Sellers, Does Disclosing Multiple Offers on Your Property Make Sense?

That depends. What is your strategy, meaning what do you think will happen?

The Pennsylvania Association of REALTORS Listing Contract has a clause that states in part, “Unless prohibited by Seller, if Broker is asked … Broker will reveal the existence of other offers …”. Broker could mean Agent since the contract is really with the Broker.

This “conversation” should take place at the time the listing contract is being signed so that there is no misunderstanding about what the parties have agreed to do. Frankly, I am not sure that all agents really discuss what the seller is signing, that all agents completely understand the listing contract or that every seller really understands what they are signing or that they really care as long as their property gets sold. My experience as a mediator and serving on Professional Standards hearing panels has shown time and again that a number of sellers and buyers claim that they did not understand what they signed. The agents may have done their job or not. Electronic signing can make this more problematic as people rush to execute contracts and get properties on the market and under contract. How sad! Real Estate is typically our biggest asset and largest investment. Mistakes can be very costly!

At the very least, this MUST be discussed before there is any interest in a property or there could be a problem especially if the seller thinks their agent acted unethically. Absent discussing the paragraph, the “default” position as stated is that the agent has been “authorized” to disclose whether or not there are multiple offers. If asked, the answer could be yes or no.

Many buyer agents will call to ask if there are offers “in hand” or “other interest” in a property before preparing an offer; some will even call to ask before scheduling a showing. In “hot” seller’s markets these instances will increase. Why is this a concern at all?

From a buyer or buyer agent’s perspective, they may not want to waste their time pursuing a house that may be unattainable as doing so may result in their missing out on their “second choice” if a seller has or is about to sign another offer. Our multiple listing service requires that the listing status be changed within one business day of executing a contract but a lot can happen in that time. Listing agents may have advertised a due date for offers that others assume valid only to find that something was signed sooner than expected. Real Estate sales are a “moving target”. Even if I answer your question now, the answer could change.

As far as the disclosure, some buyers may be willing to “compete” so thinking that there is competition may cause them to make their “highest and best” offer at the outset. On the other hand, some may decide not to compete. Are they entitled to know anything short of an agreement of sale being signed? No they are not unless the seller grants that permission.

What should a seller do?

As far as how to respond to inquiries about “multiple offers”, a listing agent MUST have a conversation with their seller client about how to handle inquiries. We cannot lie and we cannot divulge the answer without our seller client’s permission. We can tell others that we are not authorized to answer the question, which may make others think there is competition. How they handle our response is up to them.

I do not like to disclose that we have other offers but I believe that there is a time and place for doing that. Telling others that there are no offers makes no sense, does it? Whatever other agents and sellers do, throughout any given year, I see MANY listings expire, meaning that the listing contract ran out before getting an offer signed, or get canceled, meaning that the seller and agent decided to stop working together such as when the seller decides not to sell, that advertised in their “remarks” section that there was a “multiple offer situation”. That adds a “twist”:  the listing agent is answering the question without being asked. Did the seller authorize that? The fact that these houses did not go “under contract” and sell can mean that multiple buyers thought them priced too high. Did that disclosure help the seller? Did it deter any serious buyers who may have offered enough to convince a seller to sign a purchase offer? There is no “one size fits all” answer.

There is no guarantee that, regardless of the type of market or the amount of competition, a buyer will have a “second” chance when making an offer to buy Real Estate. If they really like a house they may want to consider making their best offer at the outset. Should a buyer offer “more” if there is real or perceived competition or “less” if there isn’t? Shouldn’t they base their offer on HOW MUCH they like and want to own a house and what they can manage financially?

A market analysis is helpful as is concern about an eventual appraisal if financing is involved but why should a house be “worth more” because someone else may like it? Suppose money is “no object”? Here is the underlying question:  what is the point of making an offer on Real Estate? I believe that the goal should be to lock it up to exclude other buyers. A buyer can do a number of inspections to see if there are any “material defects”. If their interest changes, they can request repairs or credits or even terminate a sale. I do not take any of these lightly but I do feel for buyers who misjudge the market and miss out on what may have been the best house for their needs and wants.

One interesting point of contrast is that a seller may entertain any number of offers, of course they can only sign one, but a buyer can really only pursue one house. I have heard of buyers making multiple offers but that can blow up if not handled properly.

My job as a listing agent is to “protect and promote” my seller client’s best interest. They rely on my experience, training and education even if we disagree about how to manage this specific topic. As I mentioned, I do NOT like to disclose the existence of other offers generally speaking but that can change when it suits our strategy. Let me share the possibilities.

Let’s assume we have a buyer agent with a buyer interested in making an offer. When the agent calls me to ask if there are any offers, which I presume to mean “in writing” and not a mere expression of “interest” which means nothing and does not always result in an offer being written and presented, if I do not know my seller client’s thinking, absent this paragraph in the contract, I would have to say that I have not discussed that with my client, which may lead some to think there are offers or not. Either of those could hurt my client.

Suppose I have at least one offer in hand and I disclose that. Will their buyer decide not to compete or could that make them try to win? Who knows? However, having one or more offers in hand does not guarantee that a seller will sign one or even be interested in what they may have offered. Suppose I have multiple offers but all are well below the stated asking price or have contingencies or conditions that concern the seller? While that could help me convince the seller that the price is too high, what sense does it make to tell buyer agents that we have offers in hand if none are going to be signed?

The life of a listing agent would be easier if every listing had quality multiple offers to review and if telling someone that they have competition compelled them to do their best to “win” but

human beings are unpredictable. In reality, an offer can even be retracted before being signed and returned, which we call “execution and delivery”. As I often say. It is never over until the seller has the buyer’s money and the buyer has the seller’s house keys.

Here is what I suggest and my seller clients have generally agreed with my thinking:

First, I do not want to disclose whether or not we have other interest or offers in hand.

Second, when I receive an offer, after doing what I need to do before presenting it to my seller, I will look at the recent and upcoming showing activity and review any feedback I may have received. I need to think about whether anything else might be coming in. If I think there is, we need to stall to allow that to develop. However, purchase offers have expiration dates and I never assume they are flexible. Waiting for an offer that does not materialize and letting one “in hand” expire makes no sense. Some buyers will just move on to another house, especially in a competitive market.

Third, if I have received at least one offer that a seller is strongly considering signing and someone inquires about the existence of any offers in hand, I will ask my seller for permission to report that we do have other offers. I won’t specify the number or disclose the details. Worst case, the caller does nothing and we are no worse off. Best case, they bring us an offer that is better than what we already have in hand. Absent a concern about an “appraisal”, before signing the latest offer, to be fair, I ask my seller for permission to let the other agents know that there is competition and ask for their buyer client’s “highest and best” offer. My thinking is that it would only be fair to let everyone now know since the latest offer was prepared with that knowledge. I have heard complaints about agents who were led to believe that a seller was going to sign their offer but changed their mind when a better one came in. We need to be conscious of what we say and do to avoid any misunderstandings. A buyer may be selling their house and have an offer they would sign if they knew they had a house to buy. Imagine signing an offer only to learn that the house you wanted to buy was sold to someone else!

Do I have to go back to those who took the initiative and brought offers in already? I don’t think so. If none of those agents ever asked the question, that is on them. If they did ask, regardless of how I answered, they should not assume or expect me to keep them up-to-date as the situation changes. Again, Real Estate is a moving target. The seller is my client and I work for them.

As I often say, this is NOT a “retail” environment. The asking price is not necessarily the final price and the purchase of Real Estate typically requires several steps allowing either party the opportunity to “change their mind”. It can be like a “roller coaster” and that aspect can wear on the parties or their agents.

This is especially true when the market is not “in balance”, meaning that sellers or buyers have a decided or perceived advantage. Our REALTOR Code of Ethics requires us to be honest, meaning that we cannot lie although our not being permitted to disclose something could adversely affect another agent’s client. I try to be “fair” meaning that I am treating all parties “consistently”. The public, including my fellow agents, deserve nothing less regardless of what they “expect”.

There is NO TIME for inexperience, empty promises OR false expectations!

HIRE WISELY: We are NOT “all the same”!

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Buyers, Does It REALLY Matter If a Listing Has Multiple Offers?

That depends. How would that information affect your level of interest?

As long as a property is “still available” to bid on and you know if a contract signing is imminent, you have a decision to make. Even then, there is no guarantee that, regardless of the type of market or the amount of competition, a buyer will have a “second” chance when making an offer to buy Real Estate. If they really like a house they may want to consider making their best offer at the outset. Should a buyer offer “more” if there is real or perceived competition or “less” if there isn’t? Shouldn’t they base their offer on HOW MUCH they like and want to own a house and what they can manage financially?

