Agent telling me to increase buy offer. Is this normal?

30 Replies

First time home buyer here. I'm trying to understand the world of real estate but the longer I deal with this the more I get the feeling real estate agents are like used car salesmen... shady. I told my agent to put in a buy offer for me for $5,000 over asking price, instead she says she will check what the highest offer is, then tells me to offer at least $50,000 over asking because that's the highest offer. I know agents get a commission based on sale price so she has an interest on me bidding a higher price. The whole thing seems shady, especially when I Google this and people say it's illegal for seller agents to disclose offers and their amounts. Should I replace the agent or am I being paranoid? 

Put yourself into the shoes of the seller.  You have an offer of $50k over asking, and then get another offer of $5k over asking.  Which offer would you pick?

The agent is trying to make the deal happen, which it won't if you come in under the other offers.  Simple as that.

A simple reminder what your price range and cash position are should get the buyer agent back on track, with a supplemental reminder that the price range is offer price, not asking price.  If the buyer agent continually tries to up-sell you above your price range, fire her and let her team leader/broker know why.

You can also watch the properties you didn't purchase to see what they actually sold for. ie, like the property on Zillow and it will show the sold price once it gets recorded.

@Kyle Danielson

First of all, it’s not illegal to reveal the other offers in all cases. In California it is up to the listing agent unless instructed not to do so by the seller in writing.  A good agent will get as much information out of the listing agent as possible. If you’re lucky, they’ll give you the cheat codes and tell you exactly what number it will take to win that house. $5k over is nothing in this market unless you’re shopping in the $50-100k range.

Whatever happens, pay attention to the price targets your agent sets. After you miss enough of them and they start closing, you’ll know if they’ve been right or not.

If your offering over asking and the agent comes back to you to offer 10x the over amount you put, THATS SHADY! I’m an agent and I’ve never heard of that, there is many reasons why this might happen but 3 things come to my mind:

1 your market ie. New York, Denver, etc….

2 comps on the house were not set correctly 

3 depending on the size of the house and the price then maybe.

You never disclosed any of this information so I’m going off my head of why this would not be shady but it sounds like either of the 3.

As for commissions that’s not what drives your agent to make you up the price.

@Kyle Danielson   It depends entirely on your local market.  In some places, $50,000 over asking (assuming the house is priced correctly) is the norm, due to a severely restricted supply.  In others, it's absurd.

Rather than jump straight to "sleazy Realtor" accusations (something I see all too often here on BP), think about this:

$50,000 in additional sales price at an estimated 2% buyer-side commission = $1,000.  That is most likely split with the broker 60/40.  That means that the Realtor would make an additional $600. 

That's not nothing, but it's not exactly jackpot money either.  Most likely your Realtor is telling you what she thinks it will take to get the deal done. 

You can limit the risk of over paying by use of an escalation clause.  Ask your agent about making that part of your offer.

Agents shouldn't be telling each other what the highest offer is-though someone said they can in some areas.

You and your agent need to be on the same page.  They should be showing you places that are in your price range and if the market you are in has places selling $50K over asking regularly, then she needs to show you places where the offer not list price fits your budget.  Ask her to show you numbers on some recent sales in your price range.  You can then see what the list and sales prices are.

The important part to the realtor is the sales.  Do the math as a slightly higher offer doesn't get them a lot more in commission.

@Kyle Danielson

I would watch the properties in the area and note list price versus sale

price. Let the number speak for themselves and decide if you trust your agent. Make sure you have someone in your corner you trust. Some time agent list properties low to gain a lot of traction.

The market is strong so it’s not uncommon to have home go 15k-100k over list price. Some buyer understands that even if you increase your offer by 50K it will only affect your monthly payment by a couple hundred dollars a month.

@Kyle Danielson is that in your price range and what you are willing to pay?  Make sure you put an appraisal contigency if you do this.   It happens. My sister in law in DC area just closed at 100,000 over asking. some places its legal to disclose offers, some places probably not.  Ask the relator to help you out on understanding the value of 50k over asking. Are similar other houses selling for this amount?  Also is it in another brockerage or in the same brockerage they work in. I would not necessarily find it suspect depending on the market.

