Real Estate Blog - ATTENTION LISTING AGENTS AND BROKERS - YOU MUST READ THIS! WANT REO LISTINGS? BE CAREFUL WHAT YOU ASK FOR!

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ATTENTION LISTING AGENTS AND BROKERS - YOU MUST READ THIS! WANT REO LISTINGS? BE CAREFUL WHAT YOU ASK FOR!

FROM INMAN THIS MORNING. THIS IS A MUST READ.

"Lenders stick listing agents with REO liabilities.". more. . . . .

Folks who know me know that I'm the most risk averse real estate broker on the planet. Anytime I see a headline with key words

risk . . . liability . . . stick listing agents with. . . .

It gets my attention.

This article on Inman got my attention:

"But some lenders are crafting listing agreements that attempt to shift the risk that comes with sales of bank-owned homes"

Of course the lenders are trying to reduce their liability. Many of the lenders holding foreclosed assets today have inexperienced staff listing and processing these contracts.

Experienced real estate agents and brokers also know that the addenda required by lenders often shift the burden of risk for buying a foreclosure to the buyer. We're used to that. But, some of the newer foreclosure addenda are shifting must risk to real estate agents and their brokers.

"Hey, let's be careful out there." Sergeant Phil Esterhaus, Hill Street Blues, 1981.

We're all probably familiar with the "as is" clauses. That's never been a big concern to me because, fact is, all resale real estate is sold "as is". Some properties may be sold "as is" subject to a home inspection contingency, but they are still sold "as is". Banks rarely do upgrades and buyers need to negotiate a price based on present condition and market values. That's where an experienced Buyers' Agent earns their money.

A careful reading of many "as is" clauses will show holes big enough to walk through and I advise all agents to carefully read any new contract or addenda through and through a couple of times. Don't be cowed by the bank addenda because it's negotiable. Even when the listing says "as is" clause is not negotiable, I can attest to the fact that we have negotiated modifications to bank addenda, credits to buyers for home inspection matters, pest infestation, and much more. If you are a Buyer's Agent or Buyer's Broker, negoitate. That's why we get the big bucks.

Remember Lenn's Law #43: EVERYTHING IN REAL ESTATE IS NEGOTIABLE!

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988.

Posted by Lenn Harley, Real Estate Broker, Maryland & Virginia on 07/24/2008 11:06 AM

Comments (31)

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31 Comments on ATTENTION LISTING AGENTS AND BROKERS - YOU MUST READ THIS! WANT REO LISTINGS? BE CAREFUL WHAT YOU ASK FOR!

JUL

2008

So...now my seller is tearing down the back storage that had no permit.... no as is here. We do it right or not at all :) Thanks for the info. Though I have yet to do a bank owned property (some of us steer clear as they are really not 'good deals'. The cost may be less but fixing up would cost more than market price!)

There is a liability here. There are numerous things that you become responsible for and the lender puts their addendum out there and then washes their hands and then you are there to cover the other bases.

This was the concern I raised when I posted my blog entitled "How did the Lender Get you to Shoulder the Load" at the beginning of the month. Most agents are so anxious to jump in that they don't read the fine print.

Sally. I don't believe that foreclosures are a major part of your market. But in areas where they are, lenders are going to try to protect themselves. We sell a lot of foreclosures. Listing them is not something I want to do. I did it years ago and didn't like it then.

Kim. Agents need to stop taking these listing. Negotiate the terms and conditions of the listing agreement but agents shouldn't "stake themselves out".

Cindy. I read that and you are absolutely right. I did relo/reo listings for Weichert years ago. Even then, the agents carried a tremendous burden. Times have changed and buyers are much more litigious now.

I agree with all of you. This isn't easy and the liability is high yet some agents feel that it's a quick buck and it isn't. I'm not saying not to do them but one has to know what they are getting into and when a lawyer writes for a bank, it will be written for their benefit not the Realtor. People, people, people, read the fine print!

