Present All Offers?
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from the Real Estate News Observer Editors
Editor’s Note: This article first appeared in the December 1975 issue of the Real Estate News Observer.
Most state laws call for the sales agent to present all offers to the vested owner on a listed property. What is the listing agent’s responsibility for presenting offers if they are on preliminary exchange proposals (mini offers) signed by another agent for his client?
In the mid-1960s, Don Eymann from Southern California developed the preliminary exchange proposal. It was a wonderful concept. Ideas and solutions could be “put to paper” at the exchange meeting when the ideas were generated. For this concept, Real Estate Exchangors will always be grateful, and it certainly earned Eymann a part of Exchange history.
SOUND FAMILIAR?
Ann Broker recently joined the Great American Exchange Group. She attended her first meeting and liked what she saw! At the next meeting, she presented her first real estate offering on the customary package. She presented a $175,000 commercial building leased for nine more years to Big X Company, a nationally rated firm. The property was encumbered by a $100,000 loan. Her clients had owned the building for 10 years and were out of depreciation, and the income was now taxable. Her counseling sessions determined that the best solution for her clients was an I.R.C. section 1031 exchange.
Ann Broker did a beautiful job in presenting the offer. Her moderator, Tom Gomez, did an outstanding job in getting offers for her.
ELEVEN MINI OFFERS
She received 11 mini offers on the accepted form, the preliminary exchange proposal. The offers were all signed by the agents for their clients. The concept was to “put to paper” ideas that might solve Ann’s clients’ problem. Of course, it is a truism that many ideas are lost if they are not written down.
Ann Broker was really happy about all the action. She couldn’t believe she really got 11 offers. However, she was concerned about what to do with a file folder full of offers. She asked the person sitting next to her what she should do and how she should handle all of the offers.
She was sitting next to Frank Jones, who was a nationally known exchangor, author, and lecturer. He told her to present all of the offers.
THE PRESENTATION
Swifter than an arrow, Ann was off to present the offers.
Offer 1: (from Smith) A vacant lot with a loan.
Offer 2: (from Evers) 200 acres in Oregon.
Offer 3: (from Jones) 90 lots in another state (unencumbered).
Offer 4: (from Gomez) A vacant encumbered apartment house.
Offer 5: (from Wilson) All cash.
Offer 6: (from Tompkins) A lot of oil paintings.
Offer 7: (from Smart) A lot of credits in a barter system.
Offer 8: (from Garvey) A parcel of Southern California land.
Offer 9: (from Minor) An office building leased to the state.
Offer 10: (from Johnson) A parcel of land and several lots.
Offer 11: (from Cole) Six single-family residences.
Had the Great American Exchange Group conducted a series of introduction sessions for new members, Ann Broker would not have been off presenting the offers.
OUCH!
Ann dropped out of the Great American Exchange Group and was never seen again. After presenting all offers to her client, she became bitterly disappointed, lost her client and her confidence, and retreated back to “whence she came.” Why?
One reason is that she presented six offers best classified as “soft” offers, or in more sophisticated circles, “junk” offers.
Another four offers were not presented with the homework. They were just preliminary exchange proposals without the benefit of support data.
Five of the 11 offers were written in a way that no one could read all of the data on the offer. In other words, the writing could not be interpreted.
One or two offers could have been possibilities. However the clients were so confused at the other offers that they gave up and reviewed these options as if there were a “cobra” attached to them.
LET’S BE HONEST!
Let’s face it, some of these offers deserved to receive a fair presentation. Others would find their best use in starting a fire in the fireplace. Many of these offers destroyed the confidence between listing agent and client, and these offers (if you can ever read them) are not even good counseling tools.
The broker who submits the all-cash offer often shuts out other offers that might work (and how many times can a broker convert an all-cash offer on a preliminary exchange proposal to a closed escrow?)
Is it really a rule or law that brokers have to submit all offers on preliminary exchange proposals to their clients?
I’M OK; YOU’RE WHAT?
Our thoughts are that if the brokers don’t sit down and explain exactly what they are attempting to do with the exchange, make the exchange offer in a format that you can read, and give you the support and back-up data, you don’t have to present the preliminary exchange proposal.
EDITOR: Ann Broker is no longer in exchanging. The Great American Exchange Group is still running and still getting many, many preliminary exchange offers. However, these transactions may be taking place “behind closed doors.”
