Failure to Verify Seller's Loan Balance

One of the main things brokers or agents need to do prior to putting a listing on the market is to verify the loan balance of the sellers. On one occasion early in my real estate career, I failed to do just that. Being relatively new in the business 20 years ago, I was just excited to have picked up a listing off phone duty. I guess the red light should have clicked on me when the seller told me that other agents had turned her down and were not willing to take on that listing and place her home on the market.

First, the lady was not easy to get along with and often used profanity in her conversations with me. Consequently, I dealt mostly with her husband to obtain information about their property. Shortly after placing their home on the market, and spending time marketing their property, a senior agent in my office had inquired about that listing. That agent asked me if I had verified the loan balance on that property, and was there going to be enough profit to pay everyone’s commissions on both sides of the transactions? After all, I had advertised in the MLS that I would pay the buyer’s agent a commission of three percent. 

After obtaining a loan statement from her husband, I immediately learned that they owed more on their home than what I had listed the property to sell for in the MLS. I had determined the sales price based upon other comparables in that area. The senior agent told me to remove the listing from the MLS, and to cancel the listing agreement with those sellers. That was the first time I had encountered someone being upside down (owing more than what they could sell for). I almost marched into trouble had I actually placed that home under contract with another agent from our local board. It was a lesson that I had learned the hard way. Therefore, I started requesting to see the last statement from the mortgage company on all future listings, and I would request a payoff amount from them to verify if homeowners would at least have enough to pay my commission, which was a huge part of their closing costs. If you don’t ask sellers the right questions, they won’t always disclose needed information to their agents.