\n<\/p>\n
There\u2019s a saying that listing agents use from time to time, and it goes like this:<\/p>\n
\n\u201cMy clients can\u2019t accept what\u00a0isn\u2019t<\/em> in front of them.\u201d<\/p>\n<\/blockquote>\n
It\u2019s a way of trying to convince a buyer agent, whose clients are on the fence or lying in wait, to bring an offer on the property.<\/p>\n
You can see how this plays out in various scenarios, right?<\/p>\n
Consider the buyer agent who\u2019s posturing, or testing the waters: \u201cDo you think your clients would accept $2,000,000?\u201d<\/p>\n
A non-committal answer would be, \u201cWell, my clients can\u2019t accept what\u00a0isn\u2019t<\/em> in front of them.\u201d\u00a0 It\u2019s a nice way of telling the buyer agent to bring the offer, without showing your hand and directly answering the question.<\/p>\n
Consider the listing agent who\u2019s out there, grinding away, trying to drum up business, and while trying to avoid sounding desperate, simply offers to the buyer agent, \u201cLook, Jimmy, my sellers can\u2019t accept what\u00a0isn\u2019t<\/em> in front of them.\u201d<\/p>\n
I use this line all the time, and do so in a multitude of situations.<\/p>\n
But know this: even though this is a metaphor, it\u2019s also very true when used in a\u00a0literal<\/em> sense, and that is the premise of our story today!<\/p>\n
When it comes to the most basic tenets of contract law, you would have to understand that you can\u2019t accept an offer that\u2019s not in front of you \u2013 that\u00a0doesn\u2019t exist<\/em>.\u00a0 Right?<\/p>\n
Well, there are many times in real estate, sorry to say, when agents\u00a0do<\/em> try to accept an offer that doesn\u2019t exist, and it\u2019s usually because of one of two reasons:<\/p>\n
1) The agent is ignorant and uneducated, lacking the knowledge required to understand contract law.<\/p>\n
2) The agent is looking to cut a corner, be lazy, be sneaky, or be unethical.<\/p>\n
I honestly don\u2019t know which one is worse, but let me tell a story today that lays out all the facts, and then you can decide why\u00a0<\/em>the agent did what he did\u2026<\/p>\n
I have a listing for a freehold property, priced at $1,199,900, which has been on the market since Labour Day.<\/p>\n
It\u2019s a fantastic house, and I say that without bias.\u00a0 The home is located in an area that\u2019s dominated by \u201cunloved\u201d homes, which is to say that my clients have not only taken great care of the home but also have wonderful taste, and the home\u2019s aesthetic benefits from their style.<\/p>\n
We received two offers from buyers that seemed to be running around the neighbourhood, lowballing<\/em> sellers.\u00a0 To be honest, I don\u2019t blame the buyers.\u00a0 There are deals to be had out there in this market, and there are a lot of homes that don\u2019t present well and might deserve a lowball.<\/p>\n
Our home is\u00a0not<\/em> one of those, however.\u00a0 We rejected two lowball offers without signing them back, which spits in the face of another one of my mottos: \u201cNever let a deal die,\u201d but when somebody offers you $980,000 on $1,199,900, and the buyer agent\u2019s email reads, \u201cWe saw twenty houses on the weekend and we\u2019re giving you a CHANCE to sell before we move on to another home,\u201d you know pretty quickly that this isn\u2019t your trade partner.<\/p>\n
The\u00a0third<\/em> offer that we received on the property was a good one: $1,150,000.<\/p>\n
The terms were reasonable, i.e. deposit, closing date, conditions, etc., and we elected to work with the offer.<\/p>\n
I called the agent and asked what I always ask: \u201cWhere is this offer going?\u201d<\/p>\n
A good buyer agent will work around the question, but many agents just like to hear themselves speak.<\/p>\n
An agent might say, \u201cWell, my clients want to get the property for $1,500,000, so they offered $1,400,000, thinking that we\u2019d have to sign it back-and-forth at least three times, so that\u2019s our plan.\u201d<\/p>\n