A market analysis is helpful as is concern about an appraisal if financing is involved but why should a house be “worth more” because someone else may like it? Suppose money is “no object”? Here is the underlying question:  what is the point of making an offer on Real Estate?

I have taught the Accredited Buyer Representative core course and offered my opinion that the point of putting a house “under contract” is simply to lock it up so that the buyer and seller can go through the process of seeing if transferring the deed works for both parties. When a house goes “under contract” before a buyer can make an offer or their offer gets rejected that opportunity does not exist. There may be no “second chance”. First impressions may doom an offer even if there is no competition. Not to minimize the process of buying or selling Real Estate but both parties likely have one or more chances to reconsider their interest in closing a sale. This is not a retail transaction.

Of course, we are dealing with human beings. How they respond to real or perceived “competition” will dictate whether and how they react when they learn about a house they like. If they reach a “meeting of the minds” with a seller will they come to think they paid too much? Home inspections and appraisals can help “correct” that. Do they have remorse, wondering if they bought the best house for their “needs and wants”? I have specific ideas about how to approach “the search” to help ensure that a buyer will have minimal if any “second thoughts” but, in reality, other houses will keep coming on the market. Whether sales contracts fall through or new houses become available, they can tantalize a buyer who is not fully committed to a house they have under contract. I have had buyers want to view a new listing or one that came back on the market while in the inspection contingency phase. I remind them about our search and how they arrived at the decision to make an offer on the house they now have under contract. I also tell them that we have no idea how much other interest the new listing may have, what it will take to get a signed contract, what may have led to its being back on the market or what inspection issues may exist. A “bird in the hand” ….

Is there anything worse for a serious buyer than NOT getting the “best house” under contract? Competition is what it is. Others may be in a better position to buy what you want to own. If you start looking before you are prepared and organized, you may be forced to watch others buy the house you liked and wanted to own. All any buyer can do is “know their limitations” and act accordingly. An experienced, trained and educated professional can help! The Real Estate market is constantly churning and that can frustrate even the most serious buyer.

As far as how to respond to inquiries about “multiple offers”, a listing agent MUST have a conversation with their seller client about how to handle inquiries. We cannot lie and we cannot divulge the answer without our seller client’s permission. We can tell others that we are not authorized to answer the question, which may make others think there is competition. How they handle the situation depends.

I do not like to disclose having other offers in hand but there is a time and place for doing

that. Telling others that there are no offers makes no sense. Whatever others do, throughout any given year, I see MANY listings expire, meaning the listing contract ran out, or get canceled that advertised in the “remarks” section that there was a “multiple offer situation”. The fact that these houses did not go “under contract” and sell can mean that multiple buyers thought them priced too high. Did that disclosure help the seller? Did it deter other serious buyers who may have offered enough to convince a seller to sign a purchase offer?

Frenzied markets typically result in buyers and sellers having regrets, especially if they failed to plan and prepare as well as they might have. Did sellers wait too long to put their houses on the market or to sign an offer, thinking prices would continue to rise? Did they sign one too quickly? Did buyers jump too quickly, perhaps thinking they paid too much? Do they wish they had bought a different house or waited to buy? Did they wait only to find that nothing nicer came on the market? There is no perfect house search!

Some sellers have told me they settled to quickly or waited too long and felt that they had missed a better opportunity. I have read a number of articles about buyers having remorse. Whether they feel that they overpaid or jumped too quickly only to find that a better choice came along is a shame! They may not be able to sell for what they paid or recover their costs. Real Estate is likely our biggest asset requiring our largest investment. Mistakes can be very costly!

There is NO TIME for inexperience, empty promises OR false expectations!

HIRE WISELY: We are NOT “all the same”!

My Buyer’s Offer Did Not Get Accepted: What Can They Do? Part 4 of 4: The MLS, Seller and Listing Agent.

Whether you are starting the process of buying your first or “next” home, engaged in the process of house-hunting or you have already been denied a house you really wanted to own, I want to share some time-tested advice.  I am going to address the main question in three parts.  This is not intended as legal advice and not intended to interfere if you have an existing business relationship.

Let’s start with the premise that you have made an offer and it was rejected.  You may have had no response or you may have been given an opportunity to negotiate that did result in a signed contract.  If a buyer makes what they think is a reasonable offer and the seller did not accept it, they should have no regrets.   Easy for me to say.  However, did the buyer have the right expectations and understanding about the process?  Could or should their agent or the listing agent or the seller have done anything differently?

If the seller was given the opportunity to review all offers and was properly informed of any possible interest that could generate additional offers and they accepted what they thought was the best offer, who has any reason to complain about the process?  Every executed agreement will not close so it may be best to remain on good terms with everyone involved.  You may get another chance to get a house you want to own, if you want one, but do not assume you will.

I provide my buyer-clients with a few pearls of wisdom I have gained through experience, training and education.  The process of buying or selling Real Estate is typically an emotional decision justified with logic.  It should be treated as “business” and not taken personally.  It is also not retail.  Looking for a house can be a full-time job but it is worth the investment of time and effort.  Your life will get back to normal after you succeed.  Bad decisions are costly and their effects can last a long time.  Real Estate is typically our biggest asset and requires our largest ongoing investment so buying or selling it deserves a lot of attention.

I have already discussed how a buyer might manage their search and making their offer in a previous post.  Those are both important but there is more work required to get the house you like under contract.  Respectfully, you may have had the best planning and preparation and made your best offer but there are still two potential obstacles to having a signed contract:  they are the listing agent and the seller.

As a buyer agent, it can be very frustrating just trying to show properties to our clients.  Add to that possibly waiting for a buyer to decide if they want to make an offer, their trying to assess how to do that and then trying to ensure that your buyer’s offer is properly presented to the seller.  My intent is not to criticize acceptable business models but I do question some business practices.  Article 1 of our REALTOR Code of Ethics requires that we protect and promote the interest of our clients and that we be honest with others.  Not all Real Estate agents are REALTORS.

The MLS has rules and regulations which member agents are required and expected to follow.  Listing statuses and their definitions are a major part of them.  For example, Bright MLS requires that properties are listed in the MLS within three business days of having an executed listing contract and within one business day once it is advertised if not already uploaded to the MLS.  There is status called “Coming Soon” which offers agents an opportunity to advertise properties before any showings are allowed.  There is a publicized date when showings will start.  Those dates change so buyer agents need to monitor them as they should when a listing agent specifies when offers are due and going to be presented to sellers.  There is no rule that you cannot submit an offer sooner than required or that you can’t have it “expire” before they intend to present it.  Obviously your buyer must agree with what you do.

The “Coming Soon” status can be effective with generating interest but frustrates some waiting for showings to start.  Listing agents and sellers tend to like this status as it can reduce the actual marketing time while maximizing competition and the selling price.  Buyer agents and buyers are less enthusiastic.  Should a buyer wait to make an offer on another house, especially if the listing agent of a “Coming Soon” property has not shared pictures or provided a decent write-up?  Is this property better than what they have already seen?  Competition and a lack of knowledge can create anxiety.  However, a major concern is that some listing agents may be allowing some people to  see inside, against the rules, while others are left out.  Some buyers are willing to make offers “sight unseen”.  However anyone views that, it is perfectly fine even if some refuse to do so.  Some think it “unfair” and risky.

Some agents have suggested eliminating this status saying that a property is either “active” and available for showings or it isn’t.  I can see their point but I do not agree.  Even now, some houses are listed as active and immediately placed “under contract”, suggesting that it never got full market exposure.  I think the issue is how the status is handled and that is a “people problem”.  There is no perfect system.  What guarantee is there that every interested buyer would be able to see every “active” and available house?

If you were going to design a perfect, “neutral” system, meaning it levels the playing field rather than favoring or potentially harming buyers or sellers, several things would have to be in place.  I will suggest a few although many will see the folly:

1. Perhaps no showings should be allowed until a property is “active” in the MLS.  PERIOD.  This makes sense but how do you implement it or prove it was violated?
2. Once “active”, a property should be kept available for showings and offers for some “reasonable” amount of time to allow any interested buyer and their agent an opportunity to visit and make an offer.  In theory, this should maximize the selling price but some sellers are more interested in a quick sale.  Only a seller gets to decide what is in their best interest and which offer to accept.  Either way, there is no way to force this on a seller.  What about buyers unable to see a house for whatever reason?  Even then, how do you know that your offer was properly presented to the seller for their consideration?
3. All listing agents should be required to use a third-party showing service to schedule appointments.  I have had to call listing agents to schedule showings on numerous occasions.  That tends to take longer as far as getting an answer and a confirmation than contacting an appointment scheduling service.  Are these listing agents too busy to promptly respond or are they trying to keep out competition, hoping to sell their listings to their own buyers?  I do not know but that is the suspicion.  Calls for showings can go unanswered for days.  Even worse, some listing agents, for whatever reason (some are valid!) need to attend showings.  A buyer and their agent should not have to work around a listing agent’s schedule.  Granted, they have to work around a seller’s schedule but it is the seller’s house.
4. Many agents have wondered whether their buyer’s offer was actually presented to the seller.  In PA we have forms which attempt to document that an offer was presented but you never really know.  I once had a sealed offer returned to me unopened.  That buyer never had a chance to compete.  In multiple-offer situations, I have been told by several agents that their seller-client reached a point where they wanted to stop looking at additional offers that they had in front of them.  I do empathize!  The real question is how many offers is too many to open, evaluate and compare?  My experience has been that after awhile the offers tend to seem very similar but you never know about any offers you do not actually look at.  What about the time and effort the agent and buyer took to see the house and prepare and deliver an offer?

