The Real Estate Podcast

Multiple Offers MISHANDLED! Do Not Make this Same Mistake | The Real Estate Podcast EP311

In this episode, we dive into a recent scenario discussed by the Real Estate Council of Ontario (RECO), where multiple offers were mishandled, resulting in a significant fine. We explore the implications for sellers, agents, and the real estate market as a whole, especially as market conditions evolve. Learn how to navigate multiple offer situations, understand irrevocable offers, and ensure you're representing clients effectively. Link to the article: https://www.reco.on.ca/news/legal-corner-$14,000-fine-for-mismanaging-delayed-offer-process ************************ 0:15 – Intro 1:52 – Real Estate Market Outlook 2:43 – The Importance of Proper Representation 3:09 – Educating New and Experienced Agents 4:10 – Common Missteps in Offer Handling 10:37 – Challenges Faced by Sellers in Multiple Offer Scenarios 11:24 – The Gamble of Waiting for More Offers 13:59 – The $14,000 Fine Case Study 15:01 – Legal Requirements and Transparency in Offers 17:22 – How to Avoid Leaving Money on the Table 18:35 – Understanding Irrevocable Offers 20:41 – Exceptions to Irrevocable Offers 26:33 – Outro/recap ************************ Want more real estate podcast discussions? Watch it here: youtu.be/uLhNb8fdHt4 Listen to it here: http://www.soundcloud.com/ktrealty Catch clips and highlights of the show here: http://www.instagram.com/kormendytrott ************************ Our Social: Instagram: http://www.instagram.com/kormendytrott  YouTube: www.youtube.com/user/kormendytrott  Facebook: http://www.facebook.com/kormendytrott  Twitter: http://www.twitter.com/KormendyTrott Soundcloud:http://www.soundcloud.com/ktrealty  LinkedIn: http://www.linkedin.com/company/ktrealty  Pinterest: http://www.pinterest.ca/KormendyTrott  TikTok: http://www.tiktok.com/@kormendytrott?lang=en ************************ In 2011, Ariel Kormendy and Adrian Trott formed The Kormendy Trott Team, now often referred to as KT (thanks to our logo!). The foundation of KT is built on providing unmatched value and attention to detail in everything we do. From our ever-expanding, comprehensive list of exclusive services to our expertly trained team, you will receive the highest level of care throughout your entire real estate journey. Originally a team of two in Milton, Ontario, the KT Team has grown into a large team of exceptional REALTORS®, a client-care department, and now includes KT media, KT Commercial and KT Property Management to provide our clients with a complete lineup of genuine, professional, and proven services across Halton Region, Peel Region and the surrounding Regions within the Greater Toronto Area. We’d appreciate it if you’d subscribe and follow us for behind-the-scenes footage, real estate tips, industry secrets, exclusive listings, The Real Estate Podcast, and more!

Duration:: 28m
Broadcast on:: 22 Oct 2024
Audio Format:: other

And not only was this agent representing both parties, he prepared and submitted the offer earlier than the scheduled date. Okay, without changing the date, without informing anyone that has been through. Hey, everybody, welcome back to episode 311 of the Real Estate podcast. In today's episode, Ariel and I are discussing a recent court case where a real estate agent was found guilty of mishandling an offer presentation and they were fined $14,000. So for sellers, you need to tune in to learn how to make sure you're holding your real estate agent accountable so that you get as much as you possibly can in your successful sale. And as a real estate agent, we've got some tips on what not to do. Enjoy. Welcome to the Real Estate podcast, your go-to source for raw, unfiltered stories and expert tips. Whether you're a buyer, seller, tenant, landlord or realtor, join us as we dive into the world of real estate. Good day. Howdy, partner. How are you? Oh, you're not wearing your cowboy boots today. No, I only have one pair of pants that they work with, so I'm limited on how many times I can wear them. Your other pants are too long? No, they're not boot cut, right? They're not wide enough, so they look funny. Hey, skinny jeans are coming back. That's what they say. I feel like skinny jeans have been a thing forever. These are pretty skinny. Well, you have chicken legs. I have nice legs, but those won't fit in your cowboy boots. Oh, these ones, God, no. I'd have to tuck it in, but men don't tuck it in. Women do. So you go over the cowboy boot men, I believe typically go over. I mean, I'm new to this, but yes. I see. I think that's what they do. Got it. Yeah. What do you want to talk about today? So an email came through from Rico, Real Estate Council of Ontario, and they often send articles that discuss best business practices. Yeah, you just sent it to me, so I'm just reading it now. Yeah, well, you would have gotten it about a week ago, if you read it. But and I think it's relevant because so the article itself discusses circumstances surrounding multiple offers scenario, where it wasn't handled properly. And I think it's an important discussion because as we start to see the market improve, which we forecast is going to happen as we head into next year, rates continue to come down, mortgage rates, mortgage approval processes and requirements change. It's likely that multiple offers and holding offers may become a