Let's admit to the elephant in the room: Listing agents are manipulating the process to double-pop their listings

By
Real Estate Broker/Owner with Maui Life Homes / Metro Life Homes RS-78439 / BRE #01708344
https://activerain.com/droplet/JpN

Let's admit to the elephant in the room:  Listing agents are manipulating the process to double-pop their listings

I've been writing tons of offers for my buyers.  Some of them ridiculously over asking with terms that are just short of pledging their next unborn child into the deal!

But Zip!  Zilch!  Nada!   No acceptance.

I decided to follow up on a few of these listings as they have closed and pulled up the MLS info after closing, and lo and behold - the same broker was representing the buyer on the deal.

Many times the offer I submitted was lightning quick.  We wanted to show the seller we were being aggressive and were stepping up to the plate with all of our I's dotted and T's crossed.

Then what?  It seemingly takes forever to get a response, and then when we finally do it's "Well, the seller wants to wait a while to see what offers come in"

 

 

 

If you are a seller and receive an offer that is all that plus a bag of chips, way over asking, why on God's green earth would you choose not to respond to it in a timely manner?

Here's one reason:  The listing agent wants more time for a buyer without representation to step up so that they can double-pop the listing.  Or perhaps they weren't expecting such an aggressive offer so quickly so they need more time for their buyer in the wings to draft an offer to compete with that.

So there 'ya go.  I just said it.  But you have to admit, you know it's what we're all thinking and we all know already.

And honestly, how many agents do you think are withholding the submitted offers from the seller until they've had the chance to find their own?

And just because there's another agent from the same brokerage or even a different brokerage representing the buyer, it doesn't mean that it's a "straw" representation that the listing agent has set up.  I've known plenty of agents who have done so and paid the other agent $500 just to write up the offer for the buyer.

So there 'ya go.  I just said it AGAIN!

And at the same time, I'm not going to pretent to be Mother Theresa.  Have I had listings where a buyer has stepped up without an agent?  Of course!

But you can bet on one thing - I NEVER would withhold communication from an agent that has sent in an offer.  I personally choose not to represent both buyer and seller on a transaction, so if a buyer steps up I refer it to my partner.  But again, we make every effort to be as fair as possible to everyone, and if that buyer who steps up without an agent is in a bidding war, then you can rest assured that they will have to step up to the plate price and term wise just like everyone else.

You're not doing the market nor the seller ANY justice by not allowing the market to drive the price point where it should be by allowing a buyer that you or someone you've referred it to circumvent the price war in a multiple offer situation.  In fact, you're not doing ANY of us justice by not allowing the natural course of recovery that our market so justifiably deserves after seven years of depression.

I my neck of the woods, if there is a mutliple offer situation in which the same brokerage is representing one of the buyers, it is mandatory that the management of that brokerage be a part of that process and make SURE that the seller is aware of ALL offers.

So as a result of all my my hard work as well as the hard work and effort of my buyers that I'm desperately trying to get into a home right now, I've decided to take the DIDS approach (Do It my Damn Self!!).

I'm sending out hundreds of letters each week to certain neighborhood homeowers seeing if they are interested in selling and letting them know I have a well-qualified, willing and able buyer at the ready.

OK.  So there ya go.  I let the cat (or elephant in this case) out of the bag.

What's your opinion?

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Re-Blogged 4 times:

Re-Blogged By Re-Blogged At
  1. Rhonda Duffy 09/30/2012 12:36 AM
  2. Lenn Harley 09/30/2012 05:16 AM
  3. Ginger Harper 09/30/2012 07:25 AM
  4. John Joseph 09/30/2012 11:15 AM
Topic:
ActiveRain Community
Location:
California Los Angeles County Sherman Oaks
Groups:
Realtors®
EcoBrokers
EXPRESS WITH WORDS AT ACTIVERAIN
LA Connection
Club Chaos
Tags:
multiple offers
dual representation
ralph gorgoglione
los angeles real estate agents

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Rainmaker
908,388
Pamela Seley
West Coast Realty Division - Murrieta, CA
Residential Real Estate Agent serving SW RivCo CA

Ralph, interesting post and comments. I think Jessica makes some great points because customarily the seller does pay the buyer's agent commission. Maybe if buyers weren't getting a free ride off the seller and had to actually pay their agent out of their own pocket they would take a different attitude to buying and not expect their offer should be accepted even if it is all that. Doesn't the seller have the right to choose what offer they want to accept? After all, they're paying for commissions and a list of other seller fees and costs.

