Bidding Wars- Unethical???

By
Real Estate Agent with Keller Williams Real Estate

One "seasoned" agent refused to give my clients a chance to beat a competing offer because he believes "bidding wars are unethical".

It all happened about a month ago when I took my buyers to see a beautiful house in Huntingdon Valley listed by a Philadelphia Remax agent. It took no more then, oh, 3 seconds for them to fall in love with this house. It had absolutely everything they were looking for and they were more than ready to make a move after months of online searching.

We scheduled a 2nd showing for the next day so their folks could get a look as well (first time home buyers...) and the plan was to write up the offer immediately afterwards. As always, I began some investigative work and made the Seller's agent aware of my clients' strong interest. In return, the Seller's agent, who was far for being any kind of courteous on the phone, informed me there was an offer on the table that was still being thrown back and forth and was to be finalized the next day. I persuaded him (more like begged) to hold off until he had our offer in hand so that my buyers have a shot at it. 

Looking at the comps we felt the asking price of $450k was a little steep and with no clues as to where the other offer was hanging we offered $425k, 45 day closing with a strong FHA pre-approval. We rushed to get the offer off to the listing agent, cautiously optimistic. When I dropped the offer I told the agent plain and clear that my clients would be willing to fight if needed.

An hour later I got a call from the listing agent saying the Seller decided to accept the other offer and that it's a done deal. I was blown away. It didn't even occur to me this is a possible scenario. Shocked, I asked "why didn't you give us a chance to come back? We could and would have done better". His reply was just as shocking: "I don't believe in bidding wars. They're unethical." "Really?" I asked in amazement. "Isn't your duty to get the best possible deal for your client? And last time I checked, the Code of Ethics has no problem with aggressively negotiating for your client. Can you honestly tell me what you just did was in your client's best interest?" The conversation (that would be a nice way to put it) went on for a few more minutes before he decided to hang up on me.   

The craziest part of the story was, the other offer was just a couple of thousands more. With a little more work, this agent could have gotten his clients a much higher sales price so they would ultimately net more.

So, agents beware! there are agents out there that make up their own ethics rules and you could be their next victim...

Please feel free to weigh in on the comments section! 

    

Comments (113)

Carrie Sampron
Home Smart Realty Group - Highlands Ranch, CO
ABR SFR & Kathy Sampron (303) 931-3629 Highlands R

It sounds like the other agent just didn't want to deal with it.  He had an offer, he was content, he was done!

Aug 12, 2009 10:22 AM
Pat & Wayne Harriman
Harriman Real Estate, LLC (203) 672-4499 - Wallingford, CT
Broker/Owners, Wallingford CT Real Estate

Bidding wars are not unethical at all, simply trying to get the best possible outcome for your client. Hopefully the listing agent really did present your offer to the sellers! Not knowing the intimate details of the other offer, there could be several reasons why they accepted it. It could have been a cash offer (unlikely, but possible), they could have offered a quicker closing, they might have been in a stronger financial position, waived inspections (again unlikely, but possible), etc etc. Bottom line is, the listing agent could have come back to you asking for highest and best, but didn't. You could have advised your client to offer their highest and best from the get go to put them in the best position to have their offer accepted, but you didn't. Unfortunate, but hey, everyone makes mistakes. Live and learn, and best of luck on your next deal!

Aug 12, 2009 10:59 AM
Anonymous
Kevin Kravcak

Odelia,

I own and operate an office near you.  While there is nothing wrong with going back and asking both potential buyers to bring back your highest and best, there is no obligation to do so and most agents in our area do not practice that way.  Once you knew there was another offer on the table YOU should have gotten your buyers to bring there highest and best or included the escalation clause that is a standard PAR form.  You also said they had the other offer for a few days and had been going back and forth and came to a verbal agreement and the papers were to be signed and finished up officially the next day.

I have been on both sides of situations like this and you would be surprised how many sellers will not go back on their word even if another offer materializes afterword, especially after rounds of negotiations as they feel obligated.   In one case the other offer was better than mine and the seller still followed through with my offer because they already gave us their word.   Sounds like this is what happened and to be honest, I would applaud the sellers if this were the case. Call me a crazy optimist but I miss the days when a persons word was all you needed and believe it or not there are still lots of us out here who do deals on a hand shake and our word every day and stick to what we say.

At the end of the day, I hope you learned a lesson.  Next time your clients love a house and you know there is another offer, get them to offer their highest and best or include the escalation clause from the get go.  As you just learned, you can't and never should rely on the seller or sellers agent to counter at all, let alone with a highest and best, no matter what the market climate is.