strategy that's more frequently utilized. Oh, 100%. I don't think it'll be commonplace like it was in the past, where every listing is effectively not yet, but it will happen in the next within the next 24 months, for sure. Yeah, maybe within that period. And I think it's important because there's two things here that are important. One is important for consumers because when you're selling your house, you need to make sure that you're represented properly because this person made a mistake and probably left money on the table because they were being selfish, as my guess. And it's important for real estate agents because some of you may genuinely not know because I feel like a lot of real estate agents when they go through the process of getting trained. So this may apply more so to newer people. They're taught the basics of their legal requirements and representation requirements as a real estate agent, but they don't know the ins and outs of actually what happens behind the scenes. The big collar side of it. Yeah. So this particular scenario. Don't throw new agents under the bus because a lot of new agents are way more particular, more educated, more diligent than some of the agents that have been around for a long time too. So it's true. We can bundle all agents into it. I'm not saying it from the perspective of me assuming that they're doing this, certainly not intentionally doing this. Right. But just from the side of how to properly represent your client, if you've never been in a scenario where you are holding offers or you just happen to get multiple offers. So I think it might be worth educating them a little bit on how to navigate the situation where there's been a realtor representing the seller and they've done this many, many times and they still have no clue what they're doing. Yeah. Well, and as a new agent, I think it's kind of fun because you can leverage that as a sales tactic to get more money for your client. How so? Well, I'll give you an example afterwards. Well, I'm going to talk about it now, I suppose. Well, let's say you get another offer. So let's say you get an offer and you're negotiating with this one offer. And so I'm going to go chat with my clients in an hour, we're going to sit down and review the offer. Just before that hour, time slot arrives, you're going to go see your client, another offer arrives. So now you're in multiple offers. And you're always looking for what's the best angle to negotiate with the buyer's agent. Yeah. So if you're a new agent, I couldn't use this because people know me generally or they can very easily see that you and I are not new to the business. But you could just play dumb and say, listen, I'm not, I got two offers now. I'm not really sure what to do. They're both attractive. We're going to look at both of them. I'm not sure what the best approach to this. But you know, I would suggest that you just put your best foot forward. Yeah, but that's the answer. And the agent is actually going to use anyway. I know, but you can play dumb and play the new card. I think it's a very effective strategy. Sure. What happened with this? So this particular scenario, this agent had a scheduled offer presentation day and time, and they had the seller's direction form signed saying that the seller would not, or the agent was not to present any offers to the seller until that day and time. Yeah. So I want to clarify that form. The seller's direction form is a standard form in the Ontario Real Estate Association. And it basically gives options as to the seller's direction of how offers are going to be handled. And it's a very common situation that in a seller's market, the seller and the realtor would have a conversation about what the best strategy is. And if the strategy was to set in offer presentation date and time, they would set that date and time. The next option is the discussion around whether or not offers would be looked at prior to that time. So the seller has an option. And oftentimes, it's we're going to present on Tuesday at 7pm. And the seller will not be reviewing offers prior to that. So there's no conveyance of offers prior to that date and time. So that gives the real estate agent the right not to inform their client if an offer comes in. Correct. No conveyance of offers. Correct. The other thing you could use that form for, and many people do, is a minimum irrevocable time. So the amount of time from when an offer is received until when it expires, some agents may say you must provide 24 hours, minimum irrevocable or 48 hours. I've seen a lot, especially in rural areas where they will say 48 hours. And I know it can be very frustrating for the first agent to submit an offer and have to deal with that. Well, before we get into this agent being fined $14,000, I would do want to touch on that because I think there is a lot of, I'll call it out bullshit that happens with the irrevocable time request. Because oftentimes it's not the seller saying, Adrian, I want 24 hours on any offer that comes in because I want to talk to my family. I want to talk to my lawyer or whatever. It's usually the realtor that is saying, okay, we'll put a 24 hour. So it's oftentimes the realtor that is starting that discussion. It's not the seller. And in a seller's market, I can guarantee you if you see a 24 or a 48 hour irrevocable or even in a balanced market, which I