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Bad Faith? Or Just Business?

By
Managing Real Estate Broker with Howard Hanna Rand Realty License # 49FA1074963

Buyers are waging a war of attrition with sellers in this market to be sure. I recall that when the sellers had the upper hand that buyers had to pretty much deal with their demands or lose the deal. The opposite is now true. At what point, though, does using their leverage cross over into bad faith?

Example: We've have a listing under contract with a buyer who poses a challenge. First, this past Spring they were a low ball offer that my seller client did not accept. They lurked, though, with their agent calling me periodically with various Jerry Bresseresque pitches as to why we should sell to them at their price. The house is pretty nice though, and in the Summer we got another offer. Given the reality of losing their chance, they upped their bid and promised a fast closing. To make a very long story short, we went with their offer. The fireworks started once they realized they were ahead of the backup offers.

We do home inspections before lawyers draw contracts in our market, and these buyers used every delay in the book in the inspection and contract process to effectively dry up the backup offers to strengthen their own leverage with us. Intentional? I'd need a crystal ball to truly know. But the upshot is that after a hack home inspection, which took time to debunk erroneous flags of the heat, electric and well water, and various other delays, the backup offers moved on.

Along the way, radon came back as elevated. The buyer wanted $14,000 to remedy well water and air. The proposed November 30 closing was delayed in all the renegotiation, and all the early December talk is now early January because of even more changed stories. Parsing the details would turn this post into a book, but the bottom line is that once the competition for the home was beaten out, the promises made to beat that competition dried up and the buyer manipulated everything available to return as much as they could to their original offer. Their agent is an ineffectual carrier pigeon with no influence over them.

Have you ever been driving behind a slow car, only to have them get inexplicably competitive and accelerate when you try and pass them? If you don't pass them, they slow down again and if you do pass them they'll pass you, as if the object is to be ahead of you for its own sake. That's what this whole transaction feels like.

So was this just business, with the buyer trying to get the best deal they could, or bad faith, where once they "got ahead" intentionally slowed down with no intention of keeping their word?

This much I know: what makes you a good businessperson is not so much how you can skew a deal to your own advantage to the detriment of your partner in commerce, but more how likely  they would do business with you again if the chance arose. That is the acorn of both good karma and repeat business. I wouldn't do business with these people again, and I wouldn't hire this agent unless she were completely retrained.

 

Comments (33)

Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

J. 

I understand the frustrations of real estate practice in NY.  I've lived through some of them with buyers relocating to my area.  It can be a screaming nightmare.

That said, I still believe that, unless there is a contractual default, I wouldn't assume bad faith. 

We value our word.  My word means everything in the world to me.  However, in real estate practice, if it isn't in writing, it just plain didn't happen.

Good luck.

 

Dec 20, 2008 08:16 AM
J. Philip Faranda
Howard Hanna Rand Realty - Yorktown Heights, NY
Associate Broker / Office Manager

Erica-

As do I. Misrepresentation can be verbal as well as written.

Dec 20, 2008 10:17 AM
Steven Wright
Home Real Estate - Aurora, CO
CRS - Home Real Estate - 720-989-5283

Sellers are just going to have to learn to deal with it until the market turns. They always have the right to say know, but you can't get frustrated when the buyers asks for the world.

Dec 20, 2008 01:57 PM
Thomas Santore Lic Associate Real Estate Broker
Coldwell Banker Realty/Coldwell Banker Commercial NRT - Yorktown Heights, NY
Realtor®-ABR-Land, Residential & Commercial Sa

Philip, The attorneys here will screw up more deals than they would admit to. I recently saw two deals taken from an attorney because he was not moving fast enough to allow certain needs of the buyer and seller to be addressed.

Dec 20, 2008 02:04 PM
Barbara Delaney
Park Place REALTORS, Inc. - Roanoke, VA

Dear J. Phillip.

Are these buyers bad, or just smart? I don't know.

The other agent might not be as competent as you might want her to be, but she just may be a pawn in the buyer's plan. If she represents them, she must abide by all of their legal instructions, whether she likes them, or not.

The other agent may not be the problem.