So you would rather your agent advise you to make offers with absolutely no intel as to how high to go? If theres multiple offers and its going a minimum $50k over list.....dont you think its a waste of your time offering $5k over list?

This is so stupid...shame on that realtor.  First, I seriously doubt that the listing agent would be stupid enough to reveal the highest offer price.  In some states, it's is illegal but, in all states, it's lowbrow and unprofessional.  But should you do it?  The offer itself doesn't matter.  You can offer $1,000,000 over list AS AS LONG AS it comes with an APPRAISAL CONTINGENCY. There's a dang great chance it will not appraise for $50k over list price (it's not that unusual here on high-end price points but not on properties that most first time home buyers would engage).  What the appraisal contingency does is state that if it appraises for less than the offer price, the seller will agree to lower the price to appraised value or return your escrow/cancel the contract.  If it appraises for higher than your offer, you don't pay more.  

Tell your realtor that any and all offers you make should have appraisal, financing, and inspection contingencies.  Ask the realtor to provide you with comparable sales to support the offer that is being recommended.  If there are no comps, don't bother.  Don't pay for an appraisal and more if the valuation isn't even in the ballpark.

And, never enter into a bidding war.  Never.  Ever.  That's the place where only stupid happens.  Let your realtor know that you're not going to overpay.  Never. Ever. 

Best...

There's nothing wrong with an agent recommending you to offer a bit more, but 10x more? Man that's crazy. I would find a new agent, or at least get on the same page with this one to form a healthy relationship. I tell my clients what I think about their offers before submitting because I know the market; however, I never force them to change their bid.

It depends on the context of things. Whats the list price? How many total offers? What market is the home in?  

In many markets $5,000 is nothing over list price. $50k over in my market is really normal with $100k+ very common. There was even a home that sold $1m over list in Berkeley with 29 offers. Was the buyer's agent shady here?

https://www.sfgate.com/realest...

With the limited information I read it as the buyers agent trying to gather more information for you so you can be fully aware of the situation. In this case the price was much higher than the price you placed.  You can decide to increase it or just stay put its really up to you. Now imagine if the situation was flipped. What if you wanted the house really bad and was willing to pay $50k more to get it. The agent never got the information for you and you went in with your original offer. Your offer got rejected and 30 days later once the home was sold you found out it was at a price you would have paid. You would be so pissed off if you didn't have the opportunity to increase your price. (This happens a lot)

Things may not be shady you just need to look for more information. This is a seller's market with inventory the lowest I have ever seen. As a buyer it is very frustrating but it is what it is. Some people just willing to pay a price and do the things some buyers are not willing to do. To win in this market you need a great agent that knows what they are doing, structure a strong competitive offer, be aggressive, and keep putting in offers. 

Originally posted by @Patricia Steiner :

This is so stupid...shame on that realtor.  First, I seriously doubt that the listing agent would be stupid enough to reveal the highest offer price.  In some states, it's is illegal but, in all states, it's lowbrow and unprofessional.  But should you do it?  The offer itself doesn't matter.  You can offer $1,000,000 over list AS AS LONG AS it comes with an APPRAISAL CONTINGENCY. There's a dang great chance it will not appraise for $50k over list price (it's not that unusual here on high-end price points but not on properties that most first time home buyers would engage).  What the appraisal contingency does is state that if it appraises for less than the offer price, the seller will agree to lower the price to appraised value or return your escrow/cancel the contract.  If it appraises for higher than your offer, you don't pay more.  

Tell your realtor that any and all offers you make should have appraisal, financing, and inspection contingencies.  Ask the realtor to provide you with comparable sales to support the offer that is being recommended.  If there are no comps, don't bother.  Don't pay for an appraisal and more if the valuation isn't even in the ballpark.

And, never enter into a bidding war.  Never.  Ever.  That's the place where only stupid happens.  Let your realtor know that you're not going to overpay.  Never. Ever. 

Best...

Out on the left coast we handle these with Escalator clauses and its right in the contract that the sellers agent is to provide the contract redakted except for purchase price to prove what the highest price is then our price is 5k over that..  I have won many a deal that way.
instead of blind offers.. 

