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Selling Real Estate Owned by a Massachusetts Estate--Some Realtors would appear to be "tiptoeing" around the Ethical Considerations, Perhaps to their Peril

By
Services for Real Estate Pros with Topkins & Bevans-etopkins@topbev.com

To the extent that Massachusetts real estate is held by an Estate, there are a different set of rules which apply to the sale thereof. In a word, the estate fiduciary, even if give specific power in the Will to convey the property, is under an ethical obligation to obtain the best price for the property in question. It is my belief that this obligation extends even beyond the time that the Executor seeks a Probate approval of the sale (generally secured by obtaining a License to Sell, for which a petition is filed with evidence of the over-all fairness of the transaction in terms of the Estate).

In Purchase and Sale Agreements which I write for Sellers who are fiduciaries of an estate, I put in a specific provision that the purchase of the property on the terms sets for in the Purchase and Sale Agreement (including price) are subject to the Estate's receiving higher bids for the sale of the property prior to the closing. As I have articulated above, I am confident that this caveat is ethically required, and I can usually convince counsel for the Buyer that this is the appropriate way to proceed.

In my experience, most of the time the property is sold at the purchase price set forth in the Purchase and Sale Agreement, subsequently approved by a License to Sell, confirming the transaction. On the other hand, I have recently become aware of the following set of circumstances which either demonstrate ignorance of the ethical standards set forth above, or worse yet, "enlightened self-interest" ,shall we say ,on the part of the Listing Realtor.

The property in question was a desirable home in a desireable Boston suburb. There was much interest in the property, and my client, represented by a Buyer's Agent, had three (3) Offers prepared, each of which raised the purchase price offered. The Buyer Agent indicated, in writing, to the Listing agent that my Buyer wanted a chance to make a "last and best" offer. The time and date for the the offers appeared. My client's bid was lower than another. The property was sold to the other bidder.

The Estate, through the Listing Agent, never got back to my client, through the Buyer's Agent, seeking information about our "last and final". In point of fact, there was NO communication, at all, from the Listing Agent to the Buyer's Agent for my clients. The plot thickens; the deal that was accepted did not involve another Realtor; the Listing Agent got to keep all of the commission. Was that the reason there was no "follow-up" communication after the first bid? It surely looks so.

Transactions like this one call into question how we operate as professionals. I wanted to let each of you know what the rules are with the thought that high-principalled professionals almost always follow the rules when they have been apprised of them. The Estate did not get as much money for the home, as they should have gotten. That is wrong!!! Whether there will be any opportunity to "re-open" this situation seems unclear. What is clear, however, is that the Listing Agent appeared to operate out of self-interest to the detriment of his or her client. None of us benefits when that situation arises!!

Elliott S. Topkins
Topkins & Bevans-etopkins@topbev.com - Boston, MA
Massachusetts Real Estate and Title Atty

Thanks to all for you for your comments.

I still stick by my guns in terms of the way I structure my Estate seller P & S Agreements, and I am pretty certain that my view of the law is the accurate one. The attorney for the Estate probably just wanted to get the property sold, and was not concerned about the "what-ifs". The thing I love about ActiveRain is the passion and intelligence of your comments. Where else can I get these?

Best wishes for the most Super of Super Sundays--the newest, and probably most fun, of all of our winter chances to get together with family and friends.

 

Elliott

Feb 06, 2010 11:56 PM
Ross Therrien
Prudential Verani Realty, Londonderry,New Hampshire - Londonderry, NH
Realtor, Broker Associate

I agree with Sarah #8.  Who was representing the listing agents buyers--not the listing agent--I hope.

Feb 07, 2010 12:05 AM
Elliott S. Topkins
Topkins & Bevans-etopkins@topbev.com - Boston, MA
Massachusetts Real Estate and Title Atty

Ross--I believe that was the case. Had all the makings of an "inside job"

 

Elliott

Feb 07, 2010 12:40 AM
Norm Werner
Real Estate One - Milford, MI
Helping the first time and every time

This type of thing happens all the time on foreclosures and short sales where the listing agents' investor buddies seem to magically win a high percentage of the time, even without the highest bid. I have certainly lost numerous deals in which I had asked the listing agent to let me know if there were multiple offers and to give my client a chance to do a best and highest, only to see later that it was sold to someone else without me ever getting a call. That's just part of the chaos that is real estate these days.

