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Are you an agent who helps contribute to the insanity, or helps STOP the insanity?!

By
Real Estate Broker/Owner with Metro Life Homes RS-78439 / BRE #01708344

Are you an agent who helps contribute to the insanity, or helps STOP the insanity?!

This is sort of a spin-off blog from an earlier post that attracted alot of attention and differing opinions:

Never drew up a Buyer Broker Agreement.......until now. Here's why.................

After reading the comments on that blog post, it got me thinking.  (And as Jane Peters would say "That's Dangerous")

The example in question was whether or not it's the right thing to do to write a block of offers at a time on short sales, say 10 at a time or so.

Some people think that's how you go about getting an acceptance on a short sale, and feel their loyalty lies with their buyers to do whatever it takes to get them into a home.

I personally feel differently, and here's why:

If you are an agent who feels this is par for the course to get the job done, are you seriously looking at the bigger picture here?

Do you realize that you are writing 10 purchase agreements for buyers who have no legal or logistical intent to purchase all 10?

Do you realize that the other 9 agents are highly likely to be the listing agents on another property for another buyer of yours that you submit an offer on in the near future?

I for one will actually remember a flakey agent in my head before I'll ever remember the names of the buyers on that offer, and I'll probably think twice about the credibility of that agent and whether or not I want to be in escrow with them the next time around.  And that mostly stems from looking after the best interest of my sellers.

Also, do you realize that when you write an offer on a short sale, that the sellers are in a financially DISTRESSED position and are likely in a position to be foreclosed upon if they do not successfully short sale their home?  And that the banks that hold their mortgage will probably deem them less likely to successfully short sale their home if they cancel the contract several times because the buyer walks?  Can you not see that at minimum the basic level of humanity?

So in the bigger picture, if your version of "whatever it takes" means writing several offers at a time to roll the dice and see what happens, can you not see how you are just contributing to the insanity, and in the even bigger picture actually making your life and the lives of other agents that much more difficult?

My approach would be to ask your buyers what home they feel most strongly about.  Pick a home.  ANY home!

Write the offer, and put a deadline on it for written approval via the short sale addendum.

If you do not hear back from the listing agent with an approval by that date, then move on to the next.

Or at bare minimum, rescind the offer in writing if you find it necessary.

All I'm advocating is:  Be courteous.  Be respectful.

Yes, you do have a fiduciary responsibility to your buyers, but that does not mean that you have to trample all over ethics and respect for those around you to honor that responsibility.

Help not only all of us other real estate professionals, but homeowners also by STOPPING THE INSANITY.

I totally respect all opinions!  Let me know what you think.

 

 

Comments(40)

Mitchell J Hall
Manhattan, NY
Lic Associate RE Broker - Manhattan & Brooklyn

As they say real estate is local. In New York neither party has any legal obligation toward the other until there is a fullly executed contract. Offers, counter offers, accepted offers mean absolutely nothing. In fact, offers and accepted offers are often shopped around for better offers.

While I would never advise a buyer to make 10 offers at a time (we don't have that much inventory) I have successfully represented buyers that have made two offers at a time.

Sellers can negotiate multiple offers why shouldn't buyers be able to do the same? I wear two hats. When I represent the seller I look out for their best interests and when I represent a buyer I look out or their best interest. IMO a back up is always good.

Nov 19, 2010 12:49 AM
Michael Simcock
Coldwell Banker (Elk Grove, CA) - Elk Grove, CA
Elk Grove, CA Realtor 916 425-1084

Ralph,

You got the passions of the AR community going on this one.

Personally, I am riding the fence on this one. It is great to get an offer so the "package" can go to the lender and get things started. I figure the first offer is to get the process rolling. Once that buyer walks because the short sale process is slow, hope that the second offer can close.

As listing agents, we need to make sure that we are giving our seller's the best chance.

Nov 19, 2010 01:03 AM
Ron Parise
LocateHomes.com - Cape Coral, FL

To use your rather condescending tone...Do you realize that my buyer wants to buy a new home and he has the money so. Do you realize that he knows that this might take some time and he is willing to wait; but not forever.  Do you realize that many short sales will never get to the closing table, And do you realize that many short sellers are simply gaming the systen to stay in their home for an extra few months with out payments. Buyers know that the chances of them actually getting the home they want through a short sale are remote at best, so sure they write multiple offers. If sellers could actually commit to sell, my buyers will wait, but most of them have played thie game more than once and come up empty handed. Too many times the house goes to foreclosure before the short sale is completed and too often the bank raises the price at the last minute, and too often someone else comes in at a slightly higher bid price and bumps my guy.