On a side note, the same holds true for liability period. I had a listing that I cancelled because the seller had done and knowingly cut corners when it came to code, didn't pull permits, hired a handyman do do some blatten bad construction, framing, porch with inadequate supports, etc. To say the least the ventilation on a hot water tank - I've love to post the photo to show all of you but they covered the stack all the way down to the top of the tank top! They left the new stack open at the top so it doesn't vent out except into the house.

There is liability all over the place and not just with the banks "stickin it to us".

This is a problem for agents taking these listings. We also see agents taking these REO listings being required to keep up the maintenance out of pocket and are hearing of them being suck with the fees if the banks decide to take the properties to auction and not let them stay on the MLS until they are sold. This problem trickles down to the contractors as well, because some agents have had contractors such as landscapers, etc. handle work that they "expect to be paid for later" and later never happens. It's a jungle out there - be careful!

I wonder if our Agency Relatonship Disclosures would do any good in covering out butts?

Some of the stuff I have seen (whether the BPO for pricing or showing a client) amazes me. The unpermitted additions, the trash out not completed when in the MLS, even unsecured property scares the pants off of me.

I am trying but have been doing BPOs for a year and cannot seem to get a listing. Maybe it was meant to be that way :-0

When you hear of lender or bank owned they want you think they are not liable for disclosing. I represented a buyer on a property that was a REO. This time the listing agent had as much liability as the lender. The listing agent said it was as is. When we were in escrow, we found out that the property had a violation from the city. In the file the city had notified the lender of this violation and wanted it fixed. The listing agent was also aware of this violation. This information was not disclosed. When we brought this to the listing agents attention they said the problem was fixed. What they tried to do was cover up the problem and not fix it. Adding to the problem they got caught by the city for doing work without the proper permits, adding to further violations.

My client was able to get a credit and get the repair done correctly with all the proper permits and inspections.

You have to be aware and be able to negotiate. If it was disclosed up front it would have saved everyone involved a lot of time.

Marguerite

Lenn - any contracts drawn up by attorneys always must be reviewed by an attorney on the other side. All I can say after reading the article - Brokerage and Listing Agents beware!

Lenn, I have always been told by some of the realtors I work with that "Everything" is negotiable, even in this market. Start from a position of strength. AJ

Barb. Listing agents often think we're crazy when we want to see the permit for clearly "homeowner improvements". In fact, we just cancelled one a couple of months ago because they refused to say whether or not a room addition had been permitted. It's primarily the homeowner electrical that concerns me.

The classic was a seller who installed a 200amp box in the house with 100amp service coming in.

Bob and Carolin. This is a real problem now with agents needing work. I suspect that the banks are weilding their power over a lot of inexperienced agents.

Lisa. Seems to me that if you don't have an agency representation agreement with the buyers, you're, by default a sub-agents of the listing agent. Then the risk become that if dual agency. Worse, undisclosed dual agency, which is FRAUD.

Renee. Can you imagine how many agents are out there trying to get REO listings now???? Problem is that many will agree to anything just to get the listings.

Marquerite. In MD, the seller is still responsible for known material defects disclosure. So is the listing agent. VA is a tad more caveat emptor.

Petra. If an agents is not familiar with these contracts and addenda, the buyer needs an attorney review. Problem is that many attorney with the wrong speciality can kill deals simply because they don't understand the foreclosure selling market.

AJ. Brokers can definately negotiate the terms and conditions of listings. If the bank wants indentured service, they can usually find it. How long do they want the property to sit????

Lenn, I always file "FOI" with the City of Chicago before a listing appointment. I run the Recorder of Deeds against the pin number as well as their name. I check the County Treasurer's office to see if they are current with thei real estate taxes, the water department as well. To top it, I even check for code violations. I give the seller first shot and then I open my folder and ask, "Care to explain?" Amazing, we never did this in the past. Maybe we should have.

Barb. I bet you are not surprised by a call from the title company with "By the way, did you know that the seller is in foreclosure?"

Many agents these days don't even ask. I have always verified the status of the seller's mortgage(s) and liens.

That's fundamental.

Thanks Lenn for the heads up. Have an REO contract in right now & I can't wait to see the addenda that the bank will fax over if it goes thru.