Feb 07, 2010 12:42 AM
Michael J. O'Connor
Diamond Ridge Realty - Corona, CA
Eastvale - 951-847-4883

I agree with Norm that I'm seeing this all the time in the foreclosure arena.  My recent blog about 'Modern Day Bank Robbery' described a similiar situation where a listing agent actually told me that the property would not be on the market for some time when in fact the listing agent was in process of haivng a buyer approved by her seller bank.  My client was preparing to offer almost 10% more than the amount the listing agent sold the property for in her double-ended deal.

Makes me crazy.

Feb 07, 2010 01:20 AM
Mark Montross
Catamount Realty Group - Burlington, VT
Listing and Buyer Specialist

I find this escalating clause in a contract to be very interesting - what a clever idea.

Feb 07, 2010 01:22 AM
Elliott S. Topkins
Topkins & Bevans-etopkins@topbev.com - Boston, MA
Massachusetts Real Estate and Title Atty

Hey Mark--I like the escalating clause idea, too. We are not in a "bidding wat world" except perhaps with estate where the heir just want to get rid of the property. fowarded Lenn's comment to the Buer's agent involved.

 

Elliott

Feb 07, 2010 01:27 AM
Barbara Birinyi
Quitman, TX
TX Real Estate Broker - Horse Property Specialist

Elliott,  Congratulations on the Feature and the lively discussion.  Catching lightening in a bottle really does happen sometimes. 

Feb 07, 2010 01:46 AM
Elliott S. Topkins
Topkins & Bevans-etopkins@topbev.com - Boston, MA
Massachusetts Real Estate and Title Atty

Barbara--I am going to subscribe to your blog. We all need people who appreciate our sincere efforts, and you are one of those people. Who knows. Louie? "this could be the beginning of a beautiful friendship!!!.

Elliott

 

Feb 07, 2010 02:21 AM
Bob Maiocco
8Z Real Estate - Evergreen, CO

Elliott, I'm with Lenn and her very well considered approach.  As we all have experienced; any counter offer -- even a request for highest and best (Which I also agree with Lenn is a poorly applied term and describes and equally poorly applied practice) is actually a rejection of any previous offer.

 

If you had an attorney write a well crafted escalation clause (since we are not legally qualified to do so) your buyer would have been in better hands and the Seller would have recognized your offer as one that was acceptable and enforceable, as written, with no counter offer.

Feb 07, 2010 04:48 AM
Sarah Rummage
Benchmark Realty LLC, Nashville TN 615.516.5233 - Nashville, TN
Love Being RealtorĀ® in the Nashville TN Area!

Do you know for sure that the listing agent received 'full/double commission,' whatever that is?  I have cut commission to the bone a couple of times lately to make the deal work. I don't like to, and don't make it a general rule, but each circumstance is different.

All offers have various terms.  The bottom line, the sales price you see recorded, isn't always 'the bottom line.'

Sarah in Nashville

Feb 07, 2010 05:05 AM
Aaron Vaughn 830-358-0455
Conifer Builders LLC - Canyon Lake, TX

If you live and work in Massachusetts, do yourself a favor -- move out of state as quickly as possible! For it is the state of confusing, contradictory and inane laws. Run. Come on, little fella! Run!

Feb 07, 2010 06:39 AM
J. Philip Faranda
Howard Hanna Rand Realty - Yorktown Heights, NY
Associate Broker / Office Manager

True story: Lew Alcindor  was drafted by both the Milwaukee Bucks of the NBA and the NY Nets of the ABA. Each club knew there was a competing offer. Each submitted a blind bid which was supposed to be their best and highest. He really wanted to play in New York. But the Nets' bid was lower, and he decided that they must not have wanted him as much as he wanted them. He signed with the Bucks. He didn't give the Nets a 2nd chance. They had their chance. 