think we're now more in a balanced market and the days on market would tell us that as they start to slip down, especially as inventory depletes. But what that does for that realtor is gives them time to shop around. So if an offer comes in, so if I send Adrian an offer at five o'clock in the afternoon on a Monday and it's a 24 hour irrevocable, that means I cannot retract that offer for 24 hours. And the seller has 24 hours now to think about it or to shop around. So now until Tuesday at five o'clock, the seller's realtor is calling everybody that's hopefully they're calling. They should be calling everybody that's been through open houses, calling everybody that's shown in trust, emailing any prospective leads on it, and certainly any showing agents that have been through the property, letting them know there's an offer. And we are going to be reviewing it at some point tomorrow or whatever. And it's a bit of a tactic, but sometimes it is legit. Like when you see ones that are 24 or 48 hours, you don't know, is it legit or is it a negotiation tactic. Sometimes it is truly legit that you got think life takes over, you're busy, you got to check with somebody, you got to call your accountant, your financial advisor, there's more than one party on the contract. One of the parties is overseas on business or who knows. Sometimes we hear some funny stories though, some excuses. Or a couple of ones were divorced and they're just not very, it's not amicable. That's a great example. Yeah, we see a lot of divorces right now. But I think it almost sounded like you were wording and you didn't end up going that direction, but in the beginning it sounded like you're going an direction where the agent was coercing somebody into doing it, but in a negative way, which isn't how you turned it out. But I think it's, you know, in many cases, it is favorable for a homeowner to have that period of time, because you want to be able to make those phone calls, you don't want to be forced to make a decision, and you may have seven showings booked tomorrow still, and you want to let these people go through. Yeah, I mean, I always laugh at, let's say you have a home that is really nice. It's an average home, but it's really nice. It shows well, and you've priced it really well, right? You've priced it where it's a fair deal for buyers and sellers and the seller, and you know that it's going to get a lot of attention quickly, because it's in a great neighborhood, it's well maintained, whatever. And you get an offer on a, you listed on the Wednesday and on Thursday, you get an offer. So you're on the market for a couple of days, and it's a good offer. It's a great offer, and the seller says, you want to wait until the open house, the end of the open houses, and we get that a lot, right? Like, oh, we got seven showings booked. Why don't we wait until and see? Well, you're gambling, you're sitting at the Blackjack table, and are you doubling down? Are you taking your winning? You know what I mean? So you got to tread carefully with that, because sometimes you can let those seven showings come through, and there's no offer coming. Sometimes out of those seven showings, they don't want to compete against another offer and get into a bidding war quote unquote. But as long as it's within the 24 hour period, it's different what you're saying where you put somebody off, and you say, okay, I know you've sent us this offer, seemingly good offer. Oh, you're saying that it happens within the year of vocable time? Yeah, so I had that happen with, you know, Volkway, which we sold in multiple offers. At a time when multiple offers weren't happening, and I required 24 hours, and during those 24 hours, there were probably about seven more showings. I think there were like five the next morning. Yeah, I remember that. So, you know, for us, it was advantageous to let those people through, and I believe two of them submitted offers. Yeah, if somebody gives you an offer, and that offer is good for 48 hours, it's in your best interest as a seller and a seller's representative to wait because they cannot retract that offer, and you've got 48 hours to shop. So just to get back to the story. Yeah, go ahead. $14,000 fine. I actually don't think it was enough, to be honest. Yeah. I don't know how much the household. Well, we don't know the financial repercussions for the seller. Right. And sometimes those are unknown. Sometimes it would just be speculatory, because who knows what it could have sold for? There's many houses that we sell for significantly more than we would have ever thought. So you never know. But so the problem with this agent's situation was they had a scheduled date and time. They had an offer come in from a buyer whom was represented by the same agent. Oh, so this agent's now represented in the buyer and the seller, which we have a policy we don't do. We will not do. And not only was this agent representing both parties, he prepared and submitted the offer earlier than the scheduled date. Okay. Without changing the date, without informing anyone that had been through. So clearly what happened is. So there was a seller's direction sign. There was a seller's direction sign with that offer. That offers were going to be presented on a specific day and time, which means in the MLS listing, the public wouldn't see that, but the broker remarks would