The bottom line is that we have to rely on and trust each other to do our job.  Technology has made our job easier as far as creating, executing and delivering paperwork than in the past but you still have to print them out and look at them.  Some buyer agents do not submit complete packages.  Some use formats that are difficult to work with.  Do all agents really explain what their clients are reviewing and signing?  Do our clients really understand the paperwork and their potential obligations?  Electronic signing and delivery have made life easier but it has also increased the possibility of a client not fully understanding what they are doing in a rush to sign documents.  Can Real Estate really be conducted electronically instead of face-to-face, at least for major documents like representation agreements and agreements of sale?

My best hope is that a seller hires an experienced, trained and educated agent that has the ethics and integrity to do their job and that a buyer does the same.  If they have both hired the same agent, that is fine but that creates an inherent conflict called “dual agency”.  If, as is more likely, they have hired separate agents, my best hope is that they do everything in their power to promote and protect the best interest of their client while being honest, at least as allowed by their representation agreement, with everyone else.

The simple facts are these:

1. houses will come on the market.  They may or may not be overpriced or poorly marketed which could prevent their exposure to the full market which can lower activity and selling prices;
2. some buyers will miss opportunities because their search criteria do not “capture” every real possibility, they simply miss listings as they rush through an email, they are not able to schedule a showing before a house sells or they are not in a position to make a serious offer for whatever reason.  Much of this falls on the buyer.  Many “shop” online for weeks before contacting a professional who can better explain the planning and preparation needed;
3. sellers may make it more difficult than it should be to see their house or they might be expecting too much from the market;
4. agents may frustrate their clients’ efforts to sell or buy.

There is a lot more to buying or selling Real Estate than marketing, showings and writing offers.  This is NOT retail!  There is no online “shopping cart” or a “Buy It Now” option.  Again, this is a business decision which is often emotional and justified with logic.  While the public has endless access to data and information, it takes an experienced, trained and educated professional to bring the knowledge and insight that Real Estate sales often require.

There is no time for inexperience, empty promises or false expectations.

HIRE WISELY: We are not “all the same”!

My Buyer’s Offer Did Not Get Accepted; What Can They Do? Part 3 of 4: The Offer

Whether you are starting the process of buying your first or your “next” home, actively engaged in house hunting or you have already been denied a house you really wanted to own, I want to share some time-tested advice.  I am going to cover this from four perspectives.  This is part 3 of 4.  This is a broad topic with no “one size fits all” answers.  My advice comes with two disclaimers:  this is not intended as legal advice and it is not meant to interfere if you have an existing business relationship.

Let me start with the premise that a buyer or you made an offer and it was rejected.  If a buyer makes what they think is a reasonable offer and the seller does not accept it, they should have no regrets.  Easy for me to say.  If yours was the only offer, I would assume that you had a chance to negotiate with the owner but could not reach a mutually beneficial solution.  If you were competing with other buyers, only one offer could win.  Did the buyer have the right expectations about the process and how it might go?  Could or should their agent or the listing agent or the seller have done anything differently?  If the seller was given an opportunity to review all offers and was properly informed of any possible interest that existed and they accepted what they thought was the best offer, there may be no valid  reason to complain about the outcome.  Every signed agreement does not close so you may get another chance, if you want one, but do not assume you will.  In fact, depending on the type of Real Estate market, you may want to assume that you have competition and that you will not have a chance to change your initial offer.

I provide my buyer-clients with knowledge that I have gained through my years of experience, training and education.  I have also learned a lot from conducting mediations between buyers and sellers and listening to ethics complaints about agents.  Fundamentally, I believe that the process of buying or selling Real Estate is best looked at as a business decision, not a personal one.  It is also not a retail transaction.

Looking for a house can become a full-time job but it is worth it.  Your life will get back to normal after you succeed.  Bad purchase decisions can be costly and their effects can last a long time.  Real Estate is typically our biggest asset and requires our largest investment so buying or selling it requires planning and preparation.  It deserves our full attention.

As I discussed in part two, The Search, once a buyer starts to identify possible houses to consider looking at and buying, there is a process to narrowing the list down to the best and getting in to see and evaluate them as quickly as possible.  I remind buyers that proper planning and preparation will position them to compete better and that they are not the only buyer seeing the search results they receive.  It all comes down to making an offer that will appeal to the seller or, at the very least, maximize the chance that the seller will offer a counter-proposal.  The purpose of negotiating is to keep talking.  While that can wear someone down, it is better than silence.  That being said, buying Real Estate can be very competitive so a buyer might want to assume that they have competition and may not get a second chance to negotiate after making an offer.  In some cases, you may want to make your “highest and best” offer from the beginning.  Unless you are concerned about over-paying, if your offer does not get accepted, you should have no regrets.  Inspections and a mortgage appraisal will provide some guidance about the property condition and the market value in any case.

When a buyer decides to make an offer on a house, only they know what they are thinking and hoping.  Did they make their best offer or are they expecting a counter-offer?  Whether they are suddenly inspired when they see a house or the decision comes after giving it some thought, if they have approached the process in a practical way, regardless of whether their offer gets accepted or not, they will at least know that they did their best.  That may be a small consolation but a buyer can only do so much.  Of course, if the search was haphazard or the buyer wasn’t completely convinced that a specific house was the best one for them but they decided to make an offer anyway, they may not know how to react even if they succeed.  Buyer remorse, meaning feeling that there may be a better option now or later or, even worse, if they come to believe that they made a bad decision after settlement, can be a problem.  There may be opportunities for either party to terminate a sale.  What will they to do?  Having remorse or doubts after closing is too late!

Some buyers will go “all-in”, perhaps to excess, with an offer.  This could include any or all of the following:  making an offer “sight unseen”, going above the asking price, keeping the contingencies to a minimum or waiving some or all of them.  Buyers have a lot of options when they really like a house, especially if they think or know there is competition.  What they do can be done to maximize their chances for success or it can be done to get a house under contract while they really take the time and effort to decide whether they picked the best house.  It is not for me to judge these things but there is a seller involved and one or two agents.  They can be impacted by a buyer’s motivation especially if the buyer is really unsure if they want to own the house.

How many buyers make offers “sight unseen” and cancel a sale using a contingency like a property inspection once they see inside?  The cost of inspections is minor compared to completing a bad purchase.  How many buyers make great offers and then ask for repairs or credits later to recover some of what they offered?  What about so-called “love letters” to the seller?  How many buyers just decide not to move forward and are willing to risk losing their deposit?  As I like to say, buying and selling Real Estate are business decisions justified with logic.  It is never over until the seller has the buyer’s money and the buyer has the seller’s keys.  So, what can prevent a buyer’s offer from being accepted?

1. Their offered price is not the highest.  For some sellers, the price is their primary motivation.  Oddly enough, in some cases sellers refuse the highest offers if they don’t think their house will appraise;
2. The buyer’s contingencies are not the best for the seller.  Perhaps the seller wants a “clean” sale, meaning few hurdles, or the buyer has a house to sell so they can buy their “next home”;
3. Something else within the contract is not the best for the seller.  This could include the settlement date, the amount of deposit money or anything that offers the buyer an option and the seller a choice.  Some agents and buyers use an “escalation clause” in the hopes of learning what it will take to make their offer better than the competition.  Many listing agents and sellers refuse to share details while expecting the offer to be improved.  Suppose there are multiple offers with these same clauses?  However you view them, they are not perfect and may not be enough to overcome stronger offers.  I view these clauses as showing that a buyer may have made a low offer and will raise it if they have to;
4. The offer does not include buyer financial information such as proof of funds for a cash offer.  Many PA agents use a “BFI” or “Buyer’s Financial Information” form, which I liken to a Seller’s Property Disclosure Statement.  Buyers and sellers basically want to know that the other person is serious and able to complete the sale.  The BFI provides an overview of the buyer’s financial information for a seller and their listing agent to review when comparing offers.  It complements a lender’s pre-qualification letter but, in my opinion, carries more weight as the buyer prepares it and the seller has legal remedies if the buyer misstates something whereas there may be no remedy for what a careless lender does.  Sad to say but I have seen some lenders provide letters that were meaningless.  I have heard of situations where a BFI negated a lender’s letter resulting in a declined offer.  Some buyers are reluctant to provide their financial information; some buyer agents and listing agents do not ask for it.  In a competitive situation this can be a problem.  Give a seller a good offer and convince them that it will settle and your chances should improve dramatically.  Most sellers want to minimize their own risk.