I'm glad it worked out for you and your clients in the end.  (Now for the tough love) But don't get it twisted, you and your clients lack of action, not the sellers agents', cost you the deal on the other one ;-)  

To Your Success,

Kevin 

Aug 12, 2009 11:02 AM
#96
Emma Vargas
Simply Staging - Cameron Park, CA
Simply Staging

I have to defend Odelia here, I wouldn't have been surprised at all by her buyers low offer if I were the seller or seller's agent.  Buyer's today are looking for deals, because they can get them.  Its a buyers market - right?

The seller's agent should've presented the 2nd offer, regardless of how high or low it was compared to the 1st one.  The seller gets to make the decision if they want to consider it or not, the listing agent doesn't get to make that call.

As some already mentioned, I think the listing agent was just being lazy and didn't want to deal with it anymore, so he gave a lame excuse to be done with it. 

Aug 12, 2009 11:53 AM
Paul Aragon
Coldwell Banker- Greater Valleys - Porter Ranch, CA

Let's get this straight...

1. the listing agent isn't selling the home, the seller is. The listing agent is only facilitating the terms of the listing contract.

2. A seller has every right to accept lower offers if they choose to- even against the listing agent's recommendation, and even in the face of higher offers that are on the table.

3. Buyers agents should express to their clients that they should leave nothing on the table for further negotiation if they truly like the house. If they really had more gas in the gas tank as you mentioned, then they should have competed to win the race, not to just finish 2nd or 3rd.

When clients are hesitant to write the full amount they are comfortable with, I always comment- "Are you willing to lose the house over X amount of dollars. If you are , then let's write at this amount, but if you are not, then let's write the higher offer- knowing that you gave it your best shot."

Aug 12, 2009 12:26 PM
Erik Elsea
Erik Elsea-Jones & Co. Realty - Fort Myers, FL

Highest and best is the way to go! I had clients this past week who offered full price and cash with no contingencies and closing in less than 30 days. All the listing agent said to me when he called to turn down our offer was that we were beat substantially. Here in Cape Coral, FL. I'm actually not shocked. This market is going crazy...again!

Aug 12, 2009 01:09 PM
Stacey Wilson
Red Oak Realty - Oakland, CA

I am a listing agent, and in a nutshell: Do not expect a counter.  Period. I am seeing more and more sellers NOT counter.  Give your highest and best offer.  If an agent tells me they can "go higher," I relay that to the seller along with my opinion that if they could go higher then they should have - ESPECIALLY if they knew there were multiple offers. 

Not all sellers want to play the counter game and they can accept or reject any offer they choose, for whatever reason they choose.  We also don't owe the selling agent an explanation as to why they didn't receive a counter - it is not mandated that the seller counter you.  My response to buyer's agents who ask why is: if you could have negotiated a counter, then you could have offered higher to begin with.

I think it is a disservice to the buyer to not advise them to give their highest and best, especially if they really love the property.  If they love it that much, they wouldn't have risked losing it.  The value of the house is what it is worth to the buyer, so how could they have overpaid?

Aug 12, 2009 02:26 PM
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

He may or may not have been short sighted.  He should have shown both offers to the seller.  Sometimes if you get a bidding war going you may end up with nothing.  I bird in the hand is better than two in the bush.  I probably would have tried to set both buyers against each other and drive the price, but it is the sellers decision.

Aug 12, 2009 04:35 PM
Carol Culkin
Diamond Partners Inc - Overland Park, KS
Overland Park Residential Real Estate

Sounds like the listing agent might have had something at stake - like both sides of the transaction.

Aug 12, 2009 04:38 PM
Jenny Durling
L.A. Property Solutions - Los Angeles, CA
For Los Angeles real estate help 213-215-4758

I'd like to hear about how many agents are actually using the escalation clause. I know you can add in that the seller must prove there are higher offers, but how do you prevent your buyers' offer from being escalated by offers from unqualified buyers?  That is a very valid point that someone brought up here that I had not previously considered.

Aug 12, 2009 06:39 PM
Robert T. Boyer
FHA Loan, VA Loan, Jumbo Loan,FHA Loans,VA Loans,Jumbo Loans - La Jolla, CA
San Diego Real Estate & Mortgage Loans, Ph.D. | VA Home Loan

In San Diego, on reasonably priced properties we are easily seeing 10 competing offers (our inventory is really low right now).  Usually the seller will do a single round of a multiple-offer counter asking for everyone's the highest and best offer.