Also as a seller in this market we put right in our purchase contracts if for some reason the property does NOT appraise then the buyer will bring in more cash.. If they wont accept that we move on.. right now the market is moving so fast you have to do that.. Now we are not selling to first time buyers these are move up 600k to 800k our average sales price is close to 500k for starter homes.. So its the next step up and what we have seen in the same floor plan ( we are building 90 new homes) sells 6 months later for 75k higher.. we have not had one appraisal bounce back on us.. Granted in other areas and lower price points with mainly FHA buyers this is a very big problem IE property not appraising. I just had some rental stock in Cleveland and of course in those C areas U can have one appraiser say 75k the next 25k so we would never agree to sell just because an appraiser low balled us..

PS  NO AGENT is suggesting higher purchase price to make a higher commission that is just not true and of course those that dont know the industry think that but really think about it  they get you to raise your price by 20k and even if they are making 3%  thats a whopping 600.00 bucks  RIGHT who is going to risk blowing a deal trying to get the buyer to come up so they can make a few hundred more dollars  LOL..  Might be some knucklehead out there but 99.9% of agents this would not even enter there thought process if they dont put the deal together they make zero.

Its a truism that no one will spend your money as carefully as you will. That's why you listen to people's counsel.... and then decide for yourself what you want to offer. If you don't get a particular property it isn the end of the world.

@Kyle Danielson

It’s not what’s illegal or legal - it’s about what’s in the contract between listing agent and seller what they’re allowed to say.

I good buyer agent can get the “feels” of right where a buyer offer need to comes in to win.

Most likely agent isn’t being shady or salesly. They’ve switching into the mode of “this is what you have to do to buy houses right now” and they’re just telling you what you need to do if you want the house.

Up to you, take their advice and increase chances of getting the house or don’t take their advice and most likely miss out.

It’s up to you, they shouldn’t be pushy about it, just factually present what they’ve found out. It’s just a different consult than buyers are used to right now.

Sounds like your agent actually has the market figured out, switching agents to a less educated one who isn’t telling you these things right now, will likely only set you back and become even more frustrated offer after offer getting declined.

Obviously could be details we don’t know here, would have to interview them myself to know for sure, but sounds like that’s all it is..

Don’t forget to throw in an appraisal guarantee of some sort with that offer ;)

@Kyle Danielson

Agree with others that this doesn’t inherently mean the agent is shady or not. In the seller’s market they are probably just trying to get your offer to stick in the first place.

If this is for a primary home, you’re also competing against emotional home buyers not just investors, which means the prices can be even more inflated since the numbers don’t have to work.

Escalation clause and appraisal gap are your friends in this market to help win offers. That way you can offer more up to what you are comfortable offering, but only if it is higher than the highest bid. Appraisal gap is also attractive in case the property doesn’t appraise and can help win over a higher offer without this clause (but just remember you would have to put more money down in this case if it doesn’t appraise so make sure it’s in your budget).

@Kyle Danielson 2 points, 1) it is not illegal for listing agents to disclose highest current offer, they just need consent from sellers. Often times that is the best way to ensure the listing agent is acting in the best interest of there clients.

And 2) your agent, if licensed, is under obligation to act as you fiduciary. If you suspect they are not acting in your best interest I’d explore a different agent, but honestly the 50k sounds pretty standard from what I’m seeing.

Welcome to the current market…and the way it’s been for over two years in my market.

Your realtor only gets a commission if your offer is accepted. You only get the property if your offer is accepted. Making offers that are too high for the market will result in deals falling through, so most real estate agents shy away from this. They want the property to appraise and the deal to close or they don't get paid. Your interests are aligned, so stop thinking they are trying to get a few extra dollars commission out of you. 

My guess is that you made the offer at $5000 over asking and the sellers agent advised your agent that your offer needed to be more like $50,000 over asking if you want a shot at getting the deal. Maybe the real number is $40,000 or maybe it is $50,000. The point is either way, you are totally out of the real of reality with your order. That doesn't mean you need to increase your offer. Offer what the property is worth to you. 

Just remember that "asking price", "market value" and "selling price" are three different things. In a hot market, it is common to list a property at an asking price that is below market price. This is done intentionally to spark a bidding war and drive the price up. It is also possible in that frenzy that the selling price ends up being higher than the average market price.