We are seeing a lot of agents pre selling their own own listings that are short sales before putting them on MLS. I know we have a fiduciary duty to the seller not to the bank but this act of not exposing the property to the market to try to get the best offer drives me crazy. It not only potentially hurts the seller but drives down the comps in the neighborhood. I know some of you will say "I only had 2 days to get an offer to hold of the foreclosure" and in this case it can make some sense but usually it's a listing agent either representing both sides or trying to sell it to a colleague in their office.
I recently put on a short sale and got 11 offers after waiting the week to expose it to try to get the best offer for the seller. It sold for $43k over asking. I could have recommended that the seller take the first all cash offer at asking price or double ended it over and over for a lot less money but I felt an obligation to the seller to try to get the best one. Not exposing it to the market would have not only hurt the seller but also affect the comps in the neighborhood. I also thinks it's our job to try and get the highest price for the bank.
I am curious if anyone can tell me why banks with short sales don't require agents to expose the property for a period of time like REO's do?
I think we should have a standard of care not only to our clients but to the neighborhood and to the bank in some regards.
What do you think?
Harry, I agree that pocket listings on short sales do not benefit the seller, most of them will sell in MLS anyway so why not put it in there if you don't already have a buyer who may fit the bill.
If I have a buyer who I know is looking for a home in a certain neighborhood and I know they are qualified and ready to go, I think that it benefits the seller greatly to get an offer immediately, especially an offer that is at market value or somewhere very close to it. Has nothing to do with double ending or arms length, it has to do with giving my seller the best opportunity to sell the home and get the short sale approved.
Not putting it in MLS and trying to find a buyer is another story, our MLS requires the listing to be immediately placed in MLS upon listing it. Just so happens it may go pending very quickly :)
I have no issue with this. I could care less what the offer is so long as my seller has a 0 deficiency and no tax ramifications in the approval (crossing fingers MDFA gets extended) - Obviously it has to be a strong enough offer to get approved. Keep in mind the contract is between the seller and buyer and you have NO idea what the seller's finanical situation has been. The property could have been draining them for quite some time so they are HAPPY to take an offer. In an REO, the lender has all the time in the world to sell their asset the way they want. Most short sale sellers don't have that luxury.
I love a pre-marketed property. I can't stand when I see short sale listings on the market for 12+ months with not ONE offer..to me that makes no sense. I get my seller out of debt in the fastest way possible, with no deficiency or tax ramifications. I have NO intentions of letting a property sit around for offers. If I can premarket and get a buyer, I will, otherwise I price it agressively and get multiple offers and we go through each to see which offer is the strongest.
I agree with Smitty. As far as REO goes, not sure what you mean by exposing property for a period of time like REOs do. I sell REO as well and 90% of the time we get an offer on the first day and it is accepted immediately, especially for good priced properties.
I have a long list of buyers who are just waiting for certain properties to hit the market and there is nothing wrong with having a buyer who fits the criteria ready to go when these listings come up.
In your case if you would have told the seller to take the first cash offer for $43K less then most likely you would have a loser of a short sale because you convinced your seller to take an offer that was less than market value. Looks to me like you underpriced it to get that many offers over ask price.
I price properties at what I beleive to be market value and if we get an offer that reflects close to market value why would I need to tell my seller to wait it out.
Remember the highest offer is not always the best offer. By having the buyer ready to go and understanding of the short sale process, I could very well be putting my seller in the best possible position.
I think Stephen makes a valid point and it raises a couple of issues.
Even assuming the agent has only his client's interests in mind, if you don't expose the property to the market how do you know you're taking the best offer? The aim is to send the bank the offer that has the best chance of getting approved. What if you take one without really marketing the home, wait a few months to hear back from the lender, and then it gets rejected, or the buyer walks? Have you done your job? What if you could have received a much better offer from a more serious buyer by having the house on MLS for a week with proper marketing and open houses, and your client faces foreclosure because you took the lazy way out?
And then there's the question of agents ignoring their duty to the client, acting in their own interest instead. Maybe they want to double end the home, save themselves the trouble of actually marketing the property as they should, or do an agent in their office a favor by accepting her client's offer rather than making it an even playing field. We'd like to think that never happens but...
Every situation is different, but I think unless there's a legitimate and compelling reason to do otherwise the best course of action is to expose the house to the market in hopes of getting the best offer, with the best chance of approval. It's also the most ethical way to proceed when considering what's best for the neighborhood, since that sale will become a comp and could negatively affect values for other homeowners in the area. There's a lot of opportunity for shenanigans in short sale situations and I think we have an obligation to act ethically, while of course keeping our client's interest foremost.
Beautifully stated! An agent who believes in professional ethics!!
I completely agree.
The short sale approval system is a JOKE. It takes 3+ months to get approved (if approved). In most markets the values are going down. After being in the system for a month you are told to add street or avenue to the address have all parties initial and notorized. Why???? You sign a document at closing that all parties agree if there are any corrections to be made you agree to do so.
there is zero issues with offers before listing. Frankly, neither the bank nor I care where or when the offer comes, all we care about is whether it is a legitimate offer. Remember, your duty is not necessarily to get the highest offer, but rather the offer that will make the most financial sense to the seller. The two are not always synonymous.
I think the bank would care that they were getting the best offer but they haven't had the time to catch up with this issue. Banks really should require proper exposure in order to get the highest and best offer like some REOs are doing now. It's really the job of an agent to get the highest and best price for a home. Many listing agents are selling short sales without putting them on MLS and I think this could not only hurt their seller but it also keeps property values down. I think our job is to get the highest and best offer for our sellers which in the end will benefit everyone involved. Agents who double end and pre-sell their own listings are probably only looking out for themselves and not the seller. The is a standard of care issue which we as agents should not violate.
you need a lesson in Fiduciary Duty. Your duty is to the seller, NOT the lender. Highest and best price may or may not be what's best for the seller.
and a larger deficiency than necessary isn't in the seller's interest.
We have a number of these "3 minute realtors" in Phoenix, who post a property way below market for three whole minutes, hit "print" (to send to the lender), then update the listing to "pending" - one even had the gall to update the text in mls to state, "solid buyer in place, no showings/offers please"... the solid buyer - exactly 91 days after closing was that same agent!
Basically, they're using the MLS as a tool to defraud the lender.
Pretending the property was "marketed", when it wasn't.
I've reported a couple of these dirtbags to the fbi's "mortgage fraud task force" and never even received a reply.
Mark, you didn't recieve a reply from the FBI because you are assuming they are comitting fraud and have no proof that they are. Believe me, if they were, the FBI would be all over them. There is only one case of short sale fraud by an agent that I know of out of the hundreds of thousands of short sales.
While it does sound fishy to have a quick buyer and that buyer is the agent, as long as it was fully disclosed and the lender was OK with the agent buying the property, there is nothing illegal about it.
I sell 100 to 125 properties consistantly every year, what that means is that I have a large pipeline of buyers and I know what they are looking for and I make sure that they are ready when the property that they are looking for hits the market.