To Jenny, my wife frequently uses the escalation clause.  Only once has an agent attempted to pull a stunt and claim a higher offer than they could prove.  In terms of unqualified buyers causing the price to increase, yes, an interesting risk.  Of course, few (good) buyer's agents will let their clients waste time making offers that they are unqualified to be making.

Aug 12, 2009 09:50 PM
The Somers Team
The Somers Team at KW Philadelphia - Philadelphia, PA
Delivering Real Estate Happiness

Odelia - First off (I read in your comments) congrats to you and your client on being under contract on a better home !  That is super.  My wife Stephanie always says "if it is meant to be, it is meant to be".  I guess that is the big picture in this market that if the buyer does not get the first property, there are more out there !  Secondly, I do think this could have been handled better by the listing agent.  I would have asked for a "sellers reply to multiple offers" or some sort of proof that my offer was presented.  Perhaps the other deal was cash or conventnional 50 percent down ?  Either way, that is why I use those "sellers reply to multiple offers" in these situations.  Many of our listings recently have had multiple offers.  Maybe the old days are slowly coming back ?  ~  Chris

Aug 13, 2009 12:28 AM
Ben Giordano
RE/MAX Sun & Sea - Boca Raton, FL

In the end, the perfect home shows up. I learned from my dad a long time ago, if it is meant to be it comes easy. It is about faith in our creator, god, divine, universe, whatever you believe in.

Aug 13, 2009 06:20 AM
Lyn Sims
Schaumburg, IL
Schaumburg Real Estate Agent Retired

I think it was in poor taste to use the company name of the listing agent personally in the post.  BUT, if you KNEW there was another offer and still wrote the one that you did for your buyers, WHY ARE YOU MAD?  You had a good chance to trump the other offer and you blew it.  You had a bidding war and you didn't like how it turned out!  What you wanted was for the seller to refuse both offers and then go back to you?  You had an advantage here and you blew it I think.  You knew about the other offer, wonder if the others buyers knew about yours?

Just my 2cents on that.

Aug 13, 2009 07:52 AM
Daniel J. Hunter
REALTORĀ® - New Port Richey, FL

Lyn I get what you are saying, but here where I am located there are multiple independent Re/Max offices, and  without given the individual offices name, it really does not identify anyone.   And everyone knows that the largert an organization gets the more likely there will be a few bad apples.  Although I do think this should have been a members only post

Aug 13, 2009 08:09 AM
Anonymous
Mike Groves

Supposing that we are all REALTORS and abide by the Code of Ethics we need to remember something I don't see mentioned.  It's not the agent's choice as to how multiple offers are handled, it's the seller's choice.  If the agent (and I noticed a couple of responses indicating "that's the way agent's in this area...") was acting ethically, they would discuss this with their client prior to getting in this situation and then they could inform the buyer's agent of their seller's instructions, not their opinion as to whether it's ethical or not.  NAR feels strongly enough about multiple offers to include it in the Code of Ethics and Arbitration Manual -

And yes I agree with coment #80 (plus a few others) - if you know ahead of time you're going into a multiple offer situation, make your best offer then - it's even more agravating to relay that the buyer's rep claimed they would improve their offer, only to have them change their mind and lose both offers.

Aug 13, 2009 10:01 AM
#109
John Juarez
The Medford Real Estate Team - Fremont, CA
ePRO, SRES, GRI, PMN

If I know that there are 1 or more existing offers, I tell my clients to write an offer that will buy them the house and live with the offer that they write. If their offer is the best, they get the house. It was not too high, it BOUGHT THE HOUSE! If it was too low, live with that fact. It was your decision, buyer. If you could not go higher, I understand. If you did not chose to go higher, I understand (but why...didn't you want the house?).

 

So, Odelia, why were you surprised when you did not get a counter offer? You already knew the agent did not want to deal with you.

John Juarez

Aug 13, 2009 11:28 AM
Mark Velasco
Sharpstone Commercial - Whittier, CA
Top Producing COMMERCIAL Team 30+ years experience

Wow Odelia. I do not want that Agent selling MY home.

Aug 20, 2009 05:20 PM
George & Arlene Paukert
Road to Wealth, Inc. - West Palm Beach, FL

I hope this agents seller doesn't read your blog, because if they do, they maybe in court and they will see that it is not only not unethical, but that it is in the best interest of the seller to get the highest and best price for their home.

Aug 25, 2009 04:38 AM
Richard Weeks
Dallas, TX
REALTORĀ®, Broker

The Texas Real Estate Commission has advised Texas agents that esculation clauses are not to be used.

Oct 20, 2013 09:50 PM