Barbara

Dec 20, 2008 02:37 PM
Brian Lee Burke
Kenna Real Estate - Lone Tree, CO
Broker & Advising Expert-Kenna Luxury Real Estate

Wow Phillip it is so different in NY. We have to have everything in writing and done by deadlines or the deal is dead! (of course you can amend and extend). But it certainly makes things runs smoother (I think). ~Rita

Dec 20, 2008 02:48 PM
Kate Elim
Dockside Realty - Spotsylvania, VA
Realtor 540-226-1964, Selling Homes & Land a

Hi Phillip...It is up to as agents to tighten up contracts if there appears to be too much leeway.  Not knowing how your radon inspection contingency reads it is hard for us to know what conditions the parties agree to but they did agree evidently.

Were your sellers aware, prior to ratifying the contract, of the potential cost to remediate if radon was discovered?

Kate

 

 

Dec 20, 2008 03:06 PM
Bill Kennedy
Keller Williams Greenville Upstate - Greenville, SC
Homes For Sale Greenville SC

These are tough situations and I'd love to have that famed crystal ball to be able to see true intent.  I have run up against similar things, but they are usually just learning points.  Good luck with things in the future!

Dec 20, 2008 03:16 PM
J. Philip Faranda
Howard Hanna Rand Realty - Yorktown Heights, NY
Associate Broker / Office Manager

Kate-

Radon is done in our market before contracts. Agents also cannot prepare contracts or change/tighten terms. The lawyers have completely taken over the process. Since lawyers by and large don't want to do the work involved in handling contingencies like inspections, they won't draw up contracts until all inspection are done and settled.

The buyers dawdled and did air twice, then water instead of everything at once. The true cost of remediating the radon for both air and water was estimated at $4000 tops by two different companies I spoke with. The $14,000 was absolutely arbitrary.

Dec 20, 2008 03:16 PM
Roland Woodworth
Blue Cord Realty - Clarksville, TN
Blue Cord Realty

WoW.. layers draw contracts there.. that would be a strange thing in our market. Of course is is good to get a home inspection completed before you get to far along

Dec 20, 2008 03:18 PM
Charles Stallions
Charles Stallions Real Estate Services - Pensacola, FL
850-476-4494 - Pensacola, Pace or Gulf Breeze, Fl.

Man sounds like you either have no contract or you're verbally making an offer. When is a contract a contract. Here it is when both parties sign and have a meeting of the minds.

Dec 20, 2008 03:58 PM
Kate Elim
Dockside Realty - Spotsylvania, VA
Realtor 540-226-1964, Selling Homes & Land a

Hi Phillip...So do I understand it correctly, the lawyers write the contracts?  We write them here, in fact that is one of our most important functions.  I believe that this is where we really earn our keep.  Not being able to do that would be a big adjustment.

If you do not have a contract until all of these inspections are completed why did the seller not go with another contract instead?

It is really interesting to learn about the different ways we practice from state to state.

Kate

Dec 20, 2008 04:00 PM
J. Philip Faranda
Howard Hanna Rand Realty - Yorktown Heights, NY
Associate Broker / Office Manager

Kate,

The system here is very clanky. It typically takes over a week to get under contract, often 2-3 weeks. In this case, it took over a month. Offers are in writing, and contracts are done through a memo system, which in court is non-binding, but if we went with another after sending out memos and allowing the people to spend money on inspections (without a crystal ball to tell us that these buys would pull all they'd pull) we could be accused of acting in bad faith. Ironic, huh.

When I worked in an upstate market we drew contracts. It was far different and far better. In the NYC area attorneys have a chokehold on the process, often delaying things for weeks while they fax back and forth their pet addenda, often without ever speaking directly. The arrogance of the process is appalling, and often even good, down to earth attorneys are doubtful they can close in 30 days even on cash contracts. 45-90 days is not uncommon. "Empire State" is a very ironic term in this climate.

Dec 20, 2008 10:09 PM
The Somers Team
The Somers Team at KW Philadelphia - Philadelphia, PA
Delivering Real Estate Happiness

I think the main thing to take away is that every deal is different and we can learn something from every deal as well.  As agents we build upon our own reputation and at the end of the day, I think most agents can tell the difference between hard-working, strong ethics, experienced versus undermining, lack of follow-up...etc.  This type of reputation is extremely important when the market starts to turn around again in a more competitive environment in terms of getting deals accepted.  Even now, when I submit a deal for a buyer, more often than not, the listing agent will gladly consider my deal before a less experienced agent as they know I know what I am doing and so forth...  Either way, every day is a learning experience : )

Dec 21, 2008 02:22 AM
Jim Lee & Janet Holt Edmond Oklahoma Luxury Home Realtors
EXIT STRATEGIES REALTY - Edmond, OK

Hi Phillip,

WOW!  What a great post!  I'm am so sorry for your troubles but it is wonderful that you shared! I have read each comment and it's amazing how varied the answers are depending on what part of the country you're from.