When a seller only receives one offer, they are more likely to negotiate if the offer is not exactly what they were looking for.  However, in a competitive or multi-offer situation, a buyer may not get a second chance to improve their “first impression”.  I remind buyers that, regardless of the type of market, there is no guarantee that they will get a second chance.  While many buyers are reluctant to make their “highest and best offer”, they need to understand the risk.  Wondering what happened later is uncomfortable.

For example, when I give a blank BFI to buyers, some will ask me how much they should reveal.  Obviously, they need to accurately disclose income and debt information and show at least enough assets to cover their closing costs.  However, some buyers are reluctant to show more than they need to justify their offer, typically saying that a seller may ask them for more money.  The same occurs with the pre-qualification letter.  Let me address both at the same time using a hypothetical scenario.

Suppose a buyer wants to offer $285,000 on a $300,000 house and they are financially able to go as high as $350,000.  Do they show enough to cover their offer?  The asking price?  Or do they show everything?  I say show EVERYTHING!  Again, if there is no competition, which you may not know, they will likely get a “second chance” if the seller wants more than $285,000.  However, if there is competition, a seller may just go with what “appears” to be a “stronger” offer or at least have a discussion with those agents who “appear” to be representing stronger buyers.  They may assume they have seen your best offer and move on.

So what if a seller wants you to raise your offer because they know you can?  Do you expect them to lower their price when you learn they have no mortgage?  Even if they ask, as I said earlier, the point of any negotiation is to keep talking to see if they can reach a mutually-beneficial agreement.  Most sellers will be happy to know that a buyer is not maxed out with their offer which could mean there is a greater chance of their loan being denied.  Even if they ask and you say no, you had a chance.  You may come to regret what happens but you had a chance.  It beats the alternative!

Ironically, when a buyer decides to raise their offer, it is likely that their expectations for the property inspection(s) also rises.  On the other hand, a seller who accepts less than they really wanted may be less enthusiastic when asked to make repairs or issue credits for repairs.  Either way, the goal is to keep the conversation going although one or both parties may tire if the process drags on and on and on.  While you continue talking, the house remains on the market allowing other buyers the opportunity to make an offer!

The bottom line is that a buyer needs to know what is in their best interest, understand the market they are in and make an informed series of decisions when making and perhaps negotiating an offer.  When an offer gets rejected or the parties cannot reach an agreement after going back and forth, a buyer needs to evaluate what happened to avoid repeating the same process over and over again.  I have worked with buyers who had several offers rejected.  For some, re-engaging in the process is tough.  Some give up for awhile while others jump right back in.  They may not know exactly what happened and they likely won’t find out what price the seller accepted for several weeks.  They may never know more than that.  A decision to buy or sell Real Estate is an emotional decision justified with logic.  Some are simply better prepared to put it all into perspective and continue moving forward.

There is no time for inexperience, empty promises or false expectations.

HIRE WISELY:  We are not all the same!

All Offers Must Be Received By … and Will Be Presented on ….

The type of Real Estate market produces some creative ways to “protect and promote” the interest of our clients.  The ebb and flow of who has “power” and “leverage” is interesting.  What may work (or frustrate others) in one market may appear insane in another.  That being said, we are required and expected to respect different “business models”.  However, do we have to do as we are told?

Many listing agents use a “Presentation of Offers” form which spells out what they want included in a purchase offer and how they conduct business.  I respect different “business models” and think the concept makes sense but I am left wondering about some of what they expect.  As long as the seller agrees that is fine but some of what I see seems counter-productive.  Here are a few examples:

• An agent must submit an offer before being allowed to show a property;
• A buyer must perform inspections before submitting an offer;
• Do not have any contingency expire on a weekend or holiday.  If you do, add language to the agreement stating that the time frame is extended to the next “business day”. What exactly is a “holiday” anyway?;
• Offers received after 5pm will be presented to the seller the next morning;
• Offers received after 5pm on Friday will be presented to the seller on Monday;
• Offers are to be submitted at a “specified time” and will be reviewed at a “specified time”.

Respectfully, if a seller agrees with any of these or other terms, perhaps that is their wish and their choice, that is fine but some of these make me wonder.  Real Estate is not a 9-5 job although it should not be 24/7 either.  I guess it all comes down to the type of market.  The question is:  do we have to comply?

We are in the hottest seller’s market I have seen in years.  Every house seems flooded with showings and multiple offers which, combined with the pandemic, many sellers and buyers are finding very frustrating.  To accelerate what I refer to as the “second step” to selling or buying Real Estate, the “third step” being when an offer is negotiated, some listing agents are doing one of two things to generate immediate interest.  They start showings at an “open house” or use a “Coming Soon” strategy to make buyers salivate before they can legally get in.  Both can work but may be creating a frenzy that will not play out as expected.  Some buyers are making offers “sight unseen”, waiving inspections and/ or going well over asking price, all in an effort to beat real or perceived “competition”.  Some agents just make their listings “active” and let the fun begin.  Th market will change.  It always does.

Some agents take this a step further and advertise when offers are due and when they will be presented to the seller.  These are bold steps that must be managed.  I find it interesting when a property listing expires unsold or a contract gets canceled and the listing agent neglected to remove language stating that offers were due and would be presented weeks or months ago.  OOPS!

Let’s suppose I activate a listing on Friday, state that offers are due by Monday at 3pm and will be presented to the seller at 7pm.  Pick any days of the week or time frames you prefer.  What happens next?  Compliant buyers and their agents will honor the listing agent’s instructions assuming they will be followed.  But will they?  Suppose they aren’t?  Some agents will try to submit offers after 3pm.  Does the listing agent say NO?  Is that buyer or agent penalized for being late?  Suppose the buyer agent has difficulty reaching the listing agent to say they have an offer or has trouble getting it to them?  We do so much electronically these days so that should not be a problem but it can be if there are Internet or equipment issues.

Suppose I have a buyer who does not like competition, may have lost out on one or more other houses they really wanted to own or they just want a quick answer so they can pursue other options before they sell?  What should I do?  I would submit an offer as soon as I can and, if my buyer is willing, we can make it expire prior to the 7pm deadline.  Listing agents are required to submit all offers in a timely manner.  While it is possible that their seller has said not to present anything before Monday at 7pm, if I were the listing agent I would let my sellers know that I had something, especially if it is compelling.  Suppose the seller says they want to accept the offer that came in early?

Buyers and their agents who were in the process of meeting the 3pm deadline have every right to be upset but did the listing agent do anything wrong?  Suppose a seller signs an offer before an “open house”?  At the very least, if my seller decided to sign an offer earlier than we advertised, I would let agents know what happened to be transparent and fair.  I would not want to waste their time and effort.  You never know, something could happen with the accepted offer and we may need to resume showings.  Perhaps a buyer is willing to provide a back-up offer.

Multiple offers are common these days which sounds nice but explaining them, evaluating their differences, responding to them and selecting the “winner” can be more complicated than it seems.  Are they taken at “face value”, which means that no one is provided an opportunity for a “second chance”, or are all or some “negotiated”?  What happens if they only “entertain” a few of them?  Even with multiple offers there is no guarantee that a seller will get what they want but they might learn the market’s perception of value.  Sellers determine the price but buyers determine the value.

What happens when the “sight unseen” buyer finally sees inside or the buyer who waived inspections questions the condition of the property or what the seller disclosed?  What happens when the appraiser files their report?  The “creativity” that secured a signed purchase agreement does not guarantee a deed transfer.  Real Estate is like 3-dimensional chess compared to a basic retail transaction where I pay you and I get my purchased item right away.  Real Estate provides “delayed gratification”:  every day until settlement may offer an unpleasant surprise.  It is never over until the seller has the buyer’s money and the buyer has the seller’s keys.

Even in “normal” markets, which generally means 3-6 months of available inventory, depending on what you believe, things can get contentious.  While we generally “cooperate” with each other, this is a competitive industry.  Only one buyer gets the house.  Buying or selling Real Estate are emotional decisions justified with logic.  Putting in the time and effort to buy or sell Real Estate requires commitment and exposing yourself to potential frustration.  They are not things most people do every day.  What one person thinks is creative can have quite a different reaction from someone else.