As long as there are uncertainties in your offer, buyers have to protect themselves and they will bid on multiple properties and they are right to do so.

Nov 19, 2010 01:15 AM
Perky&Jody Magee
Harborside Realty - Marblehead, MA

Well put words, Ralph: "you do have a fiduciary responsibility to your buyers, but that does not mean that you have to trample all over ethics and respect for those around you to honor that responsibility."

Like everyone, Realtors have choices.  How you represent your clients, within the guidelines of the law, asscoiation ethics, and by the golder rule (do unto others), is a choice.   If a client asks you to do something legal, but in your view unethical, you have the choice of doing it, helping the clients see it your way, or terminating the relationship. 

Somewhat of an analogy is the attorney who has heard his client tell him/her that he is guilty (a trial lawyer once told us that often clients admit their guilt to them, and, whether they do or not, they always know when their clients are guilty), and then proceeds to defend the client with all their energy and resources (remember OJ). 

Years ago we read an essay in Newsweek magazine by noted criminal attorney Alan Dersowitz regarding that subject.  He said that the attorney's creed/oath that everyone deserves competent representation and a air trial is true.  But, he also said, to defent them, and try to help them "beat the rap", rather than try to convince the client to admit their guilt and plea bargain, or defer taking the case, is in itself unethical.

 

Nov 19, 2010 02:48 AM
Wendy Cutrufelli
Alain Pinel Realtors - Walnut Creek, CA
Contra Costa Realtor

I read Ralph's original post, then Michael's counter-point post and now this one.  I must confess that Michael's comments raised my hackles.  Took a step back to analyze "Why?" before commenting.  As a listing agent that handles short-sales, I have been on the receiving end of more than one undisclosed one-of-many offers.  While some banks will allow the transaction to remain in process when a buyer bails, many cancel the short-sale process and require it to start over again when a new offer is in hand.  It doesn't take long to figure out who the selling agents are who agree with Michael's "write multiple offers" strategy (but at least Michael discloses it).  When an offer is received from the selling agents known for writing undisclosed multiple offers, I advise my sellers to decline the offer if their lender is one of the banks who cancels the process when a buyer bails.   The buyer isn't committed to the property or the process if they have a no penalty "get out of jail free" card and we may not be left with sufficient time to secure a new buyer and start the process over.

Nov 19, 2010 03:15 AM
Josh & Dawn McKinley
Peoria, AZ

While I don't mind if buyers state up front that they're making multiple offers on my short sale listings, I do have a problem if they refuse to submit their earnest money into escrow. I had one very early situation where I had a short sale approved in less than 30 days, yet the buyer still was able to walk with no compensation to my seller AFTER approval was received because the earnest money wasn't deposited as per the short sale addendum (which doesn't require it until after approval). Now, we amend that addendum to have the money deposited upon acceptance of the contract and non-refundable for a short time period - just to avoid this situation. I'd rather lose a flaky buyer to our counter than have to put any of my sellers through that again.

Nov 19, 2010 03:26 AM
Tim Maitski
Atlanta Communities Real Estate Brokerage - Atlanta, GA
Truth, Excellence and a Good Deal

I'd like to know how an ethical listing agent would handle this situation. It's an example of why buyers make multiple offers.

A seller accepts a short sale contract for $100,000 and submits it for lender approval. Two months later, another offer comes in at $120,000 as a back up offer.  If you tell the lender about this back up offer you know that they will just reject the first offer and go with the higher one.  Let's say that the buyer has waited patiently for three months.  Do you look at the big picture and refuse to let the lender know about the higher offer because in doing so you will have devasted this buyer and maybe lead him down the path of making multiple offers due to this experience and thus contribute to the insanity.

Or do you do what's best for your client and let the lender know about the higher offer?  Then rationalize it by saying that the buyer should have known that these things can happen in a short sale scenario so TS.

Nov 19, 2010 03:32 AM
Melina Tomson
Tomson Burnham, llc Licensed in the State of Oregon - Salem, OR
Principal Broker/Owner, M.S.