In our neck of the woods, we too write the contract.  The buyers have a set number of days to complete their inspections after the contract is signed by all parties.  There is a set dollar figure for repairs or treatments and if they go over then the terms have to be re-negotiated or the contract falls apart.  They do have the write to cancel that contract with the allotted time frame (all that happens typically within 10 days) with nary a lawyer in sight.  So as much as I complain about it on a local level, I like our system loads better than yours.

With regards to negotition and ineffective Realtors:

I have to agree somewhat with Lenn.  Wouldn't it be nice to just once have a buyer's and seller's market at the same time?  A market where everything was equal.  Well... we all can dream can't we!  Since that doesn't happen then we have to roll with the punches go where the real estate market takes us.

As I see it, there will always be in every transaction a Realtor with the home court advantage.   If it's a buyer's market then it will be the selling Realtor.   If its a seller's market then it will be the listing Realtor. We just have to deal with it!  I have always found that listing Realtors seem to be the best negotiators.  Simply because they tend to do more business. (At least that's the way it is in the Edmond/Oklahoma City area.  Please don't be offended if you're a buyers agent and are running huge numbers working only with buyers.)  Its just a simple fact, the more experience you have the stronger your skill levels will be.   Over all, selling agents are comprised more of newbies and agent who don't produces as much as Listing agents.  So it stands to reason they could be more easily controlled by their buyers.  I'm pretty agressive and consider myself a tough negotiator and well...dang, I've had Sellers walk all over me a time or two. Sometimes it just can't be help.  So just because the Realtor is relaying the buyer's demands doesn't mean the Realtor is ineffective.  And if there is not contract written then you're still in the negotiation stage, verbal or otherwise.  And like Lenn said, the seller could have refused.

Quick question: Since there was NO contract written, couldn't you have worked all offers at the same time and then taken the best one to contract? 

It sounds like the system you have to work within is a tough one for sure.  Too many cooks in the kitchen so to speak.  You'll winn this one!  After all your slogan does states that you are "the most aggressive real estate broker".......

Good luck!  You'll make it happen early in January or before!

Dec 21, 2008 03:41 AM
Judy Jennings
Top Agent Plus - Middleboro, MA
Tap into Judy's real estate expertise & resources.

Tough call, but based on the information you provided, I have to side with business vs. bad faith.  I believe the buyer used the current market condition, and perhaps the buyer agent (carrier pigeon - yikes!) as a tool to get a better deal.   I think we all at one time or another have dealt with unreasonable clients, right?

Dec 21, 2008 04:12 AM
Brenda Harmon
Century 21 Beal, Inc College Station, Texas - College Station, TX

J. Phillip,

I have had buyers like that on both sides before.  If it was truly bad faith sometimes you just wish that another, better offer would appear.  You don't know they might have been following their attornies advise.

Dec 21, 2008 08:44 AM
Tim Bradley
Contour Investment Properties - Jackson Hole, WY
Commercial Real Estate Expert in Jackson Hole, WY

I just had an office building sale fall through on a deal like this. Once under contract, the buyer made one unreasonable demand after another, and as the market fell, the demands increased. The seller finally drew a line in the sand, and the buyer went away. Wasted months of marketing time. Was it bad faith, or just hard line negotiations? Hmmm, well let's say it left a bad taste in the mouth, but at the end of the day, nothing illegal.

Dec 21, 2008 09:36 AM
Erby Crofutt
B4 U Close Home Inspections&Radon Testing (www.b4uclose.com) - Lexington, KY
The Central Kentucky Home Inspector, Lexington KY

Sounds like a good horror story for a real estate deal. 

It's also a good reason for the listing agent to push to get a good home inspection and radon testing done as part of the listing process.  It can take away a lot of the last minute angst and issues if the seller's already addressed them and taken care of them or considered them in setting the price.

Dec 22, 2008 12:35 AM
Morgan Evans
Douglas Elliman Real Estate - Manhattan, NY
LICENSED REAL ESTATE SALESPERSON

The due diligence period after the initial price has been negotiated is often a very uncertain time for all parties involved.  Without any contracts signed nothing is legally binding, in Manhattan we don't commonly have the same type of home inspection that single family homes have, but we do have the attorney looking at the buildings financials which can have an impact on the transaction.

Mar 24, 2010 02:36 AM