I know it\u2019s hard to believe that an agent would offer this, but they do it all the time.<\/p>\n
In this case, the buyer agent said, \u201cLet me speak to my clients and I\u2019ll get back to you,\u201d so I figured we had nothing to lose by waiting.<\/p>\n
The buyer agent called me back and said, \u201cThey\u2019re pre-approved for $1,150,000,\u00a0but I know that\u2019s not going to do it<\/em>, so I\u2019ll see if their parents can top them up.\u201d<\/p>\n
Once again, I waited.<\/p>\n
And once again, he called me back and said, \u201cOkay, I think I can get them to $1,170,000.\u00a0 If you sign back at that number, I think I can get them to accept it.\u201d<\/p>\n
I called my clients and passed the information along.<\/p>\n
We weighed the pros and cons of signing back at $1,170,000 and\u00a0trusting<\/em> that the buyer agent could get the buyers on board, and we talked about signing back at $1,175,000 or $1,180,000, which assumed that most buyers want the final sign-back.<\/p>\n
In the end, the sellers decided to sign back at $1,175,000 and see how the buyers would respond.\u00a0 They understood the risk in signing back at this number versus any other number, and were completely on board.<\/p>\n
We sent the counter offer over to the listing agent, and he responded in two hours with yet another\u00a0<\/em>sign back, this one at $1,160,000.<\/p>\n
He said, \u201cI tried my best, but now the parents are involved, and they\u2019re telling their kids it\u2019s a buyer\u2019s market and they should be lowballing\u2026\u201d<\/p>\n
Who knows if any of that is true or if it\u2019s just negotiation, but in any event, their sign-back to us at $1,160,000 came with a \u201cbest and final\u201d notation, and an irrevocable of 11:59pm the next day.<\/p>\n
The following morning, I spoke to my clients, who said, \u201cWe\u2019re not really in a good position here.\u00a0 We\u2019re thinking about just accepting the $1,160,000 offer.\u201d<\/p>\n
I told them that, given the market in their area, they had to consider it.\u00a0 But they also had to weigh the risk\/reward equation associated with signing back at $1,165,000 or $1,170,000.<\/p>\n
They said that they wanted to discuss and that they\u2019d get back to me.<\/p>\n
As I waited for my clients to get back to me, I received a text message from the buyer agent:<\/p>\n
\nAny update? \ud83d\ude0a<\/p>\n<\/blockquote>\n
This struck me as somewhat odd, since it was 9:30am and they had given us a \u201cbest and final\u201d offer\u00a0with authority<\/em>.\u00a0 We had until 11:59pm that evening, so the text message was very telling.<\/p>\n
All of a sudden, I began to believe that the buyer agent was\u00a0nervous<\/em>.<\/p>\n
A nervous buyer agent is one that you can play with, and so I decided to do exactly that.<\/p>\n
I texted back:<\/p>\n
\nHi Bob, thanks for checking in.\u00a0 I don\u2019t know what they\u2019re going to do, but I know they\u2019re not accepting $1,160,000.\u00a0 Full transparency here: we have another agent who said she\u2019s bringing an offer.\u00a0 And since we have until 11:59pm on your offer, we\u2019re going to take the day to see what happens.\u00a0 Thx!<\/p>\n<\/blockquote>\n
This was a bluff, in case that\u2019s not obvious.\u00a0 We had other showings, but nothing was imminent.\u00a0 And the sellers\u00a0were<\/em> considering the $1,160,000, as I noted above.<\/p>\n
But we had absolutely nothing to lose.<\/p>\n
Worst case: the buyer agent says, \u201cIt\u2019s our best and final, so take it or we walk away.\u201d<\/p>\n
Best case: the buyer agent\u00a0is<\/em> nervous and lets something slip that we can use to our advantage, or starts to negotiate against himself.<\/p>\n
What ended up happening was something both better\u00a0and<\/em> worse at the same time.<\/p>\n