Honestly I don't get this debate.  I had a buyer once that wanted to write multiple offers on homes. My attorney drafted the addendum for me to use for it.  Totally disclosed and totally ethical.  There is no ethics issue if it is disclosed.   If I was a listing agent doing a short sale I would advise my client to counter to remove those clauses.  I really don't see the issue here. The buyer offers to protect their interests; the seller counters to protect theirs. 

if a buyer is making undiclosed multiple offers and executes them without the ability to perform, then I suggest agents start reporting the buyer agent to the real estate boards for failing to disclose a material fact.  Engaging in multiple offers without the ability to actually buy all of them seems like financial misrepresentation to me.  We have a clause in our Oregon contracts about financial misrepresentation.

Nov 19, 2010 03:40 AM
Anonymous
Annette Sievert

Never go without a buyer agent agreement ever again. If nothing else it helps people who lack ethics not to stray because it will hurt their wallet, an aspect that usually supports decent behavior very effectively.

Ethics is something your parents teach you and if they failed neither NAR nor anybody else will instill this in a person. It is like with any contract: you either really do not need one at all because both sides would live up to any agreement and would never hurt the other side or your contract cannot cover all opportunities people find if they want to change the agreement to their advantage. Since you never know who you have in front of you, I opt for the contract at all times, at least that is enforceable.

Good things happen to good people so as much as this hurts, move on, there are better things ahead. There are generations of self absorbed, self centered, non ethical little brats growing up right now, gotta brace for that and do better with your children.

 

Nov 19, 2010 04:30 AM
#45
Phil & Celeste Pafford
PaffordHomes.com, Corona CA - Corona, CA
Corona Short Sale Broker

Wasn't this an infomercial?  Oh so much to talk about here... bottom line, I agree in theory, but here in southern CA (corona), it is a case by case decision, and what your buyer wants to do.  Almost every short sale out here has offers, and multiple back-up offers if they want them.  It has been almost a given that by the time the bank gets it act together (are you listening BofA?), the original offer is long gone, and the REO agent likes that (or causes that), because they already have their own back-up side deal offer ready (to double-end)... again, no rules out here.

Several good points already made on the posts above, but I would just echo, putting in "multiple" offers is NOT the best way to get an offer accepted.  Persistence, being the first to put in a strong offer... with follow up are crucial... just to name a few... ;-)

Nov 19, 2010 04:34 AM
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Ralph, doing unethical business in our industry gets your reputation tarnished very quickly.    We only have our reputation, it isn't worth it!

Nov 19, 2010 05:06 AM
Jack Mossman - The Nines Team at Keller Williams in Stockton
The Nines Team At Keller Williams - Stockton, CA
The Nines Team at Keller Williams in Stockton

Ralph - thanks for posting and raising the question.  From reading this and other posts on AR, there is such a wide variety of local laws from place-to-place that it's really hard to see how some of the commentary would be relevant to a specific location.  Add to that the lenders all work along different paths ... but the frustration level is what seems to be coming through on the commentary.  What troubles me is the the commentary also seems to indicate that "ethics" is part of the negotiation.  I would presume that hopefully "disclosure" and "material facts" would be a solution in most venues. 

Nov 19, 2010 05:37 AM
Ross Quintana
Real E Smarter - Spokane, WA
Real E Smarter Real Estate Coach - 509-362-1966

It is really a question of does this tactic hurt others. The answer is yes, but I would do it. Fact is that people representing short sales have to know this going in. They should prep the sellers that people put offers on more than one home. My buyer can't wait 2 or 3 months for the bank to say no. They have a life and need to move. I would write multiple offers because if they have 3 homes they would be happy with and we don't know which bank is going to accept of even respond. Then we write all 3 and the option that works first we take. This is also why the bank send back the contract and or addendum to be signed officially by the buyer after the bank accepts. I represent the buyer and this is just part of the short sale process that people lisitng short sale properties need to discuss with their clients. I don't think this makes a buyer or agnet flaky, it is just a different process.

Nov 19, 2010 05:57 AM
Melina Tomson
Tomson Burnham, llc Licensed in the State of Oregon - Salem, OR
Principal Broker/Owner, M.S.

Tim in our Oregon short sale addeundum it specifically states that the seller can continue to solicit offers and pass those onto the bank if they so choose.  Disclosed and part of the contract so not unethical from an Oregon standpoint. 

