OK folks...time to put on your thinking caps!!!

Bryant,

The implication was: that the buyer some how wanted out or made a bad deal, because of the new listing (an attorney would tell him that he was contractually bound!), If the LO made a mistake or didn't disclose an attorney could put the fear of God into him, there are things that can be done!

The problem is that your resonances want to point fingers, not solve problems. The most mischievous person in any child's family is "Not Me" for so many in all fields of real estate all problems come from that same guy.

I want to know how these people sell anything, because there might be a better deal if they wait 30 days!

The problem here isn't "duel agency" it just "agency!" For certainly you can't represent two people when you don't understand even one.

Bill

Blog Boy...

I think you're right. Disclose to Buyer and leave the Seller out of it unless at some point it looks like the sale is going to belly up.

P.S. I did not 'say' you were right. I only typed it and I could be lying :)

TLW...ROAR!

Matt...

I for one enjoyed reading a comment from a Non-Real Estate Person. It is in my nature to disclose when I get that gut feeling I need to. Keeps me out of trouble :)

Now...I have to go check you out :)

TLW...ROAR!

Stay out of dual agency.  Problem solved.  Here endith the lesson.

First, let me say that in order to give you my untainted opinion, I have not read any of the comments already posted.

First off, if I ever got myself into this mess, I would check that my Errors and Ommissions insurance policy was paid up.  Failing to review closing costs (including the GFE) prior to writing up the Agreemnet of Sale is a no-no.  I would make sure my client (even if I was working as a transactional agent) was clear about the cost of the transaction before submitting their offer to the seller.

If, as you describe in your example, the call about the rate change came "a few days before closing" I might think I dropped the ball yet again.  The Mortgage Commitment should have been in hand long before this point.  If the Agreement of Sale did not specify this, I should not have advised my seller to sign the contract.

Additionally, in preparing the Agreement of Sale, with a mortgage contingency, the buyer agreed to purchase the home as long as a mortgage within a certain interest rate range was available to him.  Here again, it is my duty as his agent to make sure he understands the implications.  I prepare two estimates in that situation - one for the pre-approval rate, and one for the maximum acceptable rate.  This way, the buyer has no "surprises" when the lender raises rates.  I also advise him to contact his loan officer each morning to check the current rates.  And I tell him that if he is comfortable with the payments, he should "lock" his rate as soon as possible, to avoid last-minute problems."

The appearance of another home on the market is a moot point, in my opinion.  If I were to advise my buyer to walk away from from his contract, he could stand to lose any deposit monies.  If I did so without first advising him to talk to an attorney, I would be doing him yet another dis-service. (not to mention potentially offering legal advice where I am not sanctioned to do so.)  Without jeopardizing the closing of the transaction, since in this scenario, I am getting paid a considerable amount, I would propose a solution that keeps both clients happy.  Reduce the price to the buyer, without reducing the seller's bottom line, by reducing my fee.  This might mean ammending the listing contract to reflect a flat fee, instead of a percentage of sale price.  By reducing the 15,000 commission to say, 12,000 or even $10,000 you preserve the transaction, stabilize your tenuous relationships with two clients, and perhaps most importantly, avoid a potential lawsuit for negligence in your execution of your fiduciary duties.

(For the record:  I do not practice Dual Agency, even though Pennsylvania permits it)

It appears that some are under the impression that if a buyer is willing to lose the deposit they can walk away from a contract.  These same people seem to think this is a minor issue and happens all the time in real estate.  It does not.

"He is upset because his interest rate has gone up slightly and his payment has increased by about $50 a month. It's not a big deal but he is concerned that if his payment goes any higher he won't be able to afford the house."

Here we have a buyer that  feels he can't afford the house. (This does not mean he can't qualify it means with his desired mode of living he can't afford the payment.)  So, he might want out.  This is a legal issue. 

He might be willing to walk away but he needs to know the implications of doing so.  He needs to know that prior to making a decision.  An agent that advises either that he MUST settle, or that if he does not settle he will only lose his deposit is giving legal advice they are not qualified to give. Did the lender violate legal requirements that an attorney could focus on to get lender concessions that would make the buyer ok with the purchase. Is there any other way to get out of the deal if the buyer truely feels he can't afford the purchase? That is a legal question.  If you REALLY belive the only thing a buyer can lose by backing out YOU need legal advice badly and your E & O might not help you out.