What happened was something that I have only ever experienced\u00a0once<\/em> before in my twenty-one-year career.<\/p>\n
About thirty minutes after my text message exchange with the buyer agent, my email chimed.<\/p>\n
The subject of the email read:<\/p>\n
\n789 Cherry Blossom Way \u2013 Accepted Offer<\/p>\n<\/blockquote>\n
Um, what?<\/p>\n
Speak into my\u00a0good\u00a0<\/em>ear, please and thanks.<\/p>\n
How can the offer be accepted when the offer doesn\u2019t exist?<\/p>\n
The body of the email read as follows:<\/p>\n
\nHi David, Congratulations!\u00a0 The buyers have accepted your client\u2019s counter-offer.\u00a0 Please send me an acknowledged copy of the APS once your seller\u2019s have signed, as well as a copy of the deposit instructions.\u00a0 Looking forward to working with you on this transaction!<\/p>\n<\/blockquote>\n
Now<\/em> we had a problem.<\/p>\n
You see, the buyer agent had his clients \u201caccept\u201d the offer from the previous night; our counter-offer of $1,175,000.<\/p>\n
But that offer didn\u2019t exist anymore.\u00a0 It was nullified as soon as the buyers signed it back at $1,160,000.<\/p>\n
You might be asking, \u201cDavid, isn\u2019t this a\u00a0good<\/em> thing?\u00a0 You got the buyer agent and the buyers to agree to the price that your seller wanted!\u00a0 And your sellers were about to accept a lower price!\u201d<\/p>\n
Don\u2019t get me wrong, I\u2019d love to sell the house for $1,175,000, but we needed to do so\u00a0legally<\/em>.<\/p>\n
In case any of you don\u2019t follow, let me explain\u2026<\/p>\n
\nWe were provided an offer of $1,150,000.<\/p>\n
When we signed that offer back at $1,175,000,\u00a0the offer of $1,150,000 became null and void.<\/em><\/p>\n
The buyers signed our $1,175,000 offer back at $1,160,000.\u00a0 The moment that happened,\u00a0the offer of $1,175,000 became null and void.<\/em><\/p>\n<\/blockquote>\n
The fact that an offer is nullified the moment a counter offer is provided is perhaps the most basic tenet of contract law.<\/p>\n
Should real estate agents understand the most basic tenets of contract law?<\/p>\n
Absolultey.<\/p>\n
So did the agent in this case not know?\u00a0 Or not care?<\/p>\n
I wasn\u2019t sure.<\/p>\n
But what I\u00a0did<\/em> know was that this was a problem.<\/p>\n
I called my seller clients and said, \u201cGuys, I have good news and I have bad news.\u201d<\/p>\n
I explained that the buyers wanted to pay us $1,175,000 for the home, and that they\u00a0tried<\/em> to put an accepted offer at this price on the table, but that the way they went about it wasn\u2019t legal, and could cause us issues down the line.<\/p>\n
\u201cThey can\u2019t accept our offer of $1,175,000 from last night because they negated that offer when they signed back to\u00a0us<\/em> at $1,160,000,\u201d my client said.<\/p>\n
\u201cThat\u2019s correct,\u201d I replied.<\/p>\n
And in that moment, I realized that my client, who works in computer software, seemed to know more about real estate contracts than the buyer\u2019s agent whom we were working with!<\/p>\n
My other client said, \u201cDavid, what do you recommend we do here?\u00a0 What are the potential outcomes?\u201d<\/p>\n
I explained that while we\u00a0could<\/em> simply say \u201cscrew it\u201d and work with the accepted offer, which isn\u2019t legal, there\u2019s a 99% chance that the transaction would proceed without issue.\u00a0 But if, for some reason, the buyer wanted out of the purchase over the next three months, they could argue that the accepted offer wasn\u2019t legal.<\/p>\n
We would have their deposit in trust, and this could take years to sort out in court, but ultimately, the courts would determine that the contract wasn\u2019t valid.<\/p>\n
No matter how narrow the odds that this would happen, we simply couldn\u2019t risk it.<\/p>\n
\u201cI need to explain to the buyer agent that he\u2019s done this incorrectly,\u201d I explained to my clients.\u00a0 \u201cI need him to understand that\u00a0we<\/em> will sign back to\u00a0them<\/em>, and they have to accept.\u201d<\/p>\n