Realistially though, most short sale agents work with one offer at a time.   They get the multiple offers upfront, execute the one that has the best chance of being successful with the lender and work that offer.  That is the practice out here, and when the house gets moved to contingent status in the MLS, which is the requirement here, that pretty much deters any new offers from coming in.

Nov 19, 2010 06:10 AM
Josh & Dawn McKinley
Peoria, AZ

I think if anything, Potential Buyer's comment (#51) proves that real estate markets are, indeed, regional. Here in AZ, market values have plummeted so much that I know of several "short sellers" who are still paying on their original purchase money loans - no refinances or home equity takeouts - and are selling at ONE-HALF TO ONE-FIFTH (yes, as in 5 times less) than what they paid. They lost jobs, their loan mods are denied or they don't make enough money to even support the new, reduced payment... the list can go on and on.

@Ross (#52) The banks send back the contract and/or addendums to be signed after the bank accepts in Washington? Interesting...that, too, must be regional. My experience has been that once approval has been received, our inspection period starts and everything goes on like in a "normal" buying situation. You learn something new every day!

Nov 19, 2010 06:26 AM
Bill Gillhespy
16 Sunview Blvd - Fort Myers Beach, FL
Fort Myers Beach Realtor, Fort Myers Beach Agent - Homes & Condos

Hi Ralph,  Great post and comment thread.  Remember, there were many agents and coaches who suggested that strategy of writing multiple offers.  Now we have to deal with them !

Nov 19, 2010 07:28 AM
Menlo Park Real Estate and Homes for Sale
Wende Schoof - Menlo Park, CA
WendeByTheBay.com - 650.504.0219 - SF Peninsula

Ralph, this was very educational.  I started out in agreeement with your stance that making multiple offers on several properties wasn't really kosher, and now I see how it's both ethical and potentially in the buyer's best interest when it comes to short sales and reo's.  I do still believe it would rarely be in a buyer's best interest or good for an agent's reputation to do that in most other situations, though.

Nov 19, 2010 09:34 AM
Christine R. Sutherland
Sun Realty USA, Inc. - Punta Gorda, FL
REALTOR - RSPS, e-Pro, TRC

Excellent comment, "Potential Buyer" #51 at 1:53.  The short sale situation is no different here in Florida from what you describe in Southern California!

Nov 20, 2010 07:01 AM
Kathy Schowe
California Lifestyle Realty - La Quinta, CA
La Quinta, California 760-333-8886

I completely agree with you-- I have mostly been on the receiving end of these flakey buyers and agents... I could not advise my clients to write so many offers.  Great post Ralph!  Kathy

Nov 21, 2010 03:23 PM
Juli Vosmik
Dominion Fine Properties - Scottsdale, AZ
Scottsdale/Cave Creek, AZ real estate 480-710-0739

Wow, what great comments for both sides of the issue.  However, I'll play devil's advocate and say that if we could get responses from the banks in a timely manner, this whole mess wouldn't be happening.  Since the banks won't even start talking to us until there's a contract in place, we're just stabbing at the numbers.  We can do the best CMA possible, but until the banks get their 2 or 3 BPO's done which "prove" that our numbers are correct, we're waiting, waiting, waiting. 

The buyers putting in multiple buyers are typically investors and are always playing the "hedging" game.  If this happens, fine - if not, move on is their attitude.

I personally think our association rules stink - when there's a contract on a home, we HAVE to put it in AWC - contract with contingencies.  So, if that first really low ball offer of 60 cents on the dollar comes through from the investor "hedger", then the house is "perceived" to be off the market.  So, IMHO, EVERYTHING is against an already stressed out seller - a buyer who doesn't really care if the deal goes through, the banks who are overworked and don't really care and the real estate association is also working against them because we put your sale on hold by perception.

One more side, if I may. I put in a true, legitimate offer from an occupying buyer on a property.  The agent told me, "I can't believe you're making me try to deal with the banks again."  I'm like - what?  Isn't that why you're listing the home - to get it sold?  My buyers put down earnest money.  Guess what - we NEVER heard from that agent again, despite numerous phone calls and emails. 

So, if the listing agent is just trying to help out their friend or family member by prolonging their time in the home, just tell me - I'll move on with my buyers.

 

Nov 22, 2010 05:44 PM