Real Estate

Offer wihtout agent -> unexpected result

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  • Aug 18th, 2019 1:47 am
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[OP]
Sr. Member
User avatar
Mar 2, 2009
516 posts
256 upvotes

Offer wihtout agent -> unexpected result

Can someone help me make sense of the result of an offer I made for a house?

So here are the relevant events:
- I made an offer to purchase, directly to the seller's agent, 575K
- Seller's agent told me there are 5 offers in total
- Same evening seller's agent calls me, tells me they are currently deciding between my offer and another one:
- "My offer has better conditions (downpayment, etc.) but they would accept if I increase to 600K, if not the seller will accept another offer (even if it has riskier conditions)"
- I asked whether that "higher" offer was made through a buyer's agent, or directly, i.e. are there two agents involved or one?
- I got confirmation that the other offer was made through another agents -> they will split the sales commission
- I performed a simple calculation (see below), and offered to bump my offer to 590k
- next day the call me back, that the seller accepted the other (600k) offer

Here's my calculation:

Let's assume 5% sales commission.

Other offer is 600k.
The seller's agent makes 15k (2.5%) and the buyer's agent makes 15k (2.5%), because they split.
At the end of the day, the owner gets 600k - 30k = 570k.

My offer is 590k.
So the seller's agent makes 29.5k (5%). This is enough for the seller's agent to give 10K to the owner, so the offer becomes 590K+10K, and the agent makes 19.5K.
At the end of the day, the owner gets 590k + 10k - 29.5k = 570.5k.
And of course the seller's agent could throw in 1-2k more to sweeten the deal for the owner, and still make more than the other option!

Does anyone understand why would the seller's agent and the owner pick the 600k offer in this case? Wouldn't it be better for them to pick my offer (especially considering better conditions on offer)?

From what I can understand, my offer was a win-win-win, for owner-agent-me.
Last edited by derdev on Aug 14th, 2019 7:24 pm, edited 1 time in total.
20 replies
Deal Addict
Jan 13, 2014
1778 posts
718 upvotes
Calgary
the main issue is here youre assuming that the selling realtor would give back to the seller. Doesnt always happen this way.
[OP]
Sr. Member
User avatar
Mar 2, 2009
516 posts
256 upvotes
masarwar wrote: the main issue is here youre assuming that the selling realtor would give back to the seller. Doesnt always happen this way.
Even if doing so gives the agent 4.5k more?
Deal Fanatic
Mar 27, 2004
5705 posts
3585 upvotes
Toronto
this is what happens when a buyer thinks they can beat the system that is in place.

did you and the listing agent explicitly agree that they were going to give back the coop from your side?
Full-time Realtor
Deal Addict
Jan 13, 2014
1778 posts
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Calgary
derdev wrote: Even if doing so gives the agent 4.5k more?
You may not know if there was even a buyer realtor or not. Maybe the dude might be a ethical realtor looking out for his client's best interest? lots of ifs and buts on a maybe scenario. If i were you i would just hold of for 2 weeks once the financing condition is done (either lapse or go through) and try again.
Deal Fanatic
Jul 3, 2011
5998 posts
3194 upvotes
Thornhill
There are a couple reasons why an offer even though it seems to be higher is rejected by sellers:

- Offer price isn't everything, it must be considered as a whole with the entire offer where something else within the Offer was not acceptable to the seller negating your $500 scenario.
- seller was put off by the buyer for some reason
- listing rep chose to not enter into dual agency and guided the seller accordingly as to the advantages and disadvantages of each offer

But you also made an assumption that could be faulty by presuming the listing fee was 5% and that the listing rep would be willing to negotiate a fee break with the seller to get it done.

But what if it was about commissions making the difference but the arrangement was not for 5% but 3.5% to begin with and for taking on the added liability of buyer representation in a conflict of interest, the Realtor either said there will be no fee reduction or there will only be a fee reduction of 1%. The $600k offer nets $3k more.
Deal Expert
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Aug 2, 2010
15193 posts
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Here 'n There
Plain & simple. $600 offer gave owner more $.
Sr. Member
Jun 19, 2007
795 posts
756 upvotes
Halifax
eonibm wrote: Plain & simple. $600 offer gave owner more $.
Right, but potentially less. Instead of the realtor and owner splitting 100% of a 590k pie, they get to split 97.5% of a 600k pie (essentially 100% of a smaller, 585k) pie. They're both worse off for not having been able to come to some sort of agreement on how to split this larger pie that would have left both better off. Well played.