Lenn, I'm right there with you. What is a hoot is when I open the folder and the seller doesn't disclose. Always like that look - you know the one with the mouth open that it can catch a whole sworm of flies!

With folks all too happy these days to contact Larry the Lawyer it's best not to take on any additional liability... who the devil needs the headache anyway? I'd rather go fishin' than go to a deposition.

Lenn, Lately, I've been seeing a little diidy in the REO addendums giving the bank the right to cancel the deal at any time for any reason. I've tried to remove it several times to to no avail. Dealing in REOs is an ugly business and takes a certain kind of persoanlity(and deep pockets) to want to mess with then at all. I've placed 2 REOs under contract recently on the buyer side. One bank had a 25 page addendum the other one only had 4. My only advice is to read, read, read, read read and then read again. Then make sure the buyer does the same thing.

Bryant. I believe that those REO addenda are so long is because they don't know what they are doing. However, I have also found that a careful reading of them can be beneficial. If an agent reads the documents, knows what they're reading, you can have a very good result. If the agent doesn't read or know what they're reading, the buyer can be at a significant disadvantage.

Further, if the agent doesn't read and understand what they're reading, when the buyer finds themselves backed into a corner with respect to condition, disclosures, pests, etc. they just walk.

The largest most experienced companies will have the shortest easiest to use addenda and sell their properties much faster.

Did I forget to mention that "Banks don't know how to sell real estate?"

Lenn- I keep saying, and these are the same banks that lobby to sell real estate! In the Inman article one agent said that if you don't take their REOs on their terms ( listings that is) then they will just go to another agent who will.

I say, SO! Let them! The idea that they are the only game in town is a mentality of scarcity. If only 5% of 100% of all mortgages are in foreclosure, that means there are 95% of the people paying their mortgages and some of them have to sell their property!

Lenn, very interesting article, I read it too. It's important to be informed and not to jump at what may seem like a good opportunity but may eventually have dire consequences. This article is definitely food for thought.

No doubt we will conitnue to see more rigorous contracts to shift the liability away. I "love" the 16-page addendums I have seen mutiple times.

I, too, have negotiated some repairs on "as is" properties, including a couple of bank situations. Not easy. I always tell buyers things are negotiable. Doesn't mean you will get what you want but you can always negotiate.

Jeff

JUL

2008

Great points, Lenn. Unfortunately we're seeing a gold rush of listing agents heading toward REO country the same way they headed toward short sale country a year ago. "More listings for less work" is the seminar sales pitch, though "more outlay for less commission" seems to be the reality.

Love Lenns Law #43... Amen! I used to be afraid of builders contracts... now I use them like an etch a sketch.....

Katerina. If agents had some confidence in their ability to get business, they would quickly learn to say NO. I recall that when I was with a mege broker, their relo department brought this business in and agents were practically assigned the BPOs. If you got the listing, you financed the marketing. I quickly learned to say NO. The broker made all the money and I did all the work.

Grilselda. Too many agents are the cause of this problem.

Jeff. The secret to negotiating good contracts, concessions for our buyers is having a buyer that is willing to walk away.

Frank. Sooner or later, the backlog of foreclosures will sell and we won't have to worry about them anymore.

James. Good for you. The worst thing that can happen is that you don't get the contract. Then the buyer and seller learn something.

JUL

2008

Rule #1 in Real Estate: ALWAYS READ THE FINE PRINT!

Unfortunately REO realtors have nobody but themselves to blame when they fall into this trap, we should know better than to get into situations like this! We're paid to protect our clients, why are some people incapable of protecting themselves??

Jonathan. Agreed. I do believe that as a broker, I'd want to review any REO listings my agents would want to take. The broker is at risk too.

It's frightening how much people are willing to risk because of ignorance. I just had an incident with an REO where the buyers agent wrote the contract with no inspection because she figured the property was "as-is". I wouldn't care if this was an investor situation, but these were first time buyers looking for a primary residence!

Jonathan. That "as is" term is the most misunderstood term in real estate.

Fact is, all real estage in MD and VA is sold "as is", subject to a variety of conditions and contingencies. It's the conditions and contingencies that need to be considered.

Amen! I wish more people understood that concept!

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