REALTORS have to manage expectations.  We need to explain the process of buying or selling to our clients.  We have done this before.  The consumer has 24/7 access to endless amounts of data and information, including television shows, but it takes an experienced, trained and educated professional to add two secret ingredients:  knowledge and insight.

When it comes to buying or selling what is likely your largest asset and biggest investment,

There is no time for inexperience, empty promises or false expectations.

HIRE WISELY:  We are not all the same!

Multiple Offers: Two Different Opinions

Competition and multiple offers seem normal these days.  Your opinion about them probably depends on whom you represent and your personal experiences.  They do not guarantee success for a seller but make it harder for buyers and their agents.  I recently heard two very different opinions about them.

A buyer’s agent, frustrated by losing yet another bidding war, told me that multiple offers are the result of pricing a property too low.  I guess that makes some sense, pricing it higher might reduce the amount of competition but is that best for a seller?  Would that result in their seeing the highest and best possible offer?  Who knows?  There are a few things I think I can say in general:

• Competition tends to produce the “highest and best” offer, even if it is not what a seller wants.  When there is only one offer a seller may think a better one will come later.  They often do not.
• Looking at and comparing multiple offers can get tedious, especially if they seem repetitive.  I have had several listing agents tell me that, at some point, their seller stopped reviewing additional offers.  Presumably, they had at least one they liked but that concerns me.  A buyer agent who shows a house and takes the time and effort to prepare an offer should be able to trust that their buyer’s offer was considered.  We have forms to confirm that but the bigger picture is that offers not presented may be better than what a seller accepts and that those that “appear” uncompetitive may just be a starting point for a buyer who really likes a house.
• Some agents actively encourage a flood of showings hoping for multiple offers and a quick sale.  There is nothing wrong with that but it creates an environment that must be managed.  What is the goal?  I assume it is to shorten the marketing time and to get the “highest and best” offer that will appraise and close.  The real dilemma may be knowing whether to accept an offer or question whether it will appraise.  What if it doesn’t?  Having a pre-listing appraisal may help but may not be ideal, especially if the market is rising.
• While there is nothing wrong with multiple offers, I think it places some responsibility on everyone involved.  Our clients must be advised of the advantages and disadvantages.

This agent was frustrated with writing offers that failed and having to start showings again.  Imagine being a buyer who loses your preferred new or “next” home to competition, especially if it happens again and again.  We are in perhaps the best sellers’ market I have ever seen and its major attribute, if you  want to call it that, is that the number of buyers far exceeds the number of available properties.  While this does not mean that every property will sell, every buyer will not get a house.

Another agent posted on social media that a buyer’s agent who writes offer after offer is not doing their job.  I would love to have these two agents in the same room.  While I do agree that some agents do not adequately prepare their clients, both buyers and sellers, for what is likely to happen in this market, every buyer will not be able to buy a house.  There is a supply problem.  Buyers can adjust their needs and wants and pursue a house that is not selling but will they?  If multiple buyers want the same house, only one buyer will get to own it.  Does that mean that every agent who represented an unsuccessful buyer failed to do their job?  NO, but it could.  In a multiple offer situation, a buyer  may want or need to make their “highest and best” offer rather than assuming they will get a second chance.  A buyer agent has to present what they are given but the buyer decides their terms.  Doing the same thing over again is not a formula for success but let’s not assume that the buyer’s agent did anything wrong.

There is no time for inexperience, empty promises or false expectations.

HIRE WISELY:  We are not all the same.

Is it a Better Time to Sell or to Buy Real Estate in Spring 2021?

As is usual, my best answer is it depends!  Can the answer be a “tie”?  I would like to think that when Real Estate is sold that both people “won” but Real Estate is a competitive process where two people have opposite if not adversarial motives.  No buyer ever said I want to give the seller as much money as possible unless, of course, they know there is competition or they intend to use their successful offer as leverage to negotiate something to their benefit later such as inspection results.  No seller ever said they wanted to give a buyer the lowest price unless they wanted to dump the property or intended to make no repairs.  Most sales happen between those extremes.  Getting to settlement is another matter.

The market today, Spring 2021, is as competitive as I have ever seen and I have been doing this since 1996.  The years from 2003 through 2008 were fairly hectic but that was a true “bubble” fueled by government manipulation to increase home ownership that relied on loose lending standards which financially destroyed many of the buyers it was supposed to help.  Sadly, many who bought were not really qualified to manage the finances and, frankly, many flippers took advantage of the market and sold bad rehabs.  I could go on but my main point is that this is NOT what is happening today.

Today is very different.  The market has been created by a combination of perpetually low interest rates, extremely low inventory and pent-up demand delayed by the pandemic.  Lending standards appear to be solid so buyers are better situated today, at least financially.  That being said, this cannot go on forever.  Interest rates have been rising slightly but there is plenty of money to lend.

Two significant variables are likely to change.  One is the number of buyers.  If this is anything like the “bubble years”, buyers have jumped off and over the proverbial fence and decided to buy earlier than they had been planning.  Sooner or later the market runs low or out of qualified buyers and I hope that does not result in easing lending standards.  The other variable is the inventory level.  My best guess is that the number of properties for sale will rise once whatever is holding owners back changes.  Just as the number of buyers was inflated by a number of factors, I believe that owners have been held back by a number of factors.  These diverging trends produced what we are seeing today.

Real Estate depends on “supply and demand”:  buyers and sellers are on opposite ends of a proverbial see-saw.  The supply of one often exceeds the supply of the other causing prices to rise and fall.  Competition drives prices up; excess inventory drives them down.  External factors like interest rates, the general economy and other variables like a pandemic play a vital role.  So back to the original  question, is it a better time to sell or to buy?  Let me break it down this way.

I believe that the group that has or had the most to gain in the current environment are the owners of properties which they were not selling to buy something else.  I call these “extra” properties.  Whether they are vacant, used for investment or the owners were willing to go into a rental or some other arrangement, those owners only had to focus on getting the most they could for their property.  What they achieve is determined by their understanding of what is going on and their risk tolerance.  Did they sell too soon or did they wait too long?  Many will regret missing the opportunity to “cash in”.

While I value home ownership and embrace the concept of owning compared to renting, I fear that the group who may have the most to lose are the buyers who jumped in without really thinking long-term.  It is nice to talk about building equity and owning a home for almost the same monthly payment as your rent but home ownership is more complicated than numbers.  A home purchase decision can easily become regrettable if one or more of the following happens:  you spend your savings for a down payment and suffer a loss where your savings are needed, you buy without doing the legwork to see if a neighborhood or house fits your lifestyle (having to resell in the short term can be costly), you made an offer you come to regret (did you buy “sight unseen” or waive inspections to make your offer more competitive?).  Long term, Real Estate tends to be a great investment.  However, the short term is more volatile.  Either way, you have to live somewhere but Real Estate is an investment and subject to risk.

Don’t get me wrong, private home ownership is one of the many blessings we have in America.  However, with any opportunity comes responsibility.  Buying Real Estate is an emotional decision justified with logic.  “Normal” markets generally allow a buyer time to really consider whether it is the right time for them to buy and whether a specific house really fits their “wants” and “needs”.  You may have time for a second showing or to have family and friends take a look.  Sadly, I have worked with many sellers who told me they wish they had bought another house.  I have heard many stories of how they made their decision, what they wish they had done differently and how their decision impacted their life.  Where you live affects the quality of your life.  A poor decision can rob you of equity.

The current market does not generally allow a lot of time to think and ponder, let alone compare your options.  It may compel buyers to make unwise offers they may come to regret.  I have heard many buyers respond to being told that a seller accepted another offer by saying “it wasn’t meant to be”.  That is a great response, especially if they meant it.  I have also seen people react as if their world were crumbling.  I try to prepare my clients as best I can and hope that they are ready for the process.  Planning to buy Real Estate requires a serious commitment and can be like a full-time job.

If the last frenzy was any indication, I suspect that 10 to 15 years from now, some of today’s buyers may find that their house is worth about what they paid, no more and hopefully no less.  At least that means that they “broke even”.  You have to live somewhere.  After 10 to 15 years of paying rent you walk away with nothing and, chances are, your rent has gone up dramatically.

On the other hand, unless they are forced to sell, I don’t see sellers reminiscing about a house they sold, wishing they could get it back.  Cars have that effect but not houses.  That is not to say that all sellers succeed.  Their motivation or sense of urgency may cause them to accept an offer that was not the best.  On the other hand, patience is a virtue but it can be expensive.  Contingencies within an offer can cost them money even if the price seemed nice.  A seller needs to be informed about the market just as buyers do.  Are they more focused on the money they achieve or how long it takes to sell?

