Seller taking an offer before it hits MLS
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?
Replies to This Discussion
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Permalink Reply by Smitty on
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Mark, I've tried to read all of the comments today. I honestly skimmed just most of them as it's literally time to go to sleep, but I wanted to revisit this thread. You hit the nail on the head. If you OWNED the home free and clear or even had equity, you would want to get the highest price as a homeowner. I've read these comments today and I can only assume you, George and Sheila have not done a volume of short sales. Now I could be wrong, but your comments lead me to believe you haven't done many.
In a negative equity situation, sellers are most concerned with a deficiency release. It's not the same as a traditional sale. Maybe that is why they are willing to take the first offer that's presented within reason. The biggest factor in a short sale is TIME. Sellers don't have TIME that many traditional home sales do and if you look up the dictionary of real estate appraisal you will see that homes that have a LIQUIDATED value lack two key components that their traditional home counterparts don't. 1) The homeowners have a "compulsion to sell" and 2) They don't have adequate marketing time.
Short sales are liquidations. They are NOT traditional sales, as much as many people try to treat them. I can't just list a property for a short sale seller and let this property wait for 12 months. Short sale sellers "want to SELL" - They want to have a deficiency release and get the property sold in the fastest manner, so by real estate appraisal standards, because short sale sellers have this "need" to sell and not adequate marketing time, they fall in a different category, i.e., their prices are typically LOWER than traditional home prices.
SO, there is my PROFESSIONAL explanation as to WHY it is not a FMV and you can't treat a short sale the same way. These sellers are "distressed" and I can tell you have a whole mess of different obstacles to overcome while selling their homes than a regular home sale.It's not butchery, hackery, or anything else. It's a result of the condition the homeowner is facing. There is no TRICK. You would understand this if you had done multiple short sales.
I agree with Joseph and Jeff all the way and I know both have done over a hundred sales. Joe may have done HUNDREDS as his firm represents many agents.
You are still looking at this from the perspective of a traditional sale, and it's not. If it were, I'd agree with everything you are stating, but the homeowner 99% of the time doesn't care about the price, they care about a full release, satisfaction of debt, and any ramifications after the sale.
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Permalink Reply by Jeff Payne on
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Sheila, so if I get an offer that the seller accepts and we get short sale approval with a full release and no deficiency, I harmed my seller? Please explain that one to me. My seller hired me to get them out of a jam and the goal is always to get them out with out any recourse, no deficiency, full release and if they are owner occupied they are exempt from 1099 taxes. I accomplish that and by your reasoning I am not looking out for the seller by bringing them an offer on their listing the day I list it?
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Permalink Reply by Mark on
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Jeff,
Neither of us are accountants, nor are we tax experts -
HOWEVER
One possible way that you *could* be harming your seller financially with these "pocket" buyers is that *if* the seller's mortgage was not 100% purchase money - a deficiency is taxable.
If the seller thinks they got off "scot-free" with no deficiency, ignores the deficiency for tax purposes, and moves on with their life for a year or two...
When they get the bill from the IRS, they won't be lovin' Jeff and his "pocket buyer/ investor angel" so much.
It's entirely possible you'll be asked to explain your "marketing efforts" to a judge.
Squeezing even an extra $10k out of these properties could save your seller $4k in tax liability when you add interest, fines and fees.
Please tell me how in your hundreds of short-sales, no one took any "party-money" out, and none of those properties were "investments"
"The debt must have been used to buy, build or substantially improve the taxpayer's principal residence and must have been secured by that residence. Debt used to refinance qualifying debt is also eligible for the exclusion, but only up to the amount of the old mortgage principal, just before the refinancing"
"Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the new tax-relief provision."
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I dont disagree with you here Mark, I will only say that you make too many assumptions without knowing the facts. You have made assumptions that agents are cheating and being unethical but have not show one bit of fact to back up your assumption. I have not seen anything that you have cited in regards to law or code of ethics.
As far as accountants or tax experts, you are correct, that is why ALL of my sellers are required to speak with an attorney and tax accountant.
