How Does a Home Buyer Make Sure Their Offer is Seen and not Overlooked

Copyright © 2014- 2023  AUTHOR: Paul R. Marino, REALTOR® since 1988, e-Pro®

 

Do you want to know what's really going on behind the scenes in the world of real estate offer submittal? This article does exactly that. I'm going to explain to you all the subtle things going on in the background that will provide you with a full understanding of the process. The first thing you should know is that the process of offer submittal and review is performed by humans. And, like anything performed by humans, stuff happens. Some intentional. Some by accident. Your job is to control everything you can control. But understand that some things are simply out of your control, and you're just going to have to trust the process.

 

Before we get started, you're going to have to decide if you're using a buyer broker, or you're presenting the offer yourself, without the use of a buyer broker. You may have concluded you can do this yourself, and you certainly have this option.  So let's say you want to go this route. You figure out the price and terms you want to offer, you ring up the listing broker on the phone, and you say: "We want to put in a offer.", And the listing broker exclaims, "That's great! Are you working with a buyer broker?" "No", you tell the listing broker. Why do I need a buyer broker you think to yourself...I can do this myself. The first thing the listing broker is going to do is explain they need you to review your state specific consumer disclosure. It's the law. The state real estate commission mandates that upon first contact with a real estate customer, the customer must be provided with an explanatory disclosure statement that outlines the various types of agency relationships. In other words, the real estate commission wants real estate consumers to know precisely who the broker is working for and has pledged their allegiance to. In general, if you haven't signed a specific document stating the broker is working for you, they aren't. So guard what you say. These rules are the same if your using a traditional real estate broker, or a Flat Fee MLS listing brokerage like Landfall Properties, LLC. For sale by owner (FSBO) sellers who are in no way tied to a real estate broker, are exempt from presenting this document, since they are representing themselves.

 

Back to submitting the offer. You probably know this already, but the listing broker, whether they're a traditional broker or a Flat Fee MLS broker like Landfall Properties, LLC, works for the seller, and is (by law) required to protect the interests of the seller. They are under no obligation to put your interests first. So let me ask you this. Why would you want to put in an offer by yourself to a listing broker with no buyer broker protecting your interests? The smart answer is, you wouldn't. You're not going to gain one single advantage - none. You're not going to pay one dime less for the property. In fact, you open yourself up to being taken advantage of. If you'd like to read a great article on why this is a bad idea, you can link to this article. In the modern day and age, there is simply no good reason not to be represented by a buyer broker. In fact, not only will it better protect you, it will cost you nothing, and when working with us, you actually get paid for working with us. Your four figure compensation comes in the form of a buyer rebate check made out to you on closing day. There are huge advantages to you using our Flat Fee MLS programs, whether it be Flat Fee MLS Connecticut, Flat Fee MLS Florida, Flat Fee MLS Massachusetts, Flat Fee MLS Maine, Flat Fee New Hampshire, or Flat Fee MLS Vermont. 

 

By now, I hope you've concluded that using a buyer broker offers you major advantages, and one of these is ensuring that your offer is actually seen. You might be asking, why wouldn't my offer be seen? Welcome to the real world. Imagine this scenario. There's been an open house, and many buyers have toured the home, as it is competitively priced. The listing broker takes an offer (not your offer) on the listing, shortly after the open house is over. We'll call this Buyer #1. Buyer #1 (not tied to a buyer broker) has submitted the offer directly to the listing broker because they somehow believe that submitting the offer directly is going to save them money. Buyer #1 surmises that the seller is only going to have to pay one sales commission, not two, thereby saving money all around for everyone. Actually, Buyer #1 is going to pay the exact same amount for the property, and the seller is going to pay the exact same commission agreed to in the listing agreement (somewhere in the vicinity of 5% to 6%, but commissions vary and there are no set fees). The only advantage to this scenario falls to the listing broker, who can pocket that entire 5% to 6% (or whatever) themselves, and not have to share it with a buyer broker. For you sellers out there, compare this typical 5% to 6% commission outlay, to the 0% to 3% you will pay using our Flat Fee MLS listing programs that combine the advantages of a for sale by owner (FSBO) sale, with that of a traditional broker.

 

But you (Buyer #2), working with a buyer broker coincidentally place an offer on the exact same day as the buyer referenced above. Two offers. Let's use a hypothetical sale price of $350,000 for example purposes, and let's use a hypothetical 6% gross sales commission. This is the sales commission the seller has agreed to pay the listing broker, no matter if a buyer broker is used or not. If Buyer #1's offer ultimately makes it to the closing table, the listing broker will pocket $21,000. Not too shabby. If Buyer #2 (your offer) is accepted, the seller will pay out the exact same $21,000 in commission, except part of it will be paid to the listing broker, and part to the buyer broker. The listing brokerage sets the size of the split. Sometimes it's 50%/50%. It varies. Let's assume 50%/50%. So the listing brokerage will pocket $10,500, and the buyer brokerage will pocket $10,500.

 

Now let's examine the offers. Remember, the home is competitively priced at $350,000. Wanting to have their offer accepted, Buyer #1 (no buyer broker) comes in at the ask price of $350,000. Buyer #2 (your offer), also knowing the home is well priced, come in at the same full price of $350,000. The seller is going to net the exact same amount of money no matter which offer is accepted ($329,000, or $350,000 - 6% = $329,000). However, if Buyer #1's offer is accepted, the listing brokerage pockets $21,000, and if Buyer #2's offer is accepted, the listing brokerage pockets only half this amount, or $10,500. Can you see the obvious problem here? 

 

The way it's supposed to work, if everyone is following the rules (state law, MLS rules, and Realtor Code of Ethics Rules), and everyones doing what they're supposed to be doing, is that both offers must be presented to the seller, so the seller can decide which to accept. It is not the job of the listing broker to make this decision. The seller alone has this authority. So you (Buyer #2) are concerned that because of all the activity on the home, your offer might not get seen. Well, if you're working with a buyer broker, you have some very powerful tools at your disposal. Because the buyer broker is a member of the MLS, and because the MLS has rules about how offers are submitted, the buyer broker is afforded certain assurances regarding offer submittal. While all MLS's are a little bit different, many have written into their rules that a buyer broker has the right to participate in the presentation of the offer to the seller (unless the seller provides written instructions they do not wish to have the buyer broker present). When I say "right to participate", I mean the right to be physically present when the offer is submitted. Now, I will tell you that this rarely occurs, but the right to do so is there in most MLS rules. It is however, considered somewhat "aggressive" in the real estate world to have a buyer broker on scene when the offer is presented to the seller.

 

What I recommend is this: You want to know the offer has been presented, but you don't want to cause any undue "tension" in the offer presentation. If you've signed up for our Level Three service, we'll simply include a sentence in the Purchase and Sales Agreement that reads as follows: "In the event this offer is declined with no counter, the seller shall write the word "DECLINED" on the offer, and sign and date the offer to acknowledge it has been seen and evaluated." Simple. It's basically trust, but verify. Now if I run into a listing broker that simply bounces me an email and says: "I'm sorry, your offer was declined", I refer them to the offer, and my request for written confirmation. If the listing broker balks at this request, I escalate to their managing broker, and this usually gets their attention. If this still doesn't work, I then call their attention to MLS rules, which provides me with the express right to be physically present. Hopefully it doesn't come to that. As a final note, I will add that the listing broker is under no obligation to have Buyer #1 exercise these same rights, because Buyer #1 is not a REALTOR, is not a member of the MLS, and can not exercise these privileges. Again, another reason to use us as your buyer broker.