There is one more group to consider:  the seller who needs or wants to sell one house to buy their “next home”.  In this market, they may be facing an uphill battle especially if they have competition.  That type of contingency can really impact the process.  It also impacts prospective buyers for their house.  I see listing contracts expire or get canceled because a seller wants a buyer to give them time to find a house or they want a short-term rent-back.  Any of that may be a concern for buyers.

If a seller is buying their “next home”, aside from how they manage an agreement with their buyer or the seller of the home they like, they need to compare their market with that of their “next home”.  It may be a great time to sell, convincing them that they may never have another chance to get what this market offers.  However, what will their “next home” cost them?  One of the ironies I have seen a number of times is the owner who expects top dollar for their home and thinks they can get their “next home” cheap.  There is a serious disconnect there.  On the other hand, while the two processes have to be coordinated, I have seen sellers who really needed to reduce their asking price but refused to even consider it.  If a reduction makes buying impossible I understand that but ego can get in the way.  If the seller’s property’s market value is flat or declining and the cost of buying is rising, we have a conflict.  Every day, week or month that passes is costing them more than they are gaining.  Some sellers are willing to rent so that they can sell and, ideally, buy later when prices stabilize, whatever that means.

Buying or selling as a single, disconnected act is one thing.  No one can predict what tomorrow will bring and decisions always look clearer in hindsight.  Tying a sale to a purchase or a purchase to a sale takes the game from checkers to chess and expands the thinking.  The possibilities can be endless!  All you can do is get the best information you can, decide what you want and need to accomplish and know when to make a move or when to hold back.

There is no time for inexperience, empty promises or false expectations.

HIRE WISELY:  We are not all the same!

Should a Buyer Agent Represent Two Buyers Bidding on the Same House?

This is a question that most agents and buyers never really have to think about.  How often does this happen?  I like to raise the question in my ethics classes for these very reasons.  Once people do think about it, it can generate a lively theoretical discussion which generates emotion and opinion.  I am not sure there is a perfect answer but I think it has so many aspects to it that it is worth discussing.  Better now than in an ethics hearing.  Let me start with some disclaimers.

First, this is my opinion and not intended as legal advice.  Second, I am in PA where this practice is not considered “dual agency”.  In fact, our contracts specifically allow this to happen which I will discuss later in further detail.  However, it is considered “dual agency” in some states which makes me wonder why, how can that be:  it either is or it is not “dual agency”.  How can it be looked at differently in different states?  If it were considered “dual agency”, which is not allowed in some states, that would at least provide some direction as to how to handle it and remove my concerns.  Third, my intent is not to interfere with any existing business relationships although I would respectfully suggest that buyers should know if this situation might come up so that they can make an informed decision before entering into a business relationship that might not work for them.  In PA many agents refuse to act as “dual agents”.  I wonder how they view this topic?

I am an analytical thinker so I will look at this from several perspectives.  Let’s start with some contract information, meaning some language that a potential buyer-client should know before hiring an agent to represent them.  This assumes that a buyer hires an agent and actually discusses their respective roles.  Of course, if an agent does not follow our rules and regulations, a member of the public may not be as well informed as they should be.  While well over 90% of the public searches online for Real Estate listings and information, I do not believe that most really understand agency representation.  We do more than open doors and write contracts.  Do prospective buyers know what to ask agents they might hire?  Are they resistant when an agent tries to do their job by discussing contracts and agency disclosures?  I am going to talk about this from the perspective of being a REALTOR, not just a licensee.  This means I will refer to out REALTOR Code of Ethics as well as our state’s “standard forms”.

Article 1 of our REALTOR Code of Ethics requires that we protect and promote the interests of our clients above all else.  While we are required to have a business relationship contract with someone to represent them as our client, rather than as our customer, that is not always the case and not having a contract is not an excuse when a problem arises.  What is important is what a buyer thinks of our relationship.  Our conduct may convey a perception that they are our client when they are technically not.  That poses potential problems and it likely means that they know less than they would have had they seen the proper forms.  This Article brings up the topic of fiduciary duties which I will discuss later.  These are owed to a client but not to a customer.

Article 2 states that “REALTORS shall avoid … concealment of pertinent facts relating to the property or transaction ….  REALTORS shall not, however, be obligated to …  disclose facts which are confidential”.  This Article brings up the topic of confidentiality which I will also discuss later.

In PA we have a form called a “Consumer Notice” that all licensees are required to present and explain to any member of the public before having a “substantive” discussion with them, referring to their “needs and wants”, and entering into a business relationship.  It describes the different relationships available as well as reviewing a number of agency/ representation-related issues. 

Under “Buyer Agent”, it says that we “work exclusively for the buyer”, that we “must act in the buyer’s best interest” “and must keep all confidential information, confidential”.  I mentioned a relationship called “dual agency”.  This occurs when an agent or Broker “works for both the seller and the buyer” in the same sale.  As stated in our Code of Ethics, this relationship requires “full disclosure to and with the informed consent of both parties”, meaning in writing, before acting in that capacity.

The Consumer Notice also includes several other important details.  All agents “must disclose, as soon as practicable, all conflicts of interest”.  A dual agent may not take any action that is detrimental to either party.  In a typical seller/ buyer scenario that is perhaps best explained by saying that a dual agent cannot disclose how low a seller will go or how high a buyer will go in their efforts to sign an agreement of sale or negotiate details later such as inspection issues.

Based on what I have presented so far, my non-legal but educated opinion is that representing two buyer-clients bidding on the same house seems like “dual agency” to me.  Again, I do not understand how some states see it that way while others, including PA, do not but I think that there is no harm in treating it as “dual agency”.  I have never heard a client complain that their agent over-protected their interests, have you?

Now let’s discuss “fiduciary duties”.  Working with a customer, meaning there is no contract, has requirements.  Working for a client expands that list as there is agency representation and six fiduciary duties.  The list includes:  obeying a client’s lawful instructions, being loyal to their purpose or goal, disclosing what you know that could help them succeed, keeping their information confidential, being accountable for keeping them on track with what they need to do throughout the process and providing reasonable care and diligence in your representation to protect them.  There is much more to these duties but imagine representing two buyers with similar intentions.

In a “dual agency” relationship two of these fiduciary duties are compromised or negated:  you cannot disclose to one party what the other party wants kept confidential.  This does not refer to “material facts” that must be disclosed if known.  It does refer to things that could hurt someone’s negotiating strategy.  A critical question is what is meant by confidential?

A listing agent can share details about an offer presented to them by one agent with another agent.  Many agents and consumers do not know that.  This is another topic that gets my classes going!  Absent a previously signed “confidentiality agreement”, such as is often used in commercial listings, the details of an offer are not inherently private and can be “shopped” to get a better offer.  Of course, this does not include the buyer’s name or personal information.

That being said, some people are very private and consider things “confidential” that others may not.  Learning this is part of getting to know your client.  Do you see how this can impact having more than one buyer client interested in the same property?

In PA we have two different buyer representation contracts, one is “exclusive” while the other is “non-exclusive”, the difference being whether a buyer works solely with one agent or has more than one agent assisting them.  That alone can present issues but is not my point here.  Unfortunately, some agents do not present either form to their prospective clients or they do so at the point of creating an offer on a property.  Better late than never!  I know that some clients are resistant to signing contracts or they may be willing to be a customer rather than committing to one Broker/ agent and getting the benefits of full representation.  However, there is important information they need to know and an executed contract proves they were at least informed of this information.

In both the exclusive and the non-exclusive contracts, there is the same language regarding issues related to conflicts with two clients.  They both say that a “Broker may not take action that is inconsistent with a buyer’s interest”.  They both say that an agent “may show the same properties to other buyers and may represent those buyers in attempts to purchase the same property that a buyer wishes to purchase” and that doing this is not a “breach of duty”.  They both say that “It is a conflict of interest when a Broker … cannot put a buyer’s interest before any other”.  “Unless permitted by a buyer or required by law, a Broker will not knowingly reveal or use any confidential information of a buyer”.  However, it does not specify what the word “confidential” mean.  It does talk about not treating the “existence, terms or conditions of any offer as confidential unless there is a confidentiality agreement” but the sentence ends with “between a Buyer and the seller”.  I guess the word “exclusive” only works one way, meaning that the buyer is restricted to one agent but the agent is not restricted to one buyer.

Then both contracts go on to say that “it is a conflict of interest when a Broker or licensee … cannot put a buyer’s interest before any other”.  The section concludes by saying that if there is a “conflict of interest, the broker will notify the Buyer in a timely manner”.  How does all of this sound to you?

