Listing Agents Claiming There Are Multiple Offers in a Buyer's Market

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Once upon a time, this was a good way to get more money for your listing. This led to a classic tragedy of the commons. Because it didn't take hardly any extra time, and there was no reason not to do so, listing agents will claim there are multiple offers with practically every property. It's not like they are expected to furnish any evidence.

Because of this, in the last few months, I've had listing agents try to tell me that there were suddenly multiple offers on property that has sat on the market for months. If I don't see any evidence that there's a reason for it to suddenly have multiple offers, such as a recent massive drop in the price, I find these claims dubious at best. It might be believable if the property has been on the market for three days, and has not recently been listed before that. If it's been on the market more than three weeks, such a claim is dubious at best. I recently talked a pair of clients into making an offer on a property that had expired twice and been re-listed for a third time. A week prior to that, a special incentive to buyer's agents had expired. In short, there was every reason to believe that that we had a clear field, with nobody else making offers. As I always do, I included information on comparable properties that had recently sold in the neighborhood, of which I had inspected two, and the issues that this property had. The listing agent claimed there were multiple offers and gave the kind of counter I hadn't seen since the height of the seller's market three years ago, demanding a "best and highest" counter. I and my clients jointly countered back that we'd agree to their conditions, if they'd agree to our price, and gave them 24 hours to take it or leave it.

Now before you pull something like this, you do need to have multiple counters in point of fact. Because the flinty-eyed buyer's specialists know better. Even if they do, in fact, believe that you've got multiple offers, we're going to tell our clients that it's best to counter back as if the seller is lying. Essentially, we call their bluff. If they do have multiple offers and someone is stupid enough to play ball with them, that's no skin off my client's nose. With over forty properties for sale for every buyer, if this seller doesn't want to be realistic, we can keep looking until we find a seller that will.

For an intelligent buyer in this market, even if there are multiple offers upon a property, it doesn't make us willing to offer more for the property. It means we want to expedite our deadlines for the sellers to respond, and it means we're likely to make subsequent counters with a multiple offer contingency (in other words, we're making offers on multiple properties now. If another offer gets accepted before you accept ours, we're going with that one). Mostly though, it means that this seller, and their listing agent, have their heads stuck in the land of wishful thinking, and it's time to consider another property. Nobody can make them sell against their will, but we can find another property where they seller isn't so far gone in denial, and where the agent has done a better job of explaining the realities of the current market. It's not like there's any shortage of choices.

Let's face it: Unless you fax over the offer, complete with all terms and the competing agent's name and their contact information so I can verify it, there is no reason for me to believe that you have a competing offer. If you do this, the offer is either better than my clients', or not as good. If it's not as good, the leverage is provides is minimal, in any market. If it's better than my clients' offer, it's either something my clients are willing to beat or it isn't. If it isn't, your leverage is still negligible. It's only if the other offer is better, but my clients are willing to beat it, that this trick offers you any leverage whatsoever. In this market, it's more likely to make us act like I discussed in the last paragraph - because in this market, no property is worth getting attached to before you own it. Let me baldly state that I also understand the potential benefits of collusion with your friend the agent from another office. She colludes with you on your client's property, and you collude with her on hers, each stating that they do, in fact, have clients making thus and such offers on that property. Since once again, it's trivial to convince yourself that it's in your client's best interest, even verified offers aren't going to mean a whole lot to a smart buyer's agent in this market. The buyer's market may not last much longer, but while it does, there are still no properties worth a buyer getting attached to them before closing. And for all the properties I've made offers on where the listing agent claimed there were multiple offers, I've never had one of them offer any real evidence.

People willing to price their properties to the market, and negotiate realistically, can sell properties very quickly due to the fact that comparatively few sellers are competing well for the buyers that are out there. In the last couple months, I've been involved in the sale of two beautiful properties - and two others that were plug-ugly, but sold quickly because the sellers and their agents had their heads in the right place. In one instance, I even had someone bidding against my clients, but we nonetheless consummated the sale quickly.

If you're trying to sell in this market, and you negotiate unrealistically, you are only hurting yourself. That buyer's agent can find them something better, cheaper, making the agent's client much happier. Even if you do have multiple offers, it might be a good idea not to particularly act like it. You can check the multiple offers box without being aggressive about it.

The property I mentioned earlier? Where the agent and seller acted like it was still a seller's market? It's still for sale, and my clients have moved into another property. The relocation company that owns it is out roughly $6000 per month. Had they priced it to market, and negotiated reasonably, they likely would have sold. If they simply negotiated reasonably, they would have sold it to my clients. My clients have their new home - they're happy. The sellers? Not so much. They're paying about $6000 per month for an empty property. It's been on the market for a year now, and it's not like they have any real alternative to selling. That's $70,000 they've flushed down the drain to no good purpose, and it's not like there's any chance of them getting more than the property is really worth.

For listing agents who refuse to act like their clients are competing for buyer business, and have to compete hard under current conditions, they are violating client interests no less than if they counseled the client to accept an offer from someone acting as a straw buyer for the agent, personally. In fact, I rather suspect this particular agent of being Sherrie Shark, but there's nothing I can do for the owners as a buyer's agent. It's not legal for me to so much as contact them without going through Sherrie. Nor would it benefit my clients in any demonstrable way. It just gets me and potentially my clients caught up in a legal morass to no beneficial purpose. So the owners are high and dry on their own. It's our profession's problem, but there's nothing I can do about it as an individual.

Caveat Emptor (and Vendor!)

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This page contains a single entry by Dan Melson published on September 11, 2007 7:00 AM.

100% Financing or Low Down Payment or Low Equity: PMI May Be The Only Option was the previous entry in this blog.

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