Also, as far as double pops go, buyers have a tendency to go directly to listing agents about homes they are interested in buying, so what's a listing agent to do then? As you know, dual agency is legal in California, until it isn't legal then this will continue. Listing agents are required to present all offers to the seller. That doesn't mean seller has to acknowledge offers, counter offers or formally reject offers. I've had that hunch at times that maybe my buyer's offer wasn't presented, but it's difficult to prove. Just have to move on to something else.

I like Melissa's comment #5 solution of putting all offers on a spreadsheet and presenting to the seller client. I haven't experienced that number of offers on my listings lately, but definitely something worthy of note if we have multiple offer situations in the future. 

Carla comment #13 is right, too. It's impossible to have full representation by the same agent. In theory, dual agency is a conflict of interest and perhaps in practice too.

Oct 01, 2012 02:15 AM #55
Rainmaker
1,525,877
Amanda S. Davidson
Amanda Davidson Real Estate Group Brokered By eXp Realty - Alexandria, VA
Alexandria Virginia Homes For Sale

Ralph- I think it happens in my market sometimes too. I also think there are just plain lazy agents at times and you wait and wait and never hear confirmation if your offer was even received. I like the terms Margaret's (comment #50) area has in their contract.

Oct 01, 2012 02:20 AM #56
Rainmaker
370,463
Travis "the SOLD man" Parker; Associate Broker
iXL Real Estate-Wiregrasss\ - Enterprise, AL
email: Travis@theSOLDman.me / cell: 334-494-7846

I haven't seen that here, but I may be a bit naive.

Oct 01, 2012 03:00 AM #57
Rainmaker
1,560,731
Carla Muss-Jacobs, RETIRED
RETIRED / State License is Inactive - Portland, OR

Apparently Jessica Horton (#25) doesn't know what a "fiduciary" is, nor what "fiduciary duty" implies.  No one has said that we are attorneys.  Although -- and another concept Ms. Horton fails to conceive -- is that EVERYTHING in real estate is legal, legal, legal.

Contracts are -- LEGALLY BINDING

Representation is -- the "law" of agency relationships.

So, in that sense, while we don't practice law, we do have legal precedents that go back to the COMMON LAW of Agency.  So YES, you can't have one lawyer "represent" both sides . . . and when using the term "represent" correctly, as in a fiduciary to the principle under the common law of agency (which is WELL estabished) you can not have fiduciary duties to BOTH buyer and seller.  Most principles don't understand the common law of agency and there are quite a few real estate agents that don't as well. 

Ms. Horton is also incorrect when she states that the commissions is PAID BY THE SELLER to the buyers agent.   This is NOT true.  The listing brokeage negotiates the commission with the principle.  From the listing brokerage commission they "advertise" the listing on the multiples, of which the LISTING BROKERAGE OFFFERS A BAC - broker agent / buyer agent -- COMMISSION . . . out of THEIR negotiated and contractual commission.  The listing agent offers a split of THEIR commission to the selling broker, i.e., buyer's agent.  The commission to the selling agent, aka buyer's agent, comes from the listing agent brokerage commission.  The seller is not contracted or obligated to pay the selling agent's commission.  The obligation to pay the BAC to the selling agent is attached to the listing brokerage. 

If Ms. Horton was correct in her (flawed) theory and in her way of understanding commissions and how they are distributed, then if the selling agent (aka buyers agent) had a bitch about their commissions why don't they go after the sellers/owners directly?!?  The buyers agent (aka selling agent can't and doesn't go after the seller/owner because the sellers/owners ARE NOT THE ONES obligated. Therefore, there is NO BASIS for a claim against a seller/owner for a BAC if a dispute arises.  The commissions are distributed from the LISTING BROKERAGE in a co-op fee split and that is the legal entity with the obligations -- not the sellers/owners to the Buyer's Agent. 

@ Michael #23 -- that's another side of it.  Sellers taking the listing agents to task over buyers. 

Oct 01, 2012 03:37 AM #58
Rainer
41,907
Joe LaVallie
HomeStreet Bank - Mountlake Terrace, WA
111363

Interesting, I can see how that would be really frustrating for you and your buyer.

 

Oct 01, 2012 04:05 AM #59
Rainmaker
136,901
Jessica Horton Jessica Horton Realty
Jessica Horton - Jessica Horton & Associates - Griffin, GA
Jessica Horton: I'm not #1... You Are!

You're splitting hairs. Yes, the seller contracts to pay to the buyer's agent through the listing brokerage, but no matter how you try and slice it (directly or indirectly): the seller is potentially paying for the 'privilege' of having another agent represent the buyer. And that buyer's goals and objectives are often diametrically opposed to that of the seller. I will go so far as to say: the buyer often wants the lowest price and best terms. I don't think many sellers want to pay another agent (directly or indirectly) to help make that happen...

