Danger of Live Offer Presentations
By Michael Repka, Esq.
In Silicon Valley, the typical approach to taking offers on a home is for the buyer’s agents to present their clients’ offer in-person to the listing agents and the sellers on offer date. The buyers are generally not present for this presentation. The listing agents often advice their sellers to remain stoic and emotionless during the presentation, which lasts between 10-20 minutes. Why are the buyers not present at the presentation? Who benefits from this style of negotiation – sellers, buyers, or real estate agents?
In Person Presentation: Seller’s Perspective
Overall, the in-person offer presentation process is already in favor of the buyers. The real estate community is relatively small and most successful agents know each other. As the buyer’s agents sit in the listing agent’s reception area, awaiting their turn to present their offers, they can size up the competitors. Factors that come into play include the agent’s: experience, reputation, office location, and whether that agent represents a lot of builders that are likely to tear down the home. For example, if the 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. Further, there is always the fear that the various buyer’s agents, as they await for their turn to present, will compare notes about where their clients came in, which could hurt in the seller’s counteroffer process. Generally this doesn’t happen if the competing agent thinks that their office will be completive but it does happen frequently when the other agent knows they are going to lose.
During the offer presentation process, the negotiation structure is clearly in favor of the buyers. While the principal (i.e., the seller) and listing agent are present, only the buyer agent is present from the other party. The buyer’s agent has the opportunity to ask questions and to “read” the sellers’ reaction, yet the sellers and listing agent may not do the same. Furthermore, the buyer’s agents could try to put additional pressure on the sellers through their comments, request concession of sellers, or make a response “due upon receipt,” yet the sellers could not do the same as the buyers are not present.
Electronic Submission of Offers
The alternative to the in-person presentation 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. Further, if buyer’s agents do not 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. Once all of the offers are in, the sellers can review all of the details with their agents 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.
Although I believe that the main reason that listing agents allow, and sometimes even encourage, in-person offer presentations is as a favor to the buyer’s agents—a favor that is returned when that listing agent is presenting an offer on one of the buyer’s agent’s listings— some buyer’s agents argue that they actually do it because their sellers care more about the personal background and motivation of the buyer than they do about the ultimate sales price. However, this same information can be conveyed in a simple letter from the buyers. Incidentally, I have found that information coming from the buyers in writing tends to be more reliable than information stated verbally by agent trying to get a deal.
Given that the DeLeon Team sells more Silicon Valley real estate than any other agent or team in Northern California, 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.
In Person Presentation: The Buyer’s Perspective
If you were looking to buy a home in Silicon Valley, it is generally in your best interest to have your buyers’ agent present the offer in person to the seller. This will give you, as a buyer, tactical advantage and quite possibly lead to you getting the house for less money.
As discussed above, many listing agents are willing to let buyers’ agents present offers directly to their sellers even though it generally tilts the playing field in favor of the buyers. While at first blush it is hard to understand why listing agents are willing to do this, one of the reasons may be that the listing agent wants to win favor with the buyers’ agent for future deals. The hope or expectation is that the buyer’s agents will extend the same favor to the listing agent when the roles are reversed. It’s a “you scratch my back I’ll scratch yours” kind of thing.
This is one of the problems with having agents that represents buyers sometime and sellers sometimes— a practice prohibited DeLeon Realty.
Through its School of Law & Graduate School of Business, Rutgers University offers a Graduate Certificate in Conflict Management and Negotiation. When I was in law school I decided to take this program and I found it to be extremely beneficial over the course of my career. The skills and tactics I learned though this formal training, as well as Harvard’s Program on Negotiation, along with years in practice as both an attorney and broker, helped be structure an approach to hearing offers that is both fair to all buyers and focused on the best interest of my clients.