Unrealistic Expectations from Buyers

By
Real Estate Agent with The Realty Butler llc/West USA Realty, Inc.

I have recently been in contact with a few buyers in my market. What I am discovering is that buyer's expectations are now even worse than what seller's expectations were last year. In 2004-2005, sellers felt that they could ask for what ever they wanted for their home, and probably get it. There was a huge under-supply of homes on the market, and buyer's were desperate for anything.

Now that the tables are turned however, I find that buyers can be just as unreasonable as the sellers of yesterday. Whereas sellers in 05 were asking prices that were commensurate with what the market would bear, and were sometimes asking for about 10% more than the market would bear, their demands were not totally off the mark.

However, many buyers will have very unreasonable expectations of what the seller will accept. We keep reading about how buyers and sellers are at a stalemate, each biding their time: sellers want more, buyers want to pay less. I believe that one of the issues that is contributing to the climate of hostility is that buyers want to pay a lot less.

It is now very common for a buyer to write a contract on a $400,000 home, and the offer will look something like this:

Offered price: $360,000

Earnest Deposit: $1,000

Seller to Pay 3.5% in Closing Costs

Seller to Pay Appraisal Fees

Seller to Pay Home Inspection Costs

Now, I don't know about you, but I would not write an offer like that. That's not even close to operating in good faith. It is a slap in the face of the seller, and also lets them know that the buyer is not seriously comitted to the process. It creates a climate of fear and mistrust right from the word go.

What's worse is that you are likely to come across a buyer who would like you to show them a BUNCH of homes, then ask you to offer ridiculous prices on their TOP 3 PICKS!! It's the shotgun effect: throw a bunch to the wall, and see what sticks. Not only is this a violation of the Realtor Code of Ethics, but is just bad faith dealing all around. The seller knows the offer is not serious, and the buyer will likely end up moving to the next deal, just repeating the process as they drag their hapless Realtor around town looking for someone to take advantage of.

Therefore, it is becoming more imperative than ever that you meet your buyers in person, preferably in your office, to explain the process of buying a home, and what you will expect of them. Remember that the buyer/broker exclusive employment agreement is just that: a contract between you and them. It is certainly okay to have your own set of guidelines that delineates their own obligations within that framework. Let them know what you expect. Ascertain whether they want a home to live in, or whether they want something cheap to flip when the market begins to rise again. With buyers and sellers now thinking like investors, it's time to take the market back to the idea of buying a home to LIVE THERE, and move when their needs change.

We need to be doing a good job of educating both our buyers and our sellers right now. Otherwise, our markets will not likely experience any stability for some time.

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Rainer
463,884
Maureen Francis & Dmitry Koublitsky
Coldwell Banker Weir Manuel - Bloomfield Hills, MI
Coldwell Banker Weir Manuel

Code of ethics violation?  I don't see it.  Which article of the Code are you referring to?  Maybe I am missing something.

If I represent the buyer and he wants to make numerous offers, I am duty bound to do that, aren't I?  Its easy enough to tell the seller's agent that multiple offers are being submitted, so that the SELLERS can decide if they want to deal with my buyer NOT ME.  I certainly don't presume that I know what my clients' are thinking, let alone another agents' clients.  I have to treat all parties honestly, per the code, but I can treat parties honestly and submit multiple offers. 

Aug 23, 2006 02:24 AM #1
Rainer
16,361
Allen D. Butler
The Realty Butler llc/West USA Realty, Inc. - Peoria, AZ
MSSC, GRI, CDPE

Hello. Someone asked about whether this was indeed a violation of the Code of Ethics. The following is excerpted from NAR COE 2006. It clearly states that we are to treat all parties to contracts with honesty. If we write multiple offers on properties, with the objective of only buying one, we are being dishonest.  What would you do if all of your offers were accepted? Are you intending to buy all three? How will you extricate yourself from the two that you don't want? You will be forced to be dishonest.

If you intend to buy all the properties that you write offers on, then you are set! And, you'll make lots of money! Otherwise, it's perpetrating a fraud upon the sellers and their agent.

Article 1When representing a buyer . . .as an agent, REALTORS® pledge themselves to protect and promote the interests of their client. This obligation to the client is primary, but it does not relieve REALTORS® of their obligation to treat all parties honestly. When serving a buyer, seller, landlord, tenant or other party in a non-agency capacity, REALTORS® remain obligated to treat all parties honestly. (Amended 1/01)

Aug 23, 2006 05:07 AM #2
Rainer
30,514
Wynne Achatz
Real Estate One Westrick - Marine City, MI
Michigan Realtor and Notary Trust,Care, Experience

I agree with you in theory, Allen, But sometimes there honest reasons that people are offering less. For example, In St. CLair County, Michigan we often have this happen. IT is not a slap in the face to the seller, it is often what the buyer can afford to pay. I have sold several homes like the above, my purchasers do not make multiple offers on homes. They just make offers. REASON is 1. No money for closing cost. 2. Buyer is afraid that home will not even hold today's value in another year should they lose their job and have to sell. Homes here have gone down in value 10-15% or more in the last 1 1/2 years. Sellers often come down - See my BLOG

We prepare our sellers for this to happen. It is not because they want to pay less or maybe it is - but it is because right now the buyer is afraid of what the home will be worth next year if they have to sell.

Wynne From Michigan, ABR, CRS, WCR, GRI, SHRES, RESC, Allen F. Hainge Seminars CyberStar.

 

Aug 23, 2006 07:25 AM #3
Rainmaker
613,637
Sharon Simms
Coastal Properties Group International - Christie's International - Saint Petersburg, FL
St. Petersburg FL - CRS CIPS CLHMS RSPS
Did you conduct a counselling session with the buyers before showing them property?  If the buyer's goals or attitudes are not consistent with yours, it's best to decline working with them up front.  When working with a buyer, you need to submit his offers - if you choose not to show a buyer 100 properties so that he can "steal" one, that's your choice up front.
Aug 26, 2006 06:09 AM #4
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Rainer
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Allen D. Butler

MSSC, GRI, CDPE
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