Your comment: I could argue point & counterpoints with you all day long, but it's pointless. You're not going to change my mind. I'm not going to change yours. But what I am going to do is: go show a house. 

The bottom line is: If you want to guarantee your compensation, have your client pay for it. Period. Otherwise you'll always be at the mercy of someone else and their whims. But that might actually take demonstrating real value in 'representation' being offered. So, it's probably just easier to depend on the listing broker (*cough* seller) for payment and say to the buyer, "You get my services for free. That's right! The SELLER pays me to help you beat them down on the price."

Be honest with yourself, how many times have you heard that one? We call it what it is when it's expedient, but then sweep it under the rug when it isn't. 

Pure hypocrisy.  

Oct 01, 2012 04:12 AM #60
Rainmaker
1,560,731
Carla Muss-Jacobs, RETIRED
RETIRED / State License is Inactive - Portland, OR

Again, the hair splitting.  Unfortunately, you're still incorrect.  The seller is NOT contracting to pay the buyer's agent.  Please show me the language in the listing contract that states that.  I'll wait.  

If I had a bone of contention over a commission, I do NOT go to the seller/owner.  The legal entity that is reponsible for paying the BAC is the listing brokerage.  Your colloquialsim doesn't change anything, i.e., how the selling agent receives compensation and what entity pays it.  The concept of Membership in a mulitple listing service is to ADVERTISE listings to members of the MLS, with an agreement to co-op.

The argument has also been made that the BUYER is the ulitmate consumer paying the fees, since the sales price is THEIR mortgage, and the proceeds of the net are factored in WITH the listing commission.  Isn't that why listing agents run net sheets?!?  Isn't the "net"  to show the bottom line to the sellers AFTER the commission (that the listing agent/brokerage negotiate) is paid, no?!?

And when the commission is all due and payable to the listing brokerage in the double-dip, and the buyer and seller have NO REPRESENTSTION . . . who profits the most in that scenario?

That's why it's called a "conflict of interest"

When my buyer buys a home, they are paying the price for that . . . with the commission structure established by the listing agent already in place, and DEDUCTED from the sale price

Stay on topic would you.  This entire post was about double-dipping agents and you spun it to the "SELLER pays me to help you beat them down on price."

Hmmmmmmmmmm . . . if you want to dumb it down to that level of understanding, that's fine.  But, the price is only one area of negotiation.  Come on Jessica, haven't your ever represented a buyer in a transaction to purchase?  Is that all you do for your clients?  Because when I represent buyers, it's a hell of a lot more.

But let me put it back on track for you Jessica . . .

Double-dipping agents are getting MY CLIENTS (the buyers) hard earned . . . because commission are coming out of my clients (the buyers) agreement to PAY THE PRICE and obligate themselves to a mortgage.

AND when buyers go to the lising agent, they aren't getting ANY representation . . . and paying for it all.  And when, historically, the light bulbs went on for some propoents of BUYER AGENCY, Buyer Agent representation emerged.  NOT to beat the price down, but to get legal real estate agency representation.

The price a buyer agrees to pay for a property HAS commissions worrked in.  

The buyer is paying the listng agents' commissions.  The lisitng agent priced it WITH their fees.  Again which is why there is a NET SHEET calculation run at the listing appointment, no?!?

When the buyer goes to the listing agent, who wants to double-dip, double-end -- they are screwing the buyer -- and NOT "representing" anyone.

So, here's another little colloguialism, put that in your pipe and smoke it.

Oct 01, 2012 04:38 AM #61
Rainmaker
136,901
Jessica Horton Jessica Horton Realty
Jessica Horton - Jessica Horton & Associates - Griffin, GA
Jessica Horton: I'm not #1... You Are!

Page 2 and 3 of the Exclusive Seller Listing Agreement in Georgia:

8. Commission.

A) In the event that during the term of this Agreement SELLER (emphasis added) enters into a contract (including an option contract) for the sale or exchange of the Property, or any portion thereof, with any buyer, SELLER  (emphasis added) agrees to pay Broker at closing (and regardless of whether the closing is during or after the term of this Agreement), the following commission: [Select one or more of the following sections below. The sections not marked shall not be a part of this Agreement]:

 _________________________________ percent (%) of the sales price;

stuf that's not really applicable goes on for a good bit...

B) Broker shall SHARE (emphasis added) this commission with a cooperating broker, if any, who procures the buyer of Property by paying such cooperating broker at closing ____________ percent (%) of the sales price of Property OR _____________________________.


Now, I realize things are done differently over on the "Left Coast" because I actually walked in and passed the Washington's broker exam after reading 1 prep book... 