have said offers are going to be presented on this day and this time. And typically that form is uploaded. So other agents can see, okay, it's legitimate. It's not just somebody saying it, because if somebody says it, you can still submit a form and they are legally obligated to inform their client correct, unless they have that form. Now that form is only a few years old. Yes. Prior to that form, it was agents just, well, it's pick a day and time through and there and Bob's your uncle. Well, accountability is key. So it's nice to have these processes and forms in place. Because then situations like this can someone can be held accountable. Sure. So in this scenario, how I guess would would assume it played out is so this guy got the offer put together, submitted it to his client prematurely before the scheduled date. Didn't tell anybody his client accepted it. An agent that had been through previously and was probably waiting for the offer date and time to submit an offer saw, Oh my God, the house is sold. What happened? The offer date hasn't even come and nobody's called me. So he found out what happened. Oh, the household. Okay, that's unfortunate. Nobody told me. At that point, they probably would have let it go until they saw on the real estate board that the listing agent represented the buyer's agent and a red flag goes up. So then the complaint goes to Rico and they investigate. And in this case, they didn't inform anybody. They didn't officially change the date. The seller probably had no idea what was happening. Mayor may not. Mayor may not. And subsequently, the agent involved was held accountable, found guilty, and fined $14,000. Plus they had to take an ethics course, which we know all about. The ethics course that is not fines, fortunately. We had to take it because of our podcast. Our podcast got us into which is good reason to listen to us because we sometimes controversial. Yeah. So anyway, so that's what happened. So a few things here. One is clearly that the agent wasn't working in their client's best interest because when you have multiple interested parties, even if you don't know that there's other interested parties, you want to call everybody. I call and well, sorry, I email everybody and I call or text them as a follow up. Everybody gets two methods of communication. 99% of the time I get a response from everybody. There's maybe somebody that won't get back to me, but that's fine. But I know that I've made the effort so I can sleep at night and almost always I'll have somebody who's sitting on the fence and sometimes I'll be able to get them off the fence and get an offer from them. And that changes, completely changes the dynamics of the negotiation, right? As soon as you have leverage, the first offer is going to improve almost always. So it's likely that the seller left money on the table. Now, I want to talk quickly about a scenario that just came to my mind because I think it's important for people to know in that scenario, there have been instances over our 13 years, it's our 13 year anniversary by the beginning. Congratulations. Can you believe we've been in the industry for 13 years? That's pretty crazy. So in that instance, let's just say you now get a second offer, maybe a third offer, whatever, and the first offer says, Oh, we're going to back out. So let me just clarify this to all the realtors listening out there and to educate buyers that are putting offers on properties. I want you to take a moment and go to dictionary.com, chat, GPT, Google, wherever, and research what the word irrevocable means. Because that's kind of self-explanatory. Yes. But if you don't know what the word means, you don't know the meaning. You make an offer, your offer number one, and you give us a 24-hour irrevocable. You cannot revoke your offer. It means your offer is good for that period of time, whether or not another offer is coming in or you change your mind or whatever. That's it. You're in. So just the shits and giggles. I asked chat GPT for the definition just to have a formal response. And funny enough, it gave a real estate reference. So I'll read this quickly. Irrevocable refers to something that cannot be changed, reversed, or undone in legal or contractual contexts. An irrevocable decision or action is final and binding. I mean, it cannot be altered once made. For example, in real estate, an irrevocable offer is one that cannot be withdrawn or amended by the party who made it during the specified irrevocable period. Thank you, chat GPT. That was an excellent explanation for those of you that did not know. However, I'm going to put an asterisk on this because there is a clause that you could insert into a schedule of that agreement that says this offer is being provided to you under the understanding that there are no other offers being presented during this time. And if there are any other offers that we can then revoke the offer. Now, if you go to a lawyer or court or even to Rico, this is now going to create a gray area because irrevocable means you can have two conflicting clauses. You have two conflicting clauses. Conversely, you can do the other where you say this offer is being submitted under the premise that we are in multiple offers. Correct. And the listing brokerage will provide evidence as such if this offer is actually a separate form even for that. So if you are going