These are not guidelines or suggestions, they are rules.  How do you accept all of these rules and properly manage the home searches of two buyers who want to pursue the same house?  Of course, if two or more buyers are looking in different areas and price ranges this may never be an issue.  But buyer’s plans change.  Many buyers end up buying a house vastly different from what they said they wanted.

I am not an attorney but these sections seem to conflict, don’t they?  Wouldn’t having more than one buyer interested in making an offer on the same house be about as conflicted as it gets?  While the rules say that an agent must mention having a conflict, it does not elaborate.  Do I need to do more than say “I have a conflict”?  Can I say what the conflict is?  Here is the best part:  to whom do I mention the conflict and what is the remedy?  Do I tell both buyers?  Can I just end my relationship with one of the buyers and keep working for the other?

That raises an interesting question:  who is allowed to terminate a contract?  While I could have another agent take over with one buyer, I think that poses a problem as I would still know information about that buyer that I would not normally know and that could harm them.  In fact, when agents encounter problems with seller/ buyer dual agency, I suggest that they completely remove themselves from both client relationships to avoid any perception of problems with disclosure or confidentiality.

As with all Real Estate paperwork, the buyer contracts do encourage the prospective client to seek the services of an appropriate professional, such as an attorney.  While that makes sense, is there time to do that?  If a buyer has done as I suggest, all of this would have been taken care of before I showed them any houses.  Conflicts that arise after that may not be able to be undone and it could impact a buyer’s opportunity to make an offer and get it signed.

Let’s drill down further to the real issue.  Aside from whether one agent can truly best represent the separate but conflicting interests of two different buyers, remember that only one buyer gets the house, does the agent have the right to tell each buyer-client about the other’s interest in the same house?  Does doing that conflict with the fiduciary duties owed to each buyer-client?  What is the goal?

I have had agents tell me that they want to be “fair”.  Really?  Who gets to decide what is “fair”?  What does that even mean?  The REALTOR Code of Ethics used to have that word in Article 1:  it said that, while we had a duty to protect and promote the best interests of our clients, we had a duty to treat people fairly.  If you are a sports fan, what is fair?  Is a pitch a ball or strike?  Did a referee miss a penalty or make a bad call?  The word, however nice it sounds, is confusing because it is unclear.  Do any two people, especially those working on the same sale, define the term the same?  Again, only one buyer can win.  Perhaps neither buyer will succeed but that does not mean that all is well.  Anyway, the Code of Ethics was amended years ago to say that we have to treat people honestly.  I’ll leave that alone but telling two buyer clients about the interest of the other is not a measure of honesty to me.

Years ago I had an agent in my office show one of my listings.  They brought me an offer which was negotiated, accepted and signed.  When I called to tell them that it was signed by my seller-client they made a very unusual request of me:  they asked if I would enter my name in the MLS as the buyer’s agent.  I asked why and was told that this agent had sent the same property listing information to four different clients but only one seized the opportunity and quickly got the house under agreement.  The agent was concerned that the other three would blame them for not telling them what had happened.  I commended this agent for what they did!  I can’t imagine what might have happened had they shown the house to the other clients and written and negotiated multiple offers on the same house.

The question then becomes what happens next?  Let me explore a couple possibilities.

• If neither buyer gets the house, there may have been no harm done but the question of whether our actions are ethical or professional is based on our conduct and not the outcome.  “No harm, no foul” is not the measure.  Did our actions possibly cause both buyers to lose a sale?
• Suppose one of your two buyers wins.  Did they improve their offer because they knew they had competition?  If so, did they spend or do more than they really had to and might have done if they did not know?  Did the other buyer hold back or drop out because they felt they could not win?  Some people want to compete, even if they overdo it, while others will not compete even if they might succeed.  Saying that both buyers knew that other agents had interested buyers does not change my opinion.

To conclude, there is a lot to what seems like a simple question.  Ultimately, it “appears” that our forms and contracts allow us to represent more than one buyer interested in buying the same house but I am not sure there is sufficient guidance as far as what to do when this situation comes up.  I have disclosure and confidentiality concerns.  I think each client should be allowed to make that decision.  I would guess that both would like to know about the other even if wanting their own interest kept quiet.  Suppose one cares and the other doesn’t?  Is it fair for one to know but not the other?  There is that word again, “fair”.  Trying to work this out once the situation comes up is too late. 

Let me add two thoughts.  First, this is not the same as a listing agent sharing the details of your client’s offer with another agent or having them let you know that other agents have made offers on a property that interests one or more of your buyer clients.  You must tell them that information.  However, you have no fiduciary duty to the listing agent, the seller or any other agent’s buyer clients.

My second thought is more of a question.  Suppose you write and present an offer for one buyer-client and it is rejected or countered without leading to having a signed agreement of sale.  Do you have the right or authority to tell another buyer-client the details?  While telling them what did not work with one buyer-client seems to make sense, perhaps that offer would work now if no one else has made a better offer.  Seller expectations do change.  Does telling another buyer how the seller countered an offer accomplish anything?  There is no guarantee that the seller would still be interested in that amount with a different buyer-client and, if the market is competitive, your current buyer client may only get one chance to make an offer.  Suppose you tell them a number and they lose.  An offer is more than the price and two buyers offering the same number may have very different terms and conditions.  Suppose the buyer-client whose offer failed decides to make another offer?

I am not trying to scare anyone but, if nothing else, I hope that people who read or listen to this will better understand how Real Estate works.  It is not retail where everyone is able to buy a product for a known price and there is ample supply.  Again, we do so much more than open doors and write contracts.  Real Estate requires experience, training and education.  It is not for everyone and it can get more complicated than it needs to be at any given moment.  Life would be easy if sellers would just accept their asking price or if buyers would just offer the asking price when they make an offer.  Of course, both of those statements are unrealistic if not ridiculous.  If they were true, you wouldn’t need a professional!  This is EXACTLY why I end my blogs and podcasts like this:

There is no time for inexperience, empty promises or false expectations.

HIRE WISELY:  We are not all the same!

Delaware County PA January 2021 Residential Housing Market Update

Tri-County Suburban REALTORS and Showing Time have released their January 2021 Local Market Insight report for single family homes in Delaware County Pennsylvania.  The report relies on Bright MLS statistics.  If you would like more information about this or any other County or any specific municipalities in the Delaware Valley, please contact me or visit my web site, AndrewWetzel.com.  I am only a phone call, an email or a text away!  I respond promptly to all inquiries.

The market continues to be affected by the pandemic and resulting economic impact.  The weather has also been a factor.  However, generally speaking, the results in many areas are encouraging and, as always, your experience may differ depending on your location and how you have been personally impacted.  As I always say, the decision whether and when to sell or buy Real Estate is a personal one influenced by a number of lifestyle factors and external variables.  The pandemic typifies that.  Some have not been deterred while many others have decided to delay their plans to sell or buy.

The report compares current year-to-date results to one-year ago, same time period.  This report only covers one month so I would not over-react to the information.  As with all Real Estate statistics, two things are true.  First, the performance within individual zip-codes can and will vary significantly from the overall County.  Real Estate is local and results can vary greatly from neighborhood to neighborhood and even block to block.  There is no such thing as a “national” Real Estate marketany more than there is a national weather forecast so, whether you may be thinking about selling or buying, please contact me for details about your areas of interest.  I can provide current information and keep you informed about the evolving market as well as provide you with the knowledge and insight to help you decide what works best for you.

My second point is that, unfortunately, all Real Estate statistics involving sold data are stale.  This is especially true if you are relying on Internet valuation models which use recorded data rather than up-to-date MLS information.  Even then, while a sale may be reported as having settled or closed today, the real question is when was the offer negotiated?  Typically, sales can take 45 to 60 days to close so the market today may be different from when the offer was presented and negotiated.  Up-to-date information, even if not perfect, is important!

As far as the statistics, there were 534 new listings in January 2021 compared to 586 in January 2020, a decrease of 8.9%.  The average number of active listings in January 2021 was 441 compared to 994 in January 2020.  Low inventory levels continue to affect the market.  There were 544 closed sales in January 2021 compared to 438 in January 2020, a 24.2% increase.  The median selling price was $240,000 in January 2021 compared to $202,000 in January 2020, an increase of 18.8%.  What effect did the large decrease in the number of properties being listed and available have on the market statistics?  It likely created some anxiety resulting in multiple offers, perhaps well over asking price, and buyers taking other actions to make their offers more competitive.  These include buying “sight unseen” and/ or waiving inspections.  The result was a huge increase in selling prices along with a large decrease in the Days on the Market (DOM) and the “Sold to List Price” ratio.  Do we really have an inventory problem or pent-up demand?  Time will tell.  Again, these numbers vary throughout the County:  the underlying data shows a wide range of results in all categories among the 49 different municipalities in Delaware County.

