Be Skeptical
However, be skeptical of what the other side tells you. If the broker tells you that he just received another offer, well maybe he did and maybe he didn’t.
~~~
So you finally found a house that meets your needs and desires. It’s been sitting on the market for six weeks for whatever reason. But it ticks all of your boxes, so you make an offer.
But when you call the listing broker to confirm that he received it, he says: Just so you know, there is another offer coming in. Yes, after six weeks, he gets two offers on the same day; what are the odds? This once happened to me, as the buyer’s broker, with a million dollar listing that had been sitting on the market over a year.
And here’s the thing about that: There is absolutely no way to know whether or not the listing broker is telling you the truth. And, you will never know. But I suspect that there is a class of broker who always say this, as a matter of course, in order to get the buyer to up their offer. It is an effective ploy. And even better for the broker, it cannot be unmasked or policed. Because if necessary, the broker could write up his own, fake offer.
So as I said in our chapter Be Deliberate, if you want the house, you must proceed as if he is telling you the truth (because he may be). But here I just want to point out: Be skeptical.
If you can stomach it, the best way to deal with this situation is for the buyer to remember our chapter Try Not to Care (Too Much). Call the listing broker back and withdraw your offer. There are two possibilities here: One, he is telling the truth. In which case as a buyer, you do not want to get in a bidding war and perhaps overpay. Because as you know, there is always another house. And two, he is not telling the truth. In which case, is this someone we want to be dealing with?
Then wait a bit. The house will either go under contract with the other offer…or, the listing broker will call you at some point and say the other offer fell through. Then you can decide whether or not the house is worth dealing with a maybe dodgy broker. At which point you might even decide to lower your offer price. Yes, this is no place for factitious shenanigans.
But of course this goes beyond the other offer hooey. What if the seller says: Yes, the house did have polybutylene pipes, but the previous owner replaced them. Notice how lets the seller off the hook regardless. I am not saying they are lying, I am just saying, be skeptical. Get an inspection. Same is true for any fact about the property. Oh you noticed? Yes, that is a pig farm on the adjacent property, but we never smell it.
But what about buyers? While buyers have less that we need to be skeptical about, they surely have some facts that we should not take at face value. This starts with the Pre-Qualification or Pre-Approval Letter. My goodness these things are most often not worth the paper they are written on. No, I am not saying they are fake. But the fact is they are not written by the decision maker(s). In other words, the lender-person (whatever his or her title) who writes the letter is never the underwriter.
Other buyer concerns may be proof-of-funds, contingent contracts, timelines and dates, and we have already discussed whether or not the buyer intends to honor the offer as written. Be skeptical and confirm anything that you can. Yes, call the brokers involved in the contingent sale, call the bank, etc. Do everything that you can.
Here let me just point out, if you are the seller, one way to insure buyer representations is to obtain an adequate Due Diligence Fee. Yes, the buyer’s Pre-Approval Letter may well be worthless, but by golly if they don’t proceed, you keep their money. In fact, I would go so far to say, if you get an adequate Due Diligence Fee, you worry less about even receiving a lender letter. This works for buyers as well: Yes, the seller may be less than forthright about the plumbing, and you are somewhat skeptical. So you will be conducting adequate and timely due diligence. And if you are not satisfied, you will exercise your right to terminate. So understanding and command of the due diligence provisions of the contract really help with this whole be skeptical attitude.
I am reminded of the seemingly ridiculous adage of Ronald Reagan: Trust but verify. Which of course just means don’t trust. But I think what Reagan really meant was: Don’t trust, but be as nice and respectful as you possibly can about it. Yeah, that works for real estate. All you can do is to make your verifications routine: Yes Mr. Seller, I did ask your neighbor about the pig farm…just routine.