So I did exactly that.<\/p>\n
I called the buyer agent and I said, \u201cListen, I appreciate that you want to work with us, but that accepted agreement isn\u2019t valid.\u201d<\/p>\n
He didn\u2019t understand.<\/p>\n
I said, \u201cYou\u2019ve accepted an offer that we provided\u00a0last night,\u00a0<\/em>which was nullified the moment you signed it back.\u201d<\/p>\n
He answered, \u201cWhat does it matter?\u00a0 If a buyer and seller want to make a deal, and they agree, then what does it matter?\u201d<\/p>\n
This was the outcome that I was afraid of.<\/p>\n
He continued, \u201cLook, you told me that you were getting another offer, and we didn\u2019t want to risk that, so we accepted your offer.\u00a0 Done and done.\u201d<\/p>\n
Yes, he was pulling a fast one.\u00a0 And to be quite honest, he played right into my hand, since I\u00a0wanted<\/em> him to fear a potential competing offer so we could get a deal done.<\/p>\n
But not like this.<\/p>\n
A buyer can\u2019t accept an offer that a seller hasn\u2019t presented, and in this case, with a $1,160,000 offer on the\u00a0seller\u2019s<\/em> table, there was nothing for the\u00a0buyer<\/em> to accept.<\/p>\n
At this point, I was afraid of losing the buyer.\u00a0 But my hands were tied.<\/p>\n
I couldn\u2019t move forward with the invalid agreement that we had in hand.<\/p>\n
So I told the buyer agent, \u201cI\u2019ll tell you what, you\u2019ve put me in a tough spot because you\u2019ve told your buyers that they purchased a home, and we\u2019ve made a mess of it.\u201d<\/p>\n
Of course, \u201cwe\u201d didn\u2019t make a mess of it, but I wasn\u2019t going to get him agitated and risk his emotions getting the best of him.<\/p>\n
I said, \u201cI\u2019ll have my clients sign back to you at $1,175,000, and you can have your buyers accept it.\u201d<\/p>\n
He said, \u201cBut they\u2019ll ask\u00a0why<\/em> they\u2019re signing this.\u00a0 They think they bought a house.\u00a0 They\u2019ll wonder what I did wrong.\u201d<\/p>\n
I told him, \u201cYou have a relationship with your buyer clients.\u00a0 You know best how to proceed and what to say to them.\u00a0 I\u2019m going to leave this in your capable hands.\u201d<\/p>\n
I had my clients sign the\u00a0valid<\/em> $1,160,000 offer back to the buyers at $1,175,000, and presented this\u00a0valid\u00a0<\/em>offer to the buyer\u2019s agent.<\/p>\n
Lo and behold, he got it done.<\/p>\n
He sent me an accepted agreement within the hour; a\u00a0valid\u00a0<\/em>accepted agreement this time, and disaster was averted.<\/p>\n
I feel as though a small percentage of the readers might be wondering why<\/em> we went to all this trouble to simply clean up what could be viewed as \u201csloppy paperwork.\u201d<\/p>\n
You could call the difference in the two accepted offers \u201ca technicality.\u201d<\/p>\n
But at the end of the day, there\u2019s the\u00a0right<\/em> way to do things, and then there\u2019s, well, that\u2019s it.\u00a0 There\u2019s no\u00a0other<\/em> way to do things, especially in this market.<\/p>\n
I don\u2019t consider this an example of my \u201cglass being half-full,\u201d and the fact that the chances were slim that the buyers would pull out of the deal on this technicality really doesn\u2019t matter.\u00a0 Real estate is a\u00a0profession<\/em>, and its participants need to behave professionally<\/em>.\u00a0 There are way too many people cutting corners, taking chances, and deliberately skirting rules and laws.<\/p>\n
We need to do better.<\/p>\n
But unless or until the industry is magically transformed, I would caution every\u00a0<\/em>buyer and seller out there to proceed with an extra layer of caution.<\/p>\n
There\u2019s doing it\u00a0right<\/em>, and then there\u2019s every other way.<\/p>\n
And the only way to do things is the right way\u2026<\/p>\n