The reasons for this IMO are two fold. 1) Most people aren't that smart, and it's possible that they honestly didn't figure it out.

2) People are self interested, but moreso are spiteful and will happily act against their own interests, if it means they think they can stop someone from screwing them, or screwing someone who deserves it.

Case in point: https://en.wikipedia.org/wiki/Ultimatum_game

Essentially a person is given say $100. They can split it with another person any way they choose. The other person, once hearing the split, can either take it, or annul it and both get nothing. Logically, even a 99/1 split would leave guy 2 better off and he should take the deal, but that's not what happened. Once the split drifted away much from 50/50, guy #2 overwhelmingly stuck it to guy #1 for the audacity of an unfair split.

That could be what happened here. "Compromise *my* commission? I would rather take the 100% of 2.5% I'm entitled to, then compromise and set a bad precedent and start accepting 70% of what I'm "entitled" to. I'm not going to comment on the fact that my entitlement in case 2 is 200% my entitlement of case 1. That's likely the case here. his "extra" 5k from a bigger pie. What's a fair way for the realtor and owner to split it? THe owner I'm sure would argue more along the lines of something like 90/10 since it's their house, and it would leave the realtor slight better off. The realtor I'm sure would also argue somewhere around 50/50 to leave the owner slightly better off, arguing that it's all "realtor" money in the first place.
Last edited by seadog83 on Aug 15th, 2019 9:03 am, edited 1 time in total.
Newbie
Sep 27, 2018
35 posts
46 upvotes
OP, Are you certain the other offer was 600k? i.e., maybe sellinkg agent aleaday worked the numbers as you were trying to do and calculated your offer (better conditions, reduced juice perhaps) of $600K would trump the other offer of, say 610K. But, when you went back wiht 590, the delta was too much
Deal Addict
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Mar 23, 2011
1790 posts
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Seller may also have trusted the other offer because they were working with an agent that presumably would have made sure that they were prequalified financially. If the financial difference is minimal, you may have lost simply by being the stranger off the street.
You may have done everything right, but you also will never know all the details of the other offer and what commission agreement was in place.
-----------------------------------------------------

"It's better to be dead and cool...than alive and uncool!"
Deal Guru
May 1, 2012
10027 posts
9747 upvotes
Markham
LOL OPs math works out to be 500 bucks better than another offer. What a joke, 500 bucks. This is a house purchase, this isn’t a glorified outing at the dollar store.

Man and he did “math” to get to that 500 bucks, hilarious.

You know what 500 bucks got me at the decor centre of my builder? A couple wall outlets. LOL 500 bucks to sweeten the deal, I’ve now heard everything.
Member
Feb 9, 2018
462 posts
347 upvotes
Did they tell you the other offer was accepted at 600K? or is the sold price already out? May be they did the same with other offer i.e. called them or signed it back and got a better offer. who knows?
[OP]
Sr. Member
User avatar
Mar 2, 2009
516 posts
256 upvotes
Some really good points in this thread. Thanks!

Yes, from what I understood they accepted a 600k offer. It will take a while until the price appears in the Land Registry where I can see it.

They asked me to register as second offer, in case the first one falls through. I'll pass on that, I prefer having the freedom to make offers on other properties during this time.

And in 10-15 days I can get in touch and see if it is still available.
Sr. Member
Aug 15, 2013
825 posts
410 upvotes
Guelph
Well, what transpired is anyone's guess at this point. But for the OP, the simple answer is your argument has way too many assumptions; in terms of what the commission split is, what the seller's / buyer's / realtor's motivation is, what were the final condition in the accepted offer and more.

Regarding sold price - depending on where you are, there are multiple outlets to get the information, multiple realtors on this board who am sure will be happy to share the information. [...]
Last edited by Mars2012 on Aug 18th, 2019 9:22 am, edited 2 times in total.
Reason: solicitation removed
Deal Fanatic
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Dec 20, 2004
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Toronto
oasis100 wrote: this is what happens when a buyer thinks they can beat the system that is in place.

did you and the listing agent explicitly agree that they were going to give back the coop from your side?
Don't forget that realtors generally aren't the smartest people out there. He may have simply not realized that OP's offer was a better offer.
Deal Addict
Feb 19, 2019
1240 posts
1748 upvotes
Stouffville ON
derdev wrote:

Yes, from what I understood they accepted a 600k offer. It will take a while until the price appears in the Land Registry where I can see it.

