I certainly do not mean to offend my fellow Real Estate Professionals, but sometimes I can't help but wonder. Recently at a continuing education class, I met a colleague who is new to the business and is now trying to acquire some investment property with her husband. After a brief conversation we had with other licensees in the class, she pulled me aside to ask some questions. She told me about some concerns she had regarding her current transaction.
It turns out that she had being trying to purchase property with the help of her broker. She sent out several viable offers that would surely be considered acceptable by a short sale lender. However, not one of her offers was accepted by the listing agent. Someone in her circle suggested that she use the listing agent to represent her to submit an offer. This would force her to pass on the commission she would earn by allowing the listing agent to double theirs.
She agreed and decided to submit a low offer through the representation of the listing agent to see what would happen. Sure enough her first offer was accepted and submitted to the lender for approval. The first offer! Coincidence or intentional? Please don't tell me maybe this was the best offer out there because I simply won't buy it.
In my opinion this was a simple case of double ending a commission. This brings me to my question. Where is the professionalism? Where is our oath to the Realtor's code of ethics? Where is the fiduciary duty we owe to our sellers to act in their best interest and present all available offers?
The scary part is that it appears to be a pretty common practice in today's real estate environment. I've felt the effects of this business practice being used in the REO market as well.
Don't get me wrong, I understand the market can be brutal for some and I know we are coming out of a pretty tough year, but the rules haven't changed just because the market may be fierce.
You may be saying "well, no harm no foul, the seller has anything to gain anyway. He or she will not be gaining any financial benefit from this transaction other than salvaging one's credit to begin home ownership once again sooner rather than later." I say wrong, the seller may have a lot to gain by selling the property for the highest possible value.
We need to make something very clear here, not all short sale sellers will qualify for the debt forgiveness act. Chances are that the seller will receive a 1099 at the beginning of next year stating that they may have incurred tax liability on the difference between the closing price of their home and the amount they owed to the lender. That is the precise reason the listing short sale addendum here in California indicates to the seller to consult a legal or tax professional to know what the tax consequences may be.
Real Estate Professionals are obligated to inform you of this possibility. If not, then they have no right to be selling real estate in the first place. Secondly, once the sellers are given notice by the IRS or their State Tax Board that they have potentially incurred a tax liability they were never told about, it will be too late.
If this story rings true for any real estate professionals out there then you should be ashamed of yourself and understand that you are lucky you only lost a client this time, next time you could end up on court and possibly lose a lot more than just a client's trust.
Most Real Estate Professionals out there are knowledgeable, responsible and accountable individuals who serve the public in the manner in which they are obligated. But unfortunately it only takes a few bad apples to tarnish the integrity of those of us who consider ourselves the serious professionals we set out to be.
Let me hear your opinions.
Diane Wheatley, Broker