have to pay $400,000 more for the house, as Hannah and Buyer #9’s agent worked for the same company. The suit was settled out of court and we now have “the Hannah clause” in all Buyer Agency contracts stating that the buyer is aware that the company may have other buyers under contract competing for the same house.

So Hannah’s efforts have become legendary…but only in the archives of lawyers and new stock clauses.

Hannah deserves much better…she at least deserves this article on a blog. So here’s to you Hannah! You are my idol!