In many estates, the heirs often want to expedite the process and not want to get into protracted, poker game like stake raises and want to go with the best and highest, period. My experience is also that too often, late bid raises are borne of competitiveness which is often followed by buyer remorse, and that in hindsight the initial best and highest should have been the one to stick with

I'm not comfortable with an attorney-written rider which seems to try to manipulate market forces. I think attorneys should stick with law and let the brokers broker. I wouldn't tell an attorney how to do their job. I also dispute the idea that the highest offer is the only ethical obligation. An all-cash offer at 99% of asking price strikes me as giving far more peace of mind to heirs than a highly leveraged, iffy offer at 101% of asking price. I think the obligation is to fulfill the wishes of the estate, and that might be time and certainty, not just money. 

My 2c. 

Feb 07, 2010 08:49 AM
Elizabeth Weintraub Sacramento Broker
Elizabeth Anne Weintraub, Broker - Sacramento, CA
Put 40 years of experience to work for you

We can't use the escalating clause in Sacramento because our lawyers have determined it does not create a bonafide offer since it names no specific price. The liability such a practice creates isn't worth a lawsuit.

As for highest and best, that's basically bidding against yourself. When I know I'm in a multiple-offer situation, I advise my buyers to make their highest and best offer at the inception because they might not get a second chance. And even if my buyers' offer is highest and best, when a listing agent is in dual agency, often that agent can match the offer but, by knocking a point off the commission, net the seller more. However, a selling agent can always offer to make a concession if the commission is variable in MLS.

Feb 07, 2010 12:40 PM
Wayne B. Pruner
Oregon First - Tigard, OR
Tigard Oregon Homes for Sale, Realtor, GRI

A propely crafted escalation clause is the way to go. Well maybe. If one of my Sellers gets one with a cap on it, guess what? We counter with the cap price. Works every time.

If you are going to act as a dual agent, you need to be very careful and leave a very good paper trail.

Feb 07, 2010 02:23 PM
David Cahill
Century 21 Cahill Associates - Boston, MA

Elliott,

Great post!  It can get really bad when a listing agent is going for both sides because they obviously are not putting the seller's interest first. 

There is a good way to make sure your offer is presented, though.  Ask the listing agent to have the offer sign by the seller as "rejected".  I have had this requested from me once when I was a listing agent (and they were the only offer!) to put the buyer at ease and let them know that their offer was actually presented (and rejected).

David

Feb 07, 2010 02:49 PM
Barbara Kornegay
REMAX Essential - Wilmington, NC
Wilmington NC Real Estate, Homes

I agree, the whole thing sounds VERY FISHY... and unfortunatly happens all to often....  It is a greedy unethical world our there... 

Feb 07, 2010 10:13 PM
Elliott S. Topkins
Topkins & Bevans-etopkins@topbev.com - Boston, MA
Massachusetts Real Estate and Title Atty

Erica--I should know the answer to this, but should there not be a much higher standard for realtors when they represent both sides of a deal. We, as attorneyc, just cannot do it. In Massachusetts, we are permitted to represent the Lender and the Buyer. We are never permitted to represent the Buyer and the Seller.

I just don't know how it can be expected of a realtor to give up fully 1/2 of a commission to act fairly. My suggestion would be to prohibit this, but I am sure I would be booed out of the stadium if I advocate this.

I may anyway, in a future post.

 

Elliott

 

Feb 08, 2010 08:20 AM
Robert Murray
The Corcoran Group - Westhampton Beach, NY

Thanks, i represent an estate selling a property in NY state and I will take your comments under advisement!

Feb 08, 2010 09:39 AM
Richard Weeks
Dallas, TX
REALTORĀ®, Broker

The Texas Real Estate Commission has advised Texas agents that esculation clauses are not to be used.

Oct 19, 2013 11:31 PM