Real Estate Blog - Disclosing Client's First time Buyer Status is a Bad Idea

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Disclosing Client's First time Buyer Status is a Bad Idea

You have some clients or a client. They've told you they're first time buyers and they are eagerly seeking to take advantage of the up to $8,000 First Time Home Buyer Credit available at present until November 30th 2009. They are looking at homes right and left. You're calling and making appointments. You are making offers. Agents are asking you, "Are these first time buyers?" So what do you say?

NO WAY!!!!!

I've had several offers recently on my listings where this issue came up. In all cases the Buyer Agent volunteered the buyer status. I appreciated the information which I readily passed on to my seller. However, the Buyer's negotiating position was weakened as a result. Why?

Because the seller knows that the buyer, if they can get an accepted offer, will be getting up to $8000 off.
Because the seller knows the buyer is in a hurry to get something under contract.

The seller now realizes the buyer has both a big subsidy and urgency. This does not work in the buyer's favor. In fact it probably can be argued that it is better to say that the person is not a first time buyer no matter what. Because then the urgency and subsidy is off the table and the seller is back to square one.

As agents, (fiduciaries) our duties to our clients involve exercising ordinary care and diligence, and by state law we are obligated not to disclose a clients real estate needs, at least in Iowa. So if you carelessly disclose the client status you are likely violating state law and the REALTOR code of ethics. (Standard of Practice 1-9) If it was the case that the client asked me to tell, I'd want to try to educate them about the pros and cons first.

I don't ask the status of the buyer of showing agents on my listings because in my experience agents will readily provide it without me having to even ask! However, often when I'm setting up appointments, selling agents ask me if the client is a first time buyer. My standard response is "No, they're buying this home the hard way, with their own money." But that's just me.

Posted by Matt Grohe Remax Des Moines CRS, GRI, ABR on 09/26/2009 11:37 PM

Comments (18)

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18 Comments on Disclosing Client's First time Buyer Status is a Bad Idea

SEP

You know Matt... I think we just have to remind the seller's agent that our duty is to our client and that may be considered confidential information that could hurt the buyer. Our fiduciary duty is to our client not the other agent. You are on the right track! Way to go!

I agree. Disclosing their status with the $8000 tax credit deadline coming up puts them at a disadvantage.

Matt,

As an REO Listing Agent I am constantly amazed by what agents disclose about their buyers - everything from the isues you bring up to the fact that they have parents who will give them whatever they need to make this deal work. Simply amazing....and I take this infor right to the bank (LITERALLY)

You make a great argument in regards to first time home buyers. But let me ask you this. Has a Realtor ever disclosed that their buyer/seller is relocating or having marital issues?

SEP

Matt - WOW! What an interesting concept. While I am not a Realtor writing up offers, I do know that my first time buyer clients Realtors are having a really hard time getting their offers accepted. I don't know if they are offering the info on my clients first time buyer status but I do know that many of the counter-offers are asking if the buyers are first time buyers.

I'm going to send this post to my first time buyers Realtors and see what they say about not disclosing our mutual clients status. I'm not sure what the law is here in CA about this particular scencario.

Even information that seems innocuous at the time can be used in negotiations. Better not to say anything at all.

Smart advice and right on the money. You are correct in posting this.

Very good post and a reminder that many times in life, "less is more!".

Everyone: Thanks for all your comments. Client confidetiality is a huge part of our duty.

James: At one time or another, another REALTOR has disclosed everything but the color of their clients underwear to me.

SEP

Matt, I understand your reasoning and certainly the less said about a client, the better. There are a few things it pays to remember. The $8000 tax credit was offered to get buyers "off the fence" and has absolutely nothing to do with the seller or how much s/he gets for the home. I have certainly seen cases where the seller was assuming the buyer would be getting the money (due to price point or noticing that the buyers were young or newly wed, etc) and felt that that should enter the equation. I simply explain that it is not relevant to the negotiation as the home is worth what the two can agree upon AND get the lender to lend and the appraiser to substantiate, etc. The seller has no way of knowing that the buyers will apply for or even qualify for the credit as there are income limits, timeframes to meet and paperwork to complete and as we all know, 'first time homebuyer' does not mean the buyer has never owned a home before so a NO answer to the question may not be telling the seller what he thinks it is telling him!

Also, with out some of the easy money previously available, these days the pool of qualified buyers is shallower. I would not advise a seller client to push a buyer unreasonably simply based on "they are getting $8000 and I should benefit from it too."

I work with a lot of buyers and I have yet to run into one who was simply buying to get the credit. If they told me as much I would certainly spend extra time helping them assess if this really is the best thing for them to do. Home ownership is a bigger commitment than any $8000 can make up for! I also make sure they know, especially now, that they may or may not meet the deadlines for qualifying for the credit as closings are taking much closer to 45 days than the 30 days of past years. I don't want to be liable for "you told me I'd get the money!"

At any rate, I certainly speak from the perspective of my market and my experience alone...I'm sure there are scenarios where sellers try to use it against buyers more commonly and as ever, I believe the experience and knowledge of a good agent can be the best asset a buyer or seller can have! I consider it my job to be able to explain why a path like this would not be wise!

Thanks for bringing it up!

Sarah: You always put a lot into your comments and I always enjoy reading them.

SEP

Hey Matt... I have to agree with you... keep your clients information sacred at all times.... that is what we pledge to do... thanks

Matt- As a Loan Officer this did not occur to me. I've been motivating agents and buyers to move asap but your tip is very important for all of us to consider. Do not tip your hand to the enemy.

If the seller KNOWS that the buyer loves the house and must close before the deadline they will be much less likely to offer the usual concessions. They may even use this as a negotiating tool to push a buyer to take it or leave it.

With your permission I will notify my local agents of this. Not all of them have become AR members yet.

If I was a seller, I would stick it to a first time home buyer if I knew they were IN LOVE with my home.

Another excellent blog.

I'm not sure what the $8,000 effect would have on a Seller but I can see how the buyers have an urgenc - which in turn is good for Sellers too (we have serious buyers on our hands).

I dont volunteer my buyer's information. Just today, the listing agent who was trying to sell me another house in the neighborhood asked me what's my clients' budget? Surely I have no intentions of discussing it.

Great reminder for all of us to always watch what we say!

SEP

Hi, Matt:

Good post topic. I don't like adversarial transactions, but if I were representing the seller and found out the buyers were trying to qualify for the $8,000 tax credit, I would probably mention it. And it would probably cause the sellers to be more firm on their price or counter.

Cheers,

Robin

OCT

Matt,

I can certainly see where this would less a buyer's bargaining position...

Nice post.

Ann Hayden

NOV

I recently closed one of my listings in the end of Nov. The buyer's agent told me that they were 1st time home buyers. I was glad to know. Congress had yet to extend the credit, and it was good to know we had a time frame to keep. I prefer to have important things on the table. The tax credit was only $3000, and was not an issue to my seller.

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