You, George (who I suspect might be you) and Stephen are all three very quick to assume that someone is doing you wrong. You all 3 assume that each and every short sale is exactly the same and you all 3 have tried to convince us that short sales going under contract before they hit the market is commonplace, actually rampant but I would be willing to be any of you that you can not prove it.
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Oooo Jeff. I had to take you up on this so I did some searching on my MLS - Over 14,100 homes sold last year in one of the states I work in and 224 were under contract within 24 hours. So a little over 6% of all homes sold .. but it's rampant.
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OK Smitty, I did a quick search back to 1/1/12 for all short sales that are under contract.
2.7 % were undercontract on day 1 or before. 2 % were undercontract on day 1-2.
My market is very small, we will see around 3000 total sales in one year.
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Mark, send me the information where it is a violation of MLS rules. How do you know MLS rules? From the 2 short sales that you were involved in? Our MLS rules are that the listing needs to be in MLS within 24 hours but there are no rules stating that we have to wait 24 hours to make offers.
You keep forgetting that the seller makes the decision and the bank is there to release the lien. The banks do plenty of due diligence to make sure the offer meets their desired NET amount.
You seem to think that because you disagree with something that it is illegal. When you can show me the laws that are broken, I will then change my mind.
Everyone wants to claim that laws are broken and fraud is being committed but no one seems to want to do any research to see that there is ONE case of short sale fraud that was tried and/or convicted....
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A couple of comments.
1. Something doesn't need to be illegal for it to be wrong. If your standard of practice is to do whatever is convenient as long as it's not illegal, then that's not a good way to do business.
2. You have mentioned a number of times how there's only been one case of short sale fraud. I have no idea how true that is but it doesn't prove anything, and citing that over and over sounds defensive. That doesn't mean by any stretch that there aren't shady things going on that nobody prosecutes. In fact, that's kind of the point of this whole conversation, isn't it?
Mark's comments about putting houses on MLS just for appearances is quite valid.
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George,
You have failed to prove to me how it is wrong for an agent to represent their seller and get their short sale approved without any recourse in the future to the seller. My point about fraud is that you and others want to paint a picture of widespread fraud and illegal doings but the reality of the matter is that having a buyer ready to purchase a home that you list is not illegal and is not immoral or unethical.
I do not doubt that there are shady deals, anytime money exchanges hands there is a chance that you are dealing with a slimeball. Not being defensive but I would think that if there was the amount of this activity going on that you and Mark claim, there would be more cases of this that would be found with a simple google search.
I have no issue with an agent putting a house in MLS for a certain amount of days to see what offers come in, never said I had a problem with it. Who are you to determine how long is enough? If a week is good why not wait 2 weeks or a month.
Just because you think that something is wrong or dont agree with something does not make it wrong, it makes it your opinion. That goes both ways, you have your opinion and I have mine.
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I think many assumptions are being made that are not accurate. I have had a my sign up because home is listed but awaiting the PRE-SHORT SALE approved price from bank before we put in MLS. Many times that can take months. The sign is up because home IS listed and because when homeowners are not making mortgage payments and home is vacant the bank will rekey the home. Not so, when sign is in the yard. It lets asset preservation company know home is listed and not to rekey the home. Many times we get sign calls and HAVE to present all offers to the seller. So if the seller CHOOSES to execute a contract before it hits MLS that is their choice....so many people need to quit assuming and perpetuating that myth that all agents are ethically challenged. We get enough of that from the public and media don't you think? I know how to properly advise my client for a successful short sale and their attorney is great at handling their deficiency questions. Getting an offer before the house hits MLS can happen anytime in any type of transaction...what would you advise, not presenting to the seller? Now, that would be wrong.
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Permalink Reply by Sheila Vardakis on
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I would not wait for a preapproval price to list a property. I would have it listed and up on MLS. Then when the preapproved price comes back, change it to the price based on the net the bank is wanting.
Unfortuantely there are bad eggs in every industry. they are the very ones that make us all look bad when we are doing the right thing.
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Shelia, I agree, there are bad eggs in every industry. Doing the right thing is what we are talking about. The right thing is to get our seller out of jam by finding a buyer that is ready, willing and able to purchase and will stick with it for the long haul. Our job is to get an offer that the bank will accept and to get the full release for the seller...
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