In Silicon Valley, multiple offers and above-asking bids are common. In fact, it is not unusual for a home to receive 10 or more offers. Naturally, agents who are representing buyers like the opportunity to present their clients’ offers directly to the sellers so they can argue points beyond the price and terms of the offer. Like many very experienced buyer agents, Ken DeLeon can recount countless transactions in which he was able to get homes for his buyers for less than his clients were willing to pay and, occasionally, less than other offers, because he was able to present offers in person. This is great for buyers, but many sellers would prefer the highest possible price.
Recently, I was having lunch with a Harvard Law School professor who teaches a great class in negotiation. He expressed surprise that listing agents would ever agree to a structure in which only one of the principals (the seller) was present.
Nevertheless, many listing agents encourage their sellers to sit through all of the offer presentations, despite the fact that this approach can stack the deck against the sellers in the negotiation process. While some sellers may want to get to know the agent who is representing the buyers, it is important that the sellers consider the downsides to this approach before they blindly agree. The pros and cons of both approaches should be considered, and it should be up to the sellers to decide which method is right for them.
Live Offer Presentations
In recent years, it has become common for listing agents to set a time for offers and to invite all interested agents to come and present their clients’ offers directly to the sellers (the buyers themselves rarely attend). Generally, listing agents sit in a conference room with their clients while each buyer agent spends about 20 minutes telling the sellers about their buyers and their offer. This gives the buyer agent an opportunity to ask questions of the sellers and vice versa.
The first problem with this situation is that the real estate community is relatively small, so most successful agents know each other. When good agents present an offer, they love the opportunity to size up the competition. If other agents who are presenting offers have a reputation for sloppiness, inexperience, or— even worse—questionable ethics, then good agents will submit a lower offer knowing that the listing agent will prefer to work with them. If they don’t know who they are competing against, then their fear of losing the deal/ commission (and of their clients losing the house) will likely cause them to submit their clients’ highest offer. Additionally, there is always the fear that agents will compare notes about where their clients came in, which could hurt in the counteroffer process.
Another problem arises due to the inequity of the structure. The buyer agent has the opportunity to “read” the reaction and ask questions of the sellers, yet the buyers are rarely in attendance, so the listing agent doesn’t get the same opportunity. Again, this can be a tremendous help to the buyer agent, which usually means a corresponding detriment to the sellers.
Furthermore, some buyer agents try to put additional pressure on the sellers through their comments or by making a response “due upon receipt.”
Electronic Submission of Offers
The alternative is to have all agents submit their offers electronically. In addition to removing the need for the sellers to sit in a conference room all afternoon, it also eliminates the inequities mentioned above. Once all of the offers are in, the sellers can review all of the details with their agent and ask any relevant questions. They also have the option of inviting the top offers into the office at that point if they so choose.
Given that the DeLeon Team sells more Silicon Valley real estate than any other team in the nation, we have handled countless offers utilizing both the in-person and electronic submission approaches. Generally, we have found that the electronic approach results in the highest price for the sellers. However, we are happy to discuss the pros and cons of both approaches. We will employ whichever approach the sellers prefer, provided of course that the motivation for the in-person meeting is not related to a desire to discriminate based on a buyer’s race, age, gender, sexual preference, religion, or other inappropriate factors.