But where I'm from...that sounds like the seller is agreeing to pay it. Pay it all. Including: the privilege of paying another agent to negotiate against his own best interests.

Oct 01, 2012 04:58 AM #62
Rainmaker
1,560,731
Carla Muss-Jacobs, RETIRED
RETIRED / State License is Inactive - Portland, OR

What part of SHARE don't you get?!?  If that's your listing contract, it reads pretty clear to me.  "Broker shall SHARE" the commission . . . it doesn't say "Seller shall pay to cooperating broker" or "Seller shall pay to the Selling Agent."

The seller DOES agree to pay a commission . . . to the listing broker that SHARES with a cooperating broker.

But the BUYER PAYS for it all  (emphasis added) . . . and that's why listing agents have their handy-dandy NET SHEETS to DEDUCT the commissions out of the list price.

Buyer PAYS in the (back-)end, which makes double-popping agents a real pain in the arse.

Oct 01, 2012 05:10 AM #63
Rainmaker
136,901
Jessica Horton Jessica Horton Realty
Jessica Horton - Jessica Horton & Associates - Griffin, GA
Jessica Horton: I'm not #1... You Are!

I understand your point, Carla. Perfectly. But the bottom line is: no matter how we want to try and rationalize and justify it: the seller IS potentially paying for the privilege of having another agent work against him. 

Yes, it can be argued the buyer pays the commission. But that is a flawed argument. The buyer is buying the house for a price that is acceptable to him (and the seller agrees to accept). Where in your paperwork (purchase and sale agreement or the equivalent) is the buyer made aware of HOW MUCH MONEY HE IS 'PAYING' IN COMMISSION FOR THE HOUSE? I would bet it's not mentioned--NOT EVEN ONCE!--in your purchase and sale agreement. 

Why?

Because the buyer isn't paying it! The seller has agreed to pay it. It's in the listing agreement. It's not in the purchase and sale agreement. At least it's not here in Georgia. 

You'll convince me the buyer is paying the commission, when it's disclosed--in writing on the purchase and sale agreement--to the buyer that he's paying it. But he's not. The buyer is buying a house (most often with money borrowed from a lender and a promise to repay). 

 The buyer buys a house. The seller pays the commission. I think the roles and responsibilities are pretty much covered in our listing paperwork and sales contracts. 

Oct 01, 2012 05:25 AM #64
Rainmaker
252,643
Benjamin Clark
Homebuyer Representation, Inc. - Salt Lake City, UT
Buyer's Agent - Certified Negotiation Expert

On the crazy tangent that has arisen in the comments:

My buyer-clients are ultimately responsible for my fee. We agree to it up-front before any representation starts.

To be clear: We will credit toward what the buyer owes: anything that comes to us via a seller, builder, listing brokerage... well, anyone or anything else.

If what is coming from anyone other than the buyer covers the brokerage fee the buyer and I have agreed to, the buyer would owe us nothing.

If it falls short of what we agreed to, the buyer knows (and I know) that the buyer will make us whole at settlement. (Yes, some of our buyer-clients happily pay the difference out of their pocket).

If we get more from a third party than the agreed upon amount in our contract with the buyer, we give it back to the buyer, where it came from. (Since that money ultimately came into the transaction via the buyer's purchase of the home, as has been noted by others.)

This agreement allows me to give the same superior level of representation on any home the buyer wants to buy, regardless of the compensation being offered by the seller or the company representing the seller. (And even if there is NO compensation being offered.)

The standard Utah Exclusive Buyer Brokerage Agreement contains this language, so I'm certain that a large majority of buyers and traditional brokerages enter into this agreement. Strangely, however, I may be one of a very small number of agents who explain this document to buyers as it is written. I say this because I know many agents tell buyers that their services are free and/or that they get paid by the seller or listing brokerage. This is technically false according to the legal document they place in front of the buyer to sign.

In addition to knowing the Purchase Contract thoroughly, agents should know, intimately, all of the contracts they place before buyers (and sellers). They should explain to the consumer EXACTLY what the contract says, not some dumbed-down version that is crafted merely to get the buyer (or seller) to sign.

Our clients WANT to sign our agreement and are happy to pay us what they agreed to pay us when compensation from other sources falls short.

I believe that agents who respect their clients enough to explain exactly what is happening, who do what is best for the CLIENT, and who remain fully loyal to the client at all stages of the transaction (even before a home is identified), ultimately earn loyalty, respect, and goodwill from their clients that most other agents will never have.

