Deerwood Realty and Friends Podcast

Saw a story online and I wanted to go over it with you.  Seems like people got offended but nothing untoward was done.  Let’s set the stage.

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– A family member is selling the home of her deceased parents.

– Seller says the house needed work, but it was structurally sound and in a good neighborhood.

– Seller interviewed a couple of agents and chose one. 

– There is a time lag between when the family members are clearing out the house and when the house gets listed.

– Listing Agent, with house unlisted brings forward a verbal offer from another agent far below what the house was worth, and waiving the buyer agent commission.

– This offends the sellers

The offense is

a.  The offer is too low

b.  The agent who offered to buy is attempting to cheat the sellers

Thoughts: 

1.  I can understand why the sellers are offended.  They think that they hired a listing agent to represent them and it doesn’t seem like the agent is doing so.  This is kind of complicated so let’s break it down.  I see this all the time in my business when I list homes for sale, especially those that need work.

2.  Have you signed a listing agreement with “your” agent?  It very well could be the answer is no because the house isn’t ready to be listed and there may be exemption rules in your state that differ from mine. 

If you haven’t officially listed with the agent, they aren’t working for you and they are probably looking out for themselves.

If you have listed with the agent, there are laws that require disclosure of ANY and ALL offers to the seller.  It doesn’t matter if the offer is too low, they still have to present it.  In this case, it would be better for the listing agent to have explained that to you up front, before they took the listing.

3.  Why do people insist on messing around with verbal offers?  I’ve never understood why one needs to make a verbal offer.  There’s nothing you can say that can’t also be put in writing.  In this case, what are the sellers going to agree to?  A sale price and waived commission?  What are the terms for closing?  What if the buyer can’t close, what’s the remedy?  So many questions, and there’s no point, especially if someone else puts an offer in writing.

4.  I am inferring from the story that the listing agent did indeed have some sort of agreement with the seller because the other real estate agent made the offer to the agent.  It wouldn’t make sense for that offer to occur because how would the agent have known the house was for sale or that the listing agent was the point of contact?

5.  The offer I get is this.  I’m mr investor.  I want to buy your client’s house.  You work for me, and you can have the commission.  So if the deal is 6 percent commission, I get all six.  Now, there are problems with this.

1.  If I am working for the investor and not telling my seller, that is a serious breach of ethics.

2.  There is a reason for commission.  When a buyer is willing to waive the commission, you’d better believe that they will be trying to make that up by buying the house at a super low price.  As the seller, you will pay…the word may not be commission, but it will be a payment(as in much lower sale price for the house)

6.  Do the sellers have a right to feel offended that someone put in a lowball offer?  Yes.  You have a right to “feel” anything you want.

6B. Was the buyer offer illegal?  I’m not a lawyer and I don’t give legal advice.  I have no idea if it was legal or not.  It doesn’t seem right, but the practice never has seemed right so I avoid it.

7.  How would the listing agent have handled this better?  I’ve run into this situation.  I probably know 5 people who would buy an investment property right now if I called them.  But, when I work for a seller, I don’t call them. Why?  The house needs to be on the open market where anyone can make an offer.  That is the best thing for your client.  It has to get to the market.  Otherwise, you never really know what the house “should” sell for. 

I’ve never seen an offer come in for a property before it went to market that was for more than the property eventually went for….and investors are just hoping you don’t list a property.  They want to make it seem like they are the only buyers there are.  That’s hardly ever the case.

8.  I’d be interested to know why you chose this particular agent to sell your home?  What was it about them during your initial conversations that said that this agent was the most ethical and professional choice you could have made?  And, when this investor issue came up, did it give you pause?  Should you have terminated the agreement right then and there? 

To me, it depends.  What was the advice of the agent when they relayed the verbal offer?  Did they press you to take the offer?  That would have been a red flag, in my opinion, and reason to choose someone else. 

In a strange sense though, the agent is trying to sell the property.  I don’t know that it’s offensive that they found someone before the house was listed.  After all, we talk about those real estate ads that say, “I’ve got a list of buyers who would buy your house right now.”  We know that home sellers believe this.  Agent’s wouldn’t advertise it if it didn’t work.

9.  Feeling disappointment, Feeling Confusion, Feeling offended.  These are common emotions during the home buying or selling process.  The only thing I know that I try to do to help is I try to explain up front all of the tricks and potential highs and lows I see when I’m working with buyers and sellers. 

10.  Would I report the listing agent?  I don’t see what the listing agent did wrong.  They presented a lowball offer as likely required.  They did the right thing.  If it looks like the agent put their interest above yours, I’m not sure how, given the way the situation unfolded, you could claim that. 

11.  These types of things annoy the general public and it’s a reason why real estate agents have a bad reputation…just a little higher than that of congress.  The appearance is that the buyer, who is also an agent is trying to profit off of seller desperation.  Maybe they were.  But there’s also the chance that they were just trying to buy a property and knew that it would take some amount of money to repair and that the risk warranted the lower offer.  We don’t know.  I do know that oftentimes buyers will make a low offer.  There’s nothing that requires the buyer make a high offer just as there’s nothing that requires the seller to take the lowest offer.

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