Nobody likes to juggle with hot potatoes. Why complicate life talking about serious issues when it’s so nice and comfy to accept things as they are, without making waves, asking tough questions and inviting confrontation?
Something to think about, right? I did. In my humble opinion, if we were born with a brain, we might as well use it. If we have an opinion, we might as well express it. Business, any business, keeps on evolving, for better or worse, depending on people who dare to challenge the status quo. Movers & shakers can be a headache but they try to make things better. The most important question to ask in business is WHY?
A couple of weeks ago, I was invited by a real estate attorney to participate in a panel discussion regarding the hot issues making life interesting in the industry these days. Three other real estate executives, each one representing a different company, sat next to me. We all took turns to answer questions from the facilitator or an audience made of California agents from the mid-Peninsula.
Frankly I found it courageous for brokers to express their point of view openly on topics which are highly controversial and have a tendency to divide the practitioners between pros & cons, in other words make you a hero for some and a foe for others. I also want to salute the attorney who organized the session. We need to talk if we want to have something to do with what the profession will look like in the future. If we don’t, we’ll let other entities which are strangers to our core business do it for us.
As most agents would have guessed, the following topics were on the menu: Dual agency, preemptive offers, off-market listings, multiple offers protocol… Told you they were hot potatoes! Here, I propose to give you my take on each one. Only my personal opinion; our Corporate Counsel has his own which is probably different. Although a book can be written on each topic, we’ll keep it brief. Just enough to tease the minds. Whether you agree or disagree, you are welcome to further debate these questions within your company and/or at the level of your local Association.
- Dual agency (representing both sides): I am not in favor of this election but I don’t see it as a scarecrow either. When dealing with controversial subjects, it’s convenient to throw the baby with the bath water. The problem here is not in representing both parties, it is about how it’s done by some agents. I agree that the temptation to double-end and get all or most of the total commission can be an invitation to crime (although the agent can sell the buyer another home and make as much), but there are ways to rid the profession from bad apples. Dual agency will not likely go away, unless of course we invite attorneys to drive our business. We need to recognize that Dual Agency is the preferred way to do business in much of the world. In part because brokers’ cooperation like our MLS is not (yet?) in place, but also because many buyers & sellers think that when their agent knows more about each side’s means, needs & motivations as well as the subject property, they have a better chance of reaching a win-win agreement.
- Preemptive offers: When you list a property, you are in charge of the negotiation process. Three “functions” must be kept in mind: Set the rules; Communicate those rules; Respect your own rules. If the seller, based on your advice, sets a specific day/time in the future for all agents to present offers, you forbid yourself from looking at any prior to such time. If, however, an agent tells you that he has a fabulous offer that must be presented right away and your seller tells you to break the rules, you have the obligation to change the MLS instructions ASAP and notify all agents who expressed interest in the property, thus giving them the same opportunity to enter the race. If nothing else, this “competition” should benefit the client seller.
- Off-market listings: Rarely a good idea, but there are legitimate reasons for a seller, especially at the high-end, to refuse to be on the MLS, and leave it up to the listing agent to share the news with a smaller group of pros as he may see fit. The exclusion from the MLS may be temporary if we need to allow some time to dress up the house, possibly stage it, fix up a few cosmetic or structural details, or wait for tenants to vacate. Also, as I wrote in this column a good many times, some sellers, for reasons of privacy & security, don’t care to transform their exclusive home into a museum open to the public. We’ve got to respect their decision and abide by it.
- Multiple offers: You would think that at a time when multiple offers and bidding wars are the norm in the real estate business, most companies and agents would agree on a simple protocol to keep things clean & easy. It is not happening. The 2 words that should govern a multiple offer presentations are fairness & transparency. In that spirit, you want to present all offers to the seller, preferably in the order received. Best to invite/allow the various agents to present in person since they know their buyers better than we do. A piece of paper alone does not tell the tale. Of course, if one agent gets to present his offer in person, the same opportunity should be extended to all others. Today, unfortunately, many listing agents require that offers be emailed. Time saver it is, but it is also opening the doors to an “unfair advantage” situation or other conflicts if the listing agent is aware of the price to beat.
When, as the listing agent, you receive multiple offers, it goes without saying that you have to inform all agents accordingly, so that they all have a chance to fine tune and beautify their respective offer. If one of the offers is your own, you have to disclose this “game changer” fact as well, as it is material to the fairness element of the negotiation. Another panelist suggested that not only should the listing agent disclose the number of offers, but also the identity of all the agents who made them. That’s when I say stop. Disclosing the number of offers, yes. Disclosing agents’ names and affiliations, no. Believe it or not, even transparency has its limits. Otherwise we might as well open a live discussion with all agents in real time and see what comes out. I am sorry but if that day should come, we will not be in the real estate business anymore, we will be an auction house.