Certainly makes things interesting doesn't it. I certainly would have them possibly talk to another mortgage broker, since this one has been making mistakes that are costing this client money. Such as not making a lock on the interest rate and not getting the taxes and insurance correct for starters, but mistakes can cost and it is usually the person receiving the loan and not the person making the loan.

Now, as for the new home on the market? You are going to upset one of the parties by bringing it up or not bringing it up if they find out about it. I would sit down with the seller and explain the situation and there is always the possibility that that one house will be off the market by then, but I would bring it up and explain the situation and say to the seller that another house has come on the market that the buyer wants to check out and that even though they are under contract that they may walk if this house ends up saving them $200 a month in payments.

You have to do what is right and I think being upfront with everyone is the right thing to do, not what your pocket book thinks is the right thing to do. I have a feeling you will do the right thing!

That's why I hate dual agency or that matter transaction brokerage.

the question would not even exist for a single agent.

But to me this case is very clear. DISCLOSE Yes, you might ruin the deal for the seller and the buyer and yourself - but in the end it is always best to be straight forward

Anne

Although we are allowed to practice Dual Agency in NJ ---- My broker does not allow our agents to practice it nor do we practice as a transaction agent. Again, it is allowed by law but not by our company...that said... I am always of the school to disclose all. Better safe than sorry later --- for all parties concerned.

Warning! Warning! Danger Bryant Robinson! Danger! "the property taxes are off by $100 per month and the insurance is off by $75 per month" Not acceptable around my place. Seriously, do you have loan officers actually this far off? Good grief, no wonder loan officers get a bad name if that happens. It is not acceptable around my place. We strive to over estimate - YES we COULD land a lot more business if we lied ... er, underestimated ... but I refuse.

BB, I'm adding this very late (not in the mix of the conversation) re. a NY agents comment, above (a very respected NY compadre): dual agency is defined in NY as follows: https://www.mlsli.com/ro/dod/215.pdf

Neither party is represented, and fiduciary to either is out the window. It's obviously not explained very well to real estate agents participating in NY. It takes a brilliant person to decipher "broker agency". This place is ridiculous. Edited, thanks bb.

Everything that follows:

You disclose your dual agency to your Seller and end up negotiating a deal that works for both of your "clients". 

is MOOT.  Dual agency, to be legal, must be disclosed prior to showing a broker's listing.  Since the agent/broker didn't have the seller's agreement for dual agency, the listing shouldn't have been shown to the buyer by the listing agent or any agent in that brokerage.  Further, the buyer must agree to dual agency prior to having the listing agent show a company listing. 

Once undisclosed agency, which is fraud, occurred, any action or advice taken by the agent who committed the fraud, is merely digging the hole deeper for the agent. 

Oh the troubles we find ourselves in... Don't ya just love real estate.  Enjoyed the post and always enjoy reading when other folks find themselves in fixes.  I hate it when it happens to me.  It is always easier to figure out how you should handle the situation than it is to figure out what I should do.  Thanks for sharing!

BB - you are already in a contract with both of them, so frankly it doesn't matter what comes on the market.   Regarding the mortgage payments, I would rather deal with it now that later.  point it out, and give the mortgage guy / gal time to FIX this issue!

--- I'm curious to know the outscome of this one, do post... it's almost like an R.E. Soap Opera!   ..  ONLY your blogs are entertaining and Soaps are not.. <yuck>

Lets look at these issues one at a time.

The increase i the mortgage would have been covered by the good faith estimate the buyer received when he applied for the mortgage'

The insurance is no surprise as the buyer is responsible for procuring the insurance and should have received several quotes, selected the insurance one he felt was best and have gotten a binder on the policy, The agent is literally the last to know about this.

The decline in property value cannot be helped this is the market.  In most cases both buyer and seller have a better idea what the market is doing than the Realtor(R) as the mantra among Realtors(s) has been "don't pay attention to the news, it is all negative."  They are more than likely more aware of the risk than the Realtor(R) who is most likely clueless about value and market conditions.

This leaves the issue of property taxes.  In Florida where the mentality is "stick it to the newcomers"  State license law requires - it is a part of your job even if you claim to be an independent contractor - to disclose the Amendment 10 impact.  If this was not properly disclosed and either buyer and seller are harmed financially, they should file a complaint with the Broker, the local Board of Realtors(R) FREC, and file a suit against the agent and broker, who will have to pony up the deductible on their E&O insurance.

BTW it is not just an issue for an agent who double ends a sale, these issues come up every day.  Sadly, most agents in this situation find out at the closing as they do not review the HUD except to make sure their commission is right.