They asked me to register as second offer, in case the first one falls through. I'll pass on that, I prefer having the freedom to make offers on other properties during this time.

And in 10-15 days I can get in touch and see if it is still available.
You don't have to check Land Registry to see the sold price, number of other sources can provide this information the same day the deal is firm.
If the offers falls through you will likely hear from the agent first.
Full Time and Full Service Realtor
Newbie
Apr 19, 2011
17 posts
9 upvotes
SUGA
I think you did the right Calculations and I get the feeling the Realtor was playing some game. I believe he/she wanted to look good in front of the home seller and show that I got $600k without working out the Math or numbers in the deal. This is why you need to somehow to talk to the Realtor and homeowner in person.

Lots of Realtor don't even like doing the simple math but just take the easy way out. |More than half are not looking our for the best interest for their so called customers.



derdev wrote: Can someone help me make sense of the result of an offer I made for a house?

So here are the relevant events:
- I made an offer to purchase, directly to the seller's agent, 575K
- Seller's agent told me there are 5 offers in total
- Same evening seller's agent calls me, tells me they are currently deciding between my offer and another one:
- "My offer has better conditions (downpayment, etc.) but they would accept if I increase to 600K, if not the seller will accept another offer (even if it has riskier conditions)"
- I asked whether that "higher" offer was made through a buyer's agent, or directly, i.e. are there two agents involved or one?
- I got confirmation that the other offer was made through another agents -> they will split the sales commission
- I performed a simple calculation (see below), and offered to bump my offer to 590k
- next day the call me back, that the seller accepted the other (600k) offer

Here's my calculation:

Let's assume 5% sales commission.

Other offer is 600k.
The seller's agent makes 15k (2.5%) and the buyer's agent makes 15k (2.5%), because they split.
At the end of the day, the owner gets 600k - 30k = 570k.

My offer is 590k.
So the seller's agent makes 29.5k (5%). This is enough for the seller's agent to give 10K to the owner, so the offer becomes 590K+10K, and the agent makes 19.5K.
At the end of the day, the owner gets 590k + 10k - 29.5k = 570.5k.
And of course the seller's agent could throw in 1-2k more to sweeten the deal for the owner, and still make more than the other option!

Does anyone understand why would the seller's agent and the owner pick the 600k offer in this case? Wouldn't it be better for them to pick my offer (especially considering better conditions on offer)?

From what I can understand, my offer was a win-win-win, for owner-agent-me.
Jr. Member
Jan 11, 2017
109 posts
111 upvotes
Mississauga
gei wrote: Don't forget that realtors generally aren't the smartest people out there. He may have simply not realized that OP's offer was a better offer.
Lol ouch, generalizing much?

Realtors (of course there are bad ones) are generally not THAT stupid. Like another poster said, you're talking about $500 on a $600,000 purchase, that is 0.083% of an advantage. Such a minuscule advantage, I would've suggested my client to go with the buyer who is working with an agent as well. You cannot assume the listing Realtor will accept the entire 5% commission if a private deal was brought in, they may have some agreement that says listing brokerage will only get 2.5%, were you going to sign with the listing agent as your buyer agent? And ultimately it is the seller's choice too, Realtors only represent the clients. If I was a Seller and the difference was $500, I would work with someone who is represented by an agent as well.
Realtor
Right at Home Realty Inc.
Deal Addict
Nov 2, 2014
1069 posts
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Scarborough, ON
zackcheng wrote: Lol ouch, generalizing much?

Realtors (of course there are bad ones) are generally not THAT stupid.
That statement you just said is quite the generalization itself.

Where are your numbers?

What are your numbers?

How did you come to that conclusion?

Side note - I am pro realtors and would never sell/buy a property without one.
Deal Fanatic
Dec 20, 2018
5352 posts
4428 upvotes
Because OP didn't agree to conditions requested by seller (600k), while other party did

Op has no idea the commission or how it's split.

I mean not hard to see why OP didn't get it when he didn't agree to price requested while other buyer did

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