to present offers on the offer presentation date and you're a buyer and you're afraid that you're submitting an offer thinking that it's part of other offers, but if you're the lone man standing, maybe your offer is not as good. Right. So there are ways to protect yourself around that. So just to give real life scenario as an example, so you get one offer comes in, no multiple offer situations. Second offer comes in. Now there's competing offers. Like you said offer once is, oh, I don't want to compete. Well, if you're still within the irrevocable time, they're obligated, especially if it's a firm offer with no conditions. So you don't have to go back to the second offer and say, hey, the first offer is backing out. They don't have that option until the irrevocable time has arrived. Correct. At that point, and I had this happen on our listing on concession, and I had this discussion with the second offer. So two offers came in. When the second offer came in, the first offer said, okay, well, let me see if my clients want to improve. They didn't want to improve. In fact, they said they're now having second thoughts, and the irrevocable time had expired. So she said, we're not going to resubmit a new offer. If you don't sell to the second offer, we may read, address it tomorrow. So I had to, in that case, go back to the second offer and say, hey, listen, the first offer has expired. They're not sending a new offer. They told me to call them tomorrow. If we can't put a deal together, I have to tell you, because you're no longer competing. So in that case, they revised their offer, which I already had in the end. And they revised as an improvement or they... Well, she had told me what they were... So let me clarify. So she had told me what they were going to come in at with the revised final offer under the premise of thinking the first offer at this point was still in play. So I knew where they were coming in at, and it was very strong. So after telling her the information, which I had to, and I documented it, because this is a very... You don't want to get yourself into a scenario where you don't have proof. You got to be above board on everything here. She made a decision. So she went back on her original verbal offer, just letting me know what she was going to send. And she said, okay, well, I'm going to come in a little differently than she sent a new offer, which was still very attractive. In fact, it was more than I thought she'd come in at. And we still put a deal together, and everybody's happy. But it's very important, like you're saying, stay above board in all scenarios. And keep... I won't talk about it, but I am going through a lawsuit at the moment on one of our listings from last year, which inevitably we will win. And nothing regarding our clients, it was the other clients. But anyways, it's important to keep documentation as a realtor, keep documentation on everything. Don't just have phone calls, because then it's all hearsay. And I will say this, we'll close it with this just thought, unless there's anything else you want to add. In this scenario, if a buyer presents an offer, and the buyer's realtor presents an offer, and they say to you, we're having second thoughts. Yes, you can still use that irrevocable offer as leverage and negotiation, but keep in mind, you want the transaction to close. So yes, if you sign that offer, they are legally bound to that agreement. But all of a sudden now, they are having second thoughts. They don't show up with a deposit. So now you have no financial leverage. They are still committed, just because they don't show up with a deposit doesn't mean that they didn't buy the house. But do you want to go through that process? Do you want to go through the legal battle? Do you want to take it to court? You're ultimately going to delay the sale of your property, the closing of your property. You're going to pay lawyers. I think it depends on what that offer is. Yeah, that's a good point, because if you do end up going to court and you sue that buyer for mitigated costs, damages, you could come out on the winning end of it, potentially, because usually the seller would win in that scenario. But just keep in mind that if I'd rather have a buyer backing out at the time of negotiation than right before closing, especially if you purchased another home and you have financial commitments to another property. So just keep that in mind. Yeah, I was going to mention, but you brought it up. And I think it's important just to reiterate though, is that you don't need the deposit to make it binding, because I've had scenarios where I was representing the seller. And the next day, the buyer's agent called me and said, hey, they're having issues with their financing and they're having second thoughts. They don't want to proceed. At this point, we didn't have the deposit. I don't know how they figured this out so quickly. But it was irrelevant. They signed under seal. It's a legally binding contract. And our lawyer sent a letter to their, the buyer's lawyer, basically threatening legal action if they don't provide the deposit and close. And within an hour, we had the deposit. Yeah, and it closed. And it closed. Yeah. So you got to know your, know your rights. Very much so. Yeah. All right, pal, good chat. See you next week. Ciao. Bye. so you don't miss out on next week's episode.