How do you know the Agent isn’t bluffing?

This is a very fair question for buyers to ask. They don’t always have the benefit of a long-standing professional relationship, or acquired trust. And they don’t always know the questions to ask or the ways to handle this doubting concept when the question arises.

Buyers often ask us this question when they are faced with a competitive negotiation or silent bidding type of situation. The lack of transparency can often give way to a sense of doubt about the integrity of the information being shared about other buyers, (and possible offers).

It’s an interesting situation though, because on one hand buyers yearn for transparency, but on the other hand they don’t like auctions.

When an agent calls a prospective buyer to tell them that another offer has been received, the buyer may wonder if the agent is being honest about a competing buyer, or doing so to initiate the first offer from them. And when an agent does call to say that a higher offer than that buyer’s offer has been received, the buyer may feel concerned that the higher offer doesn’t exist, and the agent is bluffing in an attempt to get a raise on the existing offer.

It is possible that this happens? Yes, absolutely.

But does it happen all the time? No, it doesn’t.

Selling Agents have a fiduciary duty to their vendor to work as hard as possible and to get them the best result that they can, within the law.  As much as buyers don’t like being thrust into a competitive situation for a property they want, the agent has a commitment to the vendor, and often a very trusted relationship to work within. They can and will determine how they intend to deal with competing buyers if the situation arises, and they reserve the right to host the competitive process in a variety of formats; from “best and highest”, to “back and forth on the phone” to “boardroom auction” and, so on.

What is interesting however, is the flexibility that they can offer upon request.

If a buyer is particularly anxious about the possibility of a bluff, they can try to influence the way in which the agent handles the situation by having an honest conversation about it. For example, if we are working with a client who we know has been burnt before, or is particularly doubtful about the integrity of an agent’s information, there are things we can do to facilitate a process that will give them more comfort. We can advise the agent before the onset of the negotiations that we’d prefer a transparent process. This may involve arranging a boardroom auction (ie. a simulated auction at the agency office where competing bidders can see each other), or it may involve asking for proof of the existing offer. The second request can be met with resistance due to privacy restrictions, but an agent can cover names and demonstrate an offer is real if they have to.

Importantly though, it’s interesting for buyers to understand the situations that could apply when bluffing is not such a likely tactic for an agent to employ.

Sometimes it just makes limited sense for an agent to bluff.

And these are some of those situations;

• When an agent is working closely with a buyer and a colleague of theirs in the office has another buyer. In most scenarios, the sales commission isn’t shared. The agents are in an ‘all or nothing’ position when it comes to eligibility of the sales commission component of the company revenue for that particular property sale. Each agent will be hoping that their respective buyer is the purchaser and they will in effect feel an allegiance to their buyer. There is little reason why (in this scenario), an agent would lie about another agent’s offer when their own income is at stake.
• When an offer is received prior to auction. An agent would be publicly exposed if they lied about an acceptable offer being received prior to auction, because the market would then see a public auction unfold days later if the earlier claim was a bluff. If the agent had been slack with paperwork and hadn’t properly documented an offer on a contract in this instance, it is possible that the offer was genuine at the time but didn’t proceed. It would be considered bad practice to call off an auction without a formally documented and acceptable offer though, so this scenario would be highly unlikely to be a bluff.
• When the agent receives multiple offers and chooses one over another. Buyers who are concerned that their offer wasn’t presented to the vendor will be able to find out at a later date what the winning bid was. The agent would have reputational risk at stake if they undersold the property to an alternative buyer. While it does sometimes happen, it’s a huge risk for an agent to take. If in doubt however, asking for a direct contact to the principal of the business before offers are presented is an option for buyers.

When the agent says that the vendor is about to withdraw the property from sale. This is an interesting claim. It sometimes suggests that the agent is about to lose the listing to another agency, and other times it can suggest that the vendor’s motivation to sell is not very strong. In either case, the risk to the buyer is not as intense, as it’s hardly about to sell to another buyer. Asking more questions and moving swiftly if the agent’s authority has limited time remaining is sometimes a good move. If the vendor’s situation has changed, (and motivation is no longer strong), the price tag they’d be prepared to sell for may no longer represent value anyway).

When buyers do have an opportunity to buy a suitable property at a fair price, they should anticipate that a good-quality property is likely to attract others. Moving swiftly and decisively gives buyers a competitive edge, and asking clear questions of the agent and being vocal about how the competitive bidding process will unfold brings further advantages.

The worst thing that a buyer can do in this situation is opt out of the competition altogether. We often have buyers say to us;

“Well if they’re going to play that game, we’re out”,

But the ‘game’ they are referring to is a competitive fight for a great property. If buyers deliberately target properties that are unlikely to have any competitive buyer interest, what does that say about the property?

It’s not a viable strategy.

Being clear about the agent’s rules, being honest about niggling trust-related doubts, and requesting a specific style of negotiation is what differentiates a mistrusting buyer from an astute buyer.