Oct 01, 2012 06:35 AM #65
Rainer
123,129
Lanise Warrior-Johnson
Real Estate Brokers Services, Inc. - Compton, CA
Real Estate Specialist
Great post! The market is very competitive. Buyers and investors alike want a good deal & the inventory of standard sales create multiple offers. It's infortunqte that some listing gents play this game.
Oct 01, 2012 06:48 AM #66
Rainer
84,237
Brad Baylor
ERA Coup Agency - Milton, PA

Ralph - When I have a listing I represent the seller, and I would never withhold an offer from them because I wanted to double-dip!  When I have a buyer for one of my listings, I even call the other agents that have shown it already to see if their clients had changed their minds about the property, because I'm going to be submitting an offer.  My job is to get the best possible deal for my client, the seller.  Not the best possible deal for Brad Baylor, the agent.

Oct 01, 2012 07:09 AM #67
Rainmaker
94,887
Nancy Pav
Century 21 Redwood Realty - Ashburn, VA
Nancy Pav, Your "GottaHave" Realtor

Wow!  It sounds like it's a cutthroat market in California!  I liked the very last part of your post.  If you can't get something that's on the market, find the market.  It shows your clients you are looking out for them and it shows the homeowners you are agressively trying to find your client a home.  Makes you look like a hero!

Oct 01, 2012 07:37 AM #68
Rainer
482,489
Kimo Jarrett
WikiWiki Realty - Huntington Beach, CA
Pro Lifestyle Solutions

This is a very interesting post with conflicting comments, however, it depends on the state's rules and regulations regarding dual agency, doesn't it? Whether it's permissible or not is the key element, isn't it, so if it is, it can be done regardless of other agents perceptions? All offers must be presented to sellers and it is they who determines to accept or reject, don't they?

Do agents abuse this scenario, I don't know, perhaps, but I'm not going to dwell on it by ranting about it. Anyone that has proof of this type of behavior where the seller was duped by a dual agency should report that incident to the state department of insurance. that's how to take action and stop the abuse. Is that reporting likely to happen, I don't think so for a variety of reasons that I won't comment on at this time?

Oct 01, 2012 08:30 AM #69
Rainmaker
1,553,747
Lyn Sims
RE/MAX Suburban - Schaumburg, IL
Schaumburg IL Real Estate

Staying on topic - It's a tough world out there & you have to do what you have to do. I like your approach that you are going to actively go & get a listing for your buyers rather than get kicked around in another dual offer situation. 

But - that means you will be possibly kicking around another agent & doing the same things?  I'm not going to judge but it does want to make you go out & kick some arse that's for sure! 

I would try & go the high road & remind everyone that the market can turn again downward in a heartbeat & all this stuff won't happen any more!  I'm sure that buyers are going to figure this out soon & just sit out 'a spell' & see what happens as their Realtors fight amoungst themselves on the front lawns.

Oct 01, 2012 09:41 AM #70
Rainer
143,845
Sylvia Jonathan
Coldwell Banker Platinum Properties - Irvine, CA
Broker Associate, SFR

It is unfortunate that the practice exists, but it does. A seller should always be suspicious if the listing agent comes with an offer before or without the home ever hitting the MLS, unless the listing agent tells the seller from the get go he is working with a buyer who would be perfect. Countless listings go on market and are "pending or back up" status from the get go. This happens more often with short sales, but it still happens.

Sellers, ask a lot of questions when offers are presented. An honest agent will answer without hesitation.

Oct 01, 2012 10:30 AM #71
Ambassador
1,202,880
Ralph Gorgoglione
Maui Life Homes / Metro Life Homes - Kihei, HI
Hawaii and California Real Estate (310) 497-9407

Greg,

As of today, there are 71 comments.

Many of which are reporting incidents of the same thing.

Not commonplace?  Really? 

Did you not read any of the 33 comments prior to yours?

Oct 02, 2012 01:06 AM #72
Rainmaker
724,201
Wayne Johnson
Coldwell Banker D'Ann Harper REALTORS® - San Antonio, TX
San Antonio REALTOR, San Antonio Homes For Sale

Ralph-I wonder if it's different in areas where the market is tight? I only ask because we don't seem to have a high percentage of listing agents handling both sides of the transaction. But we are pretty much in a balanced market.

Oct 11, 2012 12:04 PM #73
Ambassador
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Ralph Gorgoglione
Maui Life Homes / Metro Life Homes - Kihei, HI
Hawaii and California Real Estate (310) 497-9407

Wayne,

You never know how many referral agreements are out there.  When the transaction closes, many sales show on paper another agent on the other side, but the MLS does not reflect anything about referral agreements nor any other arrangements between the listing agent and selling agent.

Oct 11, 2012 11:43 PM #74
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