Why do agents do what they do with offers?

A fortnight ago, a good friend of mine contacted me in a moment of upset.

Twenty-four hours prior, his daughter and her husband had found a property they loved. They’d liaised with the agent, formulated the right offer and they’d documented their offer on a contract of sale. The agent contacted the vendor, (who verbally agreed to the offer), and the young couple received a subsequent phone call to bid them congratulations.

He had even sent me a text message that night to tell me how overjoyed they all were for his daughter and her husband.

Winding the clock forward to the following evening, the joy was clearly gone and his mood was that of worry. His daughter was distraught, her husband confused, and the moment felt very high-stakes for this young couple.

I called the agent immediately. As could be imagined, she was anxious about the whole scenario and felt horrible about it.

So what went wrong?

The offer was acceptable. The problem was that it wasn’t accepted. For whatever reason, (this time, sourcing an interpreter to formally help the vendor execute the contract was cited), the vendor didn’t sign the contract and accept the offer on the night that it was presented. The decision was made to stall this part of the process until the vendor’s son could assist and translate English to his native language for his father. While this all makes sense, the agent didn’t clearly communicate this, nor did she explain that an offer is not formally accepted until the contract is executed.

Maybe they didn’t consider the risk.

But the next day, a buyer who had previously inspected made a surprise, bold offer. The agents were duty bound to present the offer, and of course, it appealed to the vendor. It was a higher offer with no conditions.

The whole situation just felt awful. The young couple had a tight timeframe to reconsider their offer, but of course, given they’d committed their best and highest, they didn’t have any room to move further. They were devastated.

It was a miserable phone call I made back to them. I explained that a deal is never a deal until the contract is signed and executed, but I knew it was a painful blow.

I also considered the agent. Most people’s first reaction would be to blame the agent. It’s fair to say in hindsight that the agents should have been clear about when to crack the champagne, and when not to, but it was distressing for the agent I spoke to as well. She was acutely aware of the upset caused.

I remembered back to my early days as a selling agent. I had lovely boss in my office in Sandringham and he was very patient with my early learning curve. I was given the opportunity to ‘handle’ a sale in Hampton for an elderly couple who were selling their little post-war serviceman’s house. They’d raised a large family in it and this house had more than fifty years of happy memories in it. They’d found a retirement village near their daughter and my task was to help them sell their home in a short period. A family fell in love with it and commenced their due diligence, going as far as sending trusted tradesman friends through. They reviewed the contract and promptly sent me a signed offer at the level I’d encouraged them to make. We had built up a great rapport.

I called the elderly couple and arranged to see them at 5pm.

Half an hour after booking my visit, my phone rang. A local builder had pulled up outside the house, saw the board, and was enquiring about the price. My heart sank. I was already emotionally invested in the family buyers and I’d already told them that the offer was accepted. I explained (awkwardly, I might add) to the builder that I already had an offer. He asked me the shrewd question that any buyer should, “Well is it sold, or isn’t it?”

I squirmed and stammered. He wanted to make a higher offer and I had to get back to him. I asked my boss what to do and he was kind, fair and firm about it.

“CB, you work for the vendor. You have to present it.”

I called back the family to explain what was happening. I offered them a chance to increase their offer. They were distraught and angry with me though. They couldn’t understand how I could deceive them so badly.

I was that agent.

Eighteen years later, that lesson has never left me. Agent behaviour, agent actions and competitive buying ‘rules’ vary, but I always remind myself that the agent has a fiduciary duty to their vendor.

On this topic, agent rules are a common point of contention, particularly in this aggressive seller’s market. Many buyers contact me in a panic when negotiations start to unravel, or upsetting surprise twists occur.

These situations almost always have a common thread: misunderstanding the agent’s rules,

Unlike a public auction, (which is legally bound by clear auction rules), private sales are not so well understood. An agent can determine how they conduct the offer and competition process between multiple buyers, and anything from “back and forth” to “best and highest” can be permitted.

Some will facilitate a transparent process like a simulated, (or zoom) auction. This method is commonly referred to as a ‘boardroom auction’ and for any buyers who are mistrusting, this format gives them the chance to see their competition as genuine.

Buyers assume, (incorrectly) that all agents are bound to facilitate a competitive offer process a certain way, and it’s this lack of understanding that often leads to upset.

On Friday, I negotiated two sales. Both were quite different. One was a pre-auction offer, while the other was an advertised private sale with an advertised range. I carefully quizzed both agents in an effort to clearly understand the rules of engagement. The auction agent was clear about where any offers would have to be positioned in order to tempt the vendor to sell prior. He would then call around to all interested buyers, and if any wished to challenge our offer, he would then call each person, back and forth until one remained. All offers at this point would have to be unconditional, and given the auction was scheduled for Saturday, we were bound by auction conditions.

The other agent, however was comfortable for us to include a clause spanning three business days to enable us to obtain building and pest inspection that met our satisfaction. His rules were a little more complex, but he was clear. Upon receiving an acceptable offer, he would contact all interested parties and allow each person one offer opportunity in a limited, 24 hour period. He would then present all offers to the vendor, ask them to select the highest two, and then call back and forth between only these two contenders until one buyer remained.

Some agents offer a second option offer submission to the first person who makes the offer. Some agents simply set a cut off time and let the vendor decide on their preferred offer.

Rules vary, approaches are unique at times, and it’s important that buyers are clear on exactly what their agent’s rules will be.

It’s when the agent changes the goal posts that things get tricky. But that’s another blog.

We must always remember; the agent works for the vendor.