As soon as we have an offer on your property we will let you know and set up a meeting to review it with you promptly. We will explain the procedure, review its terms and conditions and represent your interest during the negotiations.
The Major Elements of an Offer
Depending on whether there are multiple bids on your property the price a buyer is willing to pay can be higher or lower than the listing price.
The buyer’s deposit shows good faith and will be applied against the purchase price of the home when the sale closes. As your real estate professional, I can advise you on an appropriate amount.
These are conditions in a buyer’s offer that must be satisfied before an offer is legally binding. These conditions might include “subject to home inspection”, “subject to the buyer obtaining financing”, or “subject to the buyer obtaining home insurance”.
- Inclusions and Exclusions
These might include appliances, light fixtures, window coverings and anything else you agree to leave behind or take with you after you vacate.
- Closing or Possession Date
This is the day in which title of the property is legally transferred to the buyer and the transfer of funds finalized.
A firm offer is one that comes with no conditions. When your home is sold firm it demonstrates the buyer is 100% certain they want to buy your home and they have done their due diligence before submitting the offer. This is the most attractive type of offer because, barring unforeseen circumstances, the buyer cannot change their mind once you accept the offer.
A conditional offer is one that is contingent on the buyer conducting a home inspection and being satisfied with the results, getting financing or insurance or even, but not likely, on selling their home before proceeding with a firm deal.
This is the optimal position to be in as a seller – receiving multiple offers at the same time for your property. Our track record shows that in 2016 we sold our listings for, on average, 113% of the list price as compared to Toronto Real Estate Boards’s average of 102% AND our listings sold, on average, in 6.6 days. We are masters at acquiring multiple offers on our listings and selling them quickly.
Although this is the optimal position to be in as a seller, the process must be handled with skill and precision to achieve the highest sale price possible. The buyers who have offered on your property are shrouded with anxiety awaiting your decision and anything can go wrong unless handled with sensitivity and precision which only comes with experience.
We will carefully vet all the offers presented and give you options as to how you can respond. You can accept one of the offers because you are satisfied with all the terms, you can counter only one and change the terms that are not acceptable to you or you can ask the buyers to improve their offer. This step must be treated with extreme caution because it can backfire and leave you with no offers at all. A recent article in the Globe and Mail quoted a buyer participating in a bidding war, “The seller’s agent swore that offers would be a one-shot deal. Taking them at their word, we put in our best offer and had the high bid. Then, of course, they sent back for re-bids. We were surprised by the flexible ethics and walked away.”
The actions of this seller and listing agent were not legally wrong but it was ethically wrong and, furthermore, it places the seller at tremendous risk. If all the buyers had walked away during negotiations, the seller would be left holding the bag. The likelihood of your agent being able to create another bidding war on your house is next to nil.
If you and your listing agent communicate to the bidders the procedure for offer presentation will be a one-shot deal then it is critical you treat bidders with respect and follow through on your promise.
A situation arises, referred to as multiple representation, when the listing agent has a buyer that has submitted an offer on your property. This means the listing agent’s brokerage company is representing you, the seller, as well as the buyer in this transaction. This is something you and the buyer have to agree to in writing.
You may be asking yourself "how can an agent represent me as a seller and the buyer at the same time? Isn’t this a conflict of interest?"
Multiple representation is probably the most controversial aspect of buying and selling real estate. The Real Estate Council of Ontario (RECO) has guidelines and rules to help listing agents deal with multiple representation but RECO has not enforced a standard procedure to deal with this situation. RECO is flooded with consumer complaints alleging unfair practises by real estate agents in this circumstance. Ultimately it is up to the individual listing agent and their brokerage firm to formulate a procedure that is fair and communicate it to the seller and the buyer before offer presentation.
Multiple Representation and Multiple Offers
A more delicate situation arises when the listing agent has a buyer for your property along with other agents in a multiple offer situation.
If the listing agent has their own offer on your property, they stand to earn a much higher commission if they sell the house to their buyer. This would not tempt a reputable agent to act contrary to their client’s best interest but it may a “fly by night” agent. How can you reassure yourself that your listing agent will work to get you the highest price possible from all interested buyers instead of focusing on selling it to their own client just to earn a higher commission?
First and foremost you should ask your listing agent to share their procedure for handling the multiple offer situation when they have their own offer and communicate it to all buyer agents. Transparency is critical because it will set the tone for successful negotiations. Many buyers feel the listing agent has an unfair advantage when the listing agent has their own offer so it’s important to assure buyers they will be treated fairly. Remember, the more buyers who come to the table the higher the sale price so if they are put off by the handling of the offer presentation process by your listing agent, they may not make an offer at all.
When we find ourselves in this situation, we strive to be fair and transparent during the offer presentation. Therefore we set the following procedure in motion to ensure that:
- we notify all buyer agents interested in making an offer that we have our own offer
- we guarantee them a fair and transparent process
- we set a time for all buyer agents to present their offer to you at our office or at your home
- I (Josie) will represent your interests during the offer presentation guided by industry rules for multiple representation
- Valerie will present our buyer’s offer to you before any other agent presents their offer
- Valerie will then leave the room
- you and I will then proceed to review all the other offers one at a time
If after we vet all the offers you decide to ask all buyers to make changes or improvements to their offer, Valerie will present her offer first, once again, before we see all the other offers. Our process is transparent, it’s fair and it reassures agents and buyers that they will be treated fairly and with utmost professionalism.
The real estate industry is filled with reputable and professional agents we work with every day. Nevertheless we have come across unscrupulous listing agents who reviewed all other buyers offers first, increased their own buyer’s offer by just $1,000 more than the highest offer on the table, presented their offer from their buyer last and had it accepted by the seller – all to earn a higher commission. Had they allowed fair competition to take its course, your house would most likely have sold for more money.
This leads us back to the importance of the agent’s reputation. An agent’s reputation is like wildfire – it spreads rapidly. Do your due diligence and ask your family, friends and neighbours for referrals before you choose an agent to entrust with your most valued asset.
We work with many buyers and the likelihood of us obtaining our own offer on one of our listings is quite high. This is to your advantage because two offers on your property at one time will result in a much higher price than having just one.
Example: We marketed a property listed at $829,000 for five days after which time we would consider offers. On the date set for offers only one buyer submitted an offer through an agent from a different brokerage. This agent expressed to us she felt the property was overpriced, possibly to prepare us for an offer below the list price. We were fortunate enough to also have our buyer decide to offer on the property that day. This created a multiple offer situation as well as a multiple representation situation by Sutton Group, the listing brokerage. Of course we contacted the other agent and informed her we had our own offer and proceeded to present the two offers to the sellers as we outlined previously. After intense negotiations, the property sold to the other agent’s client for $911,000. If we had not created a bidding war between our client, the buyer, and the other agent’s buyer, the property would likely have sold for its asking price. We’re not talking about chump change here – it was $82,000 above the list price.
Example: We marketed a property listed at $979,000 for five days after which time we would consider offers. On the date set for offers six buyers submitted offers on the property and one was from our buyer. This too created a multiple offer situation as well as a multiple representation situation by Sutton Group, the listing brokerage. Once again we contacted the other five agents and informed them we had our own offer and proceeded to present all six offers to the seller as outlined above. Our offer was substantially higher on the first round so the seller decided to accept our buyer’s offer and the property sold for $1,051,000.
When you list with us, the chances of having a multiple offer and getting top dollar for your property is high. Sometimes our buyers submit the offer with the best terms including the highest price and sometimes they don’t. Regardless, we are never swayed by the lure of higher commissions because we would never compromise our reputation – after all, only what’s in your best interest is in our best interest.