Generally speaking, the effects of what is happening remain to be seen.  Some buyers may come to regret a hasty decision to get a property under contract at “all costs”.  Buying “sight unseen”, especially without inspections comes with a risk.  Sellers and their agents need to consider how to manage such offers as they may have appraisal issues and/ or be more likely to result in buyer remorse.   Given the  expense and complexity of a typical Real Estate purchase, buyers and sellers need to fully understand what they are doing and what can go wrong.  Even with our property disclosure law in PA, many sellers either do not know about underlying issues with their properties or forget to disclose them.  Whatever your feelings about property inspections, they can provide important information to a buyer.  Getting a contract signed is only the first step to completing a Real Estate sale.

What about the properties that did not sell?  Many came off the market and remain off the market.  As the pandemic has evolved, some properties did come back on the market but many have not.  Did owners delay, change or give up their plans?  Buying activity has generally been strong but some sellers are reluctant to allow showings or may have issues holding them back.  Given the statistics, are people making an informed decision or reacting to what they “think” is happening in their local market?  A brief conversation may be very helpful if you have any questions about selling or buying.

Anyone thinking about selling or buying needs to understand their local market and decide how to react to it.  The effects of buying and selling remain for years as does inaction.  At some point things will return to whatever is “normal”:  how many will regret not taking action?  These are important decisions and likely require the knowledge and insight that an experienced, trained and educated professional can provide.

I tell my clients that I cannot guarantee that their house will sell if it is on the market but am fairly certain that it won’t if they keep it off the market.  Anyone trying to sell now may have less competition and more offers to consider.  Buyers may have more competition and fewer houses to consider.  Hiring an experienced, trained and educated professional is more important than ever.

No matter how good the market may appear, every house will not sell.  Houses may get showings without generating offers unless buyers think they are priced within the range of their perceived “worth”, whatever that means today.  Most property listings whose contracts are canceled or allowed to expire have asking prices considered high for their local market and/ or they were poorly marketed, meaning that some buyers and agents may not have even known that a property was available to look at or purchase.  Some buyers may make an attractive offer just to control the process only to have remorse later as inspection results are revealed or they see another property they prefer.

Regardless of the amount of inventory, some buyers may not be willing to look at houses priced high compared to the rest of the market:  why try to negotiate a price down when other similar properties are available at more competitive prices or others offer more for the same price?  Many sellers open to negotiating their price will never get the chance.  I will be happy to discuss specifics with you.

Statistics aside, what are you planning to do?  Real Estate is generally a long-term investment unless you are looking to fix and flip it or planning to move within a short period of time.  There are always opportunities out there.  As with the stock market, it is very difficult to pick the best time to make a move.  All you can do is get the best available information, determine what is in your best interests and then start the process.  Getting started is easy once you take action.

If you want or need to sell any type of Real Estate, now or in the future, whether you tried and did not succeed before or are planning for the first time, it is never too early to start the planning and preparation.  Please do not wait for what you think is a better or the best time to start.  Buyers look all year long and can only see and buy properties that are available to see.  Based on what we experienced in 2020, is waiting for Spring something you would consider?  If so, now is the time to start planning.

There is no time for inexperience, empty promises or false expectations!

HIRE WISELY:  We are not all the same!

Delaware County PA December 2020 Residential Housing Update

Tri-County Suburban REALTORS and Showing Time, using Bright MLS statistics, have released their Local Market Insight report for single family homes in Delaware County Pennsylvania through December 2020.  If you would like more information about this or any other County or any specific municipalities in the Delaware Valley, please contact me or visit my web site, AndrewWetzel.com.  I am only a phone call, an email or a text away!  I respond promptly to all inquiries.

The market continues to be affected by the pandemic and resulting economic impact.   However, generally speaking, the results in many areas are encouraging and, as always, your experience may differ depending on your location and how you have been personally impacted.  As I always say, the decision whether and when to sell or buy Real Estate is a personal one influenced by a number of lifestyle factors and external variables.  The pandemic typifies that.

The report compares current year-to-date results to one-year ago, same time period.  As with all Real Estate statistics, two things are true.  First, the performance within individual zip-codes can and will vary significantly from the overall County.  Real Estate is local and results can vary greatly from neighborhood to neighborhood and even block to block.  There is no such thing as a “national” Real Estate market any more than there is a national weather forecast so, whether you may be thinking about selling or buying, please contact me for details about your areas of interest.  I can provide current information and keep you informed about the evolving market as well as the knowledge and insight to help you decide what works for you.

My second point is that, unfortunately, all Real Estate statistics involving sold data are stale.  This is especially true if you are relying on Internet valuation models which use recorded data rather than up-to-date MLS information.  Even then, while a sale may be reported as settled or closed today, the real question is when was the offer negotiated?  Typically, sales can take 45 to 60 days to close so the market today may be different from when the offer was presented and negotiated.  Up-to-date information, even if not perfect, is important!

As far as the statistics, there were 8309 units listed for sale through December 2020 compared to 8993 listed through December 2019, a decrease of 7.6%.  Low inventory levels continue to affect related data points.  There were 7139 closed sales through December 2020 compared to 6984 through December 2019, a 2.2% increase.  The median selling price through December 2020 was $250,000 compared to $227,000 through December 2019, an increase of 10.1%.  The large decrease in inventory, meaning the number of properties being listed, had a relatively small effect on the number sold while substantially increasing their selling prices.  The number of currently available properties is well below one year ago and the Days on the Market (DOM) and “Sold to List Price” ratio are much improved.  Do we have an inventory problem or pent-up demand?  Again, these numbers vary throughout the County:  the underlying data shows a wide range of results in all categories among the 49 different municipalities in Delaware County.

Generally speaking, low inventory levels in some areas have produced multiple offers and a frenzy among buyers, some of whom may live to regret a hasty decision to get a property under contract. During the shutdown when “in-person” Real Estate activity was not permitted, many buyers made offers “sight unseen”, some without inspections to make their offers more attractive to sellers.  The effects of these strategies remain to be seen but Real Estate, perhaps with the exception of those properties acquired strictly as “investments” with documented income, is generally not something given its expense and complexity that the typical buyer would want to purchase without an in-person showing let alone removing the protection of an inspection contingency.  Even with our property disclosure law in PA, many sellers either do not know about underlying issues with their properties or forget to disclose them.  Whatever your feelings about property inspections, they can provide important information to a buyer.

What about the properties that did not sell?  Many came off the market and still remain off the market.  As the pandemic has evolved, some properties did come back on the market but many have not.  Did owners delay, change or give up their plans?  Buying activity has been strong but the sellers may be reluctant to allow showings or may have issues holding them back.  Given the statistics, are people making an informed decision or reacting to what they “think” is happening in the market?  A brief conversation may be very helpful if you have any questions about selling or buying.

Anyone thinking about selling or buying needs to understand their local market and decide how to react to the pandemic as a “variable” that was not here last year and, hopefully, will be gone in the near future.  However, the effects of buying and selling remain for years.  They are important decisions and likely require the knowledge and insight that an experienced, trained and educated professional can provide.

I tell my clients that I cannot guarantee that their house will sell if it is on the market but am fairly certain that it won’t if they keep it off the market.  Anyone trying to sell now may have less competition and more offers to consider.  Buyers may have more competition and fewer houses to consider.  Hiring an experienced, trained and educated professional is more important than ever.

Despite the pandemic, every house will not sell.  Houses may get showings without generating offers unless buyers think they are priced within the range of their perceived “worth”.  Most property listings whose contracts are canceled or allowed to expire have asking prices considered high for their local market and/ or they were poorly marketed, meaning that some buyers and agents may not have even known that a property was available to look at or purchase.  Some buyers may even make “full price” offers just to control the process only to have remorse later as inspection results are revealed.

If a market has a lot of inventory, some buyers may not be willing to look at houses priced high compared to the rest of the market:  why try to negotiate a price down when other similar properties are available at more competitive prices?  Many sellers open to negotiating their price will never get the chance.  I will be happy to discuss specifics with you.

Statistics aside, what are you planning to do?  Real Estate is generally a long-term investment unless you are looking to fix and flip it or planning to move within a short period of time.  There are always opportunities out there.  As with the stock market, it is very difficult to pick the best time to make a move.  All you can do is get the best available information, determine what is in your best interests and then start the process.  Getting started is easy once you take action.

If you want or need to sell any type of Real Estate, now or in the future, whether you tried and did not succeed before or are planning for the first time, it is never too early to start the planning and preparation.  Please do not wait for what you think is a better or the best time to start.  Buyers look all year long and can only see and buy properties that are available to see.  Based on what we experienced in 2020, is waiting for Spring something you would consider?

There is no time for inexperience, empty promises or false expectations!

HIRE WISELY:  We are not all the same!