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Over the years, I have seen many real estate agents make assumptions and act accordingly. Although some conjectures are relatively harmless, others have cost the agent’s clients dearly, especially in a volatile market such as the current one.
One thing I have learned: Do not make assumptions — they can lead to critical mistakes. Here are our top five:
1. Assuming there are other offers
In our market, almost every listing currently comes with an offer deadline. A majority of agents wait until just before the deadline before firing in offers with minutes to spare.
In an overheated environment such as this, most agents tend to assume that every listing will receive more than one offer. We recently had a listing that was exceedingly difficult to value due to a complete lack of comparative sales.
We set the price at what we believed was the fair market value and quickly discovered that no one seemed to know how to write an effective offer.
As a result, even though it was a stunning home in a fantastic area, we only had one offer when the deadline arrived. Interestingly, it was an offer at a full $300,000 above the list price.
At no point had the buyer’s agent called to see if I actually had any other offers. By assuming we had multiple offers and not making a simple call, the buyer paid $300,000 more than necessary.
2. Assuming the seller will take the highest offer
We recently listed a condo at $500,000. As the offer deadline approached, buyer’s agents started pinging to get an idea of offers we had in hand.
One agent texted numerous times: “Do you have offers over $520,000?” “Over $550,000?” “Over $570,000?” Near the deadline, I texted back, “$600,000.” After that, it was crickets. No further communication and no offer from that agent.
We received six offers in all, ranging from $500,000 to a max of $600,000. Unfortunately, there was no offer we could simply accept. Additionally, while one offer was fully non-contingent, it was only for $530,000. All the higher offers had serious flaws and were dead on arrival for several reasons in my opinion, especially the highest bid at $600,000.
I discussed the situation with the sellers, who said, “We don’t want to be greedy — we would have happily accepted list price and would be ecstatic at $550,000.”
Clearly, the strongest offer was the non-contingent one, so I called that agent, explained we had an offer at $600,000 and asked how much higher his buyer was willing to go. He checked in with his client and came back a few minutes later with $550,000. I called the sellers, and they told me to ink the deal.
Once in escrow, I heard back from the agent who had previously lit up my phone. “I wanted to let you know why we didn’t write,” she stated. “We couldn’t compete at $600,000.” She continued, “the highest we could go was $570,000, so I told my buyers not to write.”
“Really?” I responded. “Had you submitted at $570,000, we would most likely be in contract.”
There was a long pause and then a text: “Lesson learned,” she responded. “I won’t make that mistake again.”
3. Assuming the seller will wait for an offer deadline
The point of an offer deadline is to produce an auction-like atmosphere where buyers bid against each other and push the prices higher. Almost 100 percent of listing agents in our region implement offer deadlines, and it works very well.
Although most buyer’s agents understand the deadlines and wait, a growing number, frustrated with their inability to get their clients into a contract, are beginning to ignore the deadlines and fire in offers as soon as the listing goes live. Buyer’s agents who respect the rules are suddenly shocked when listings suddenly go pending before the deadline.
To stem the practice, some MLSs have instituted rules stating that any change to the status has to be published at least 24 hours prior to accepting an offer. Even with the rules, many sellers — eager to get their homes sold — will often accept a preemptive offer rather than wait until the deadline.
Although this whole issue raises questions about equitable practices and even ethics, buyer’s agents who make assumptions that sellers will always wait until a published deadline to accept an offer may find themselves left out in the cold.
4. Assuming cash is better
Cash is great for many reasons: quicker closes, no appraisals to worry about, and often, much cleaner transactions overall. However, cash does not automatically get the deal, especially when the buyer comes in with a lower price.
Most sellers have figured out that by waiting a few more days to close and accepting a bit higher level of risk, they will still close and end up with more in their pockets.
In the end, for many sellers, the only cash that really matters is the cash they receive once escrow closes. Additionally, because cash offers often signal “investor,” some sellers prefer that their home goes to a family instead. Bottom line: Never assume that you will get the deal if you come in with cash.
5. Assuming that the listing agent will not communicate
Although it’s true that some listing agents like to play things close to the vest and refuse to provide any meaningful information, it doesn’t mean buyer’s agents should not try to communicate. Some listing agents set offer deadlines and then refuse to respond close to the deadline, hoping the vacuum of dialogue will produce higher offers.
How does that provide an environment that has a seller’s best interests at heart? It’s so frustrating to call listing agents to inquire about other offers to be told, “Just give it your best shot.”
Personal experience has taught me that the more information I can provide a tentative buyer’s agent, the more likely I am to receive excellent offers.
Ironically, many buyer’s agents assume that no information will be forthcoming in the current market, and therefore, they make no effort to reach out to the listing agent.
At the heart of real estate is negotiation, and it always happens best when information flows freely. Never assume a listing agent will not give you the information you need to write a compelling offer.
Although there is no end to the list of assumptions I see regularly, the above all have the potential of either losing out on a potential purchase or incurring a significant financial penalty to the client.
When a market is overheated, there is a tendency to take shortcuts. Our advice is never to assume anything and always practice due diligence. Don’t be those agents who wake up one morning and suddenly realize they just misrepresented their client.
Carl Medford is the CEO of The Medford Team.