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
-
Permalink Reply by Greg A Curtis on
-
Original Question 1; "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? "
Answer; Perhaps because the bank doesn't own the property. Also, hard line requirements like that could prevent a sale. Each transaction is different and presents its own challenges. Sometimes the first offer is the best one. Time is of the essence, and perhaps you could lose a good offer in that time frame. many buyers don't want to play that game. I think it's easy to lose sight of the seller's situation as well. Remember these are distressed properties because the seller is in a bad situation. Often the seller is experiencing severe personal challenges like divorce, loss of job or death of a family member. There's too many variables to lump them all together in one classification, imposing such a requirement.
Original Question 2; "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?"
Answer; To the bank? The bank is an entity not a person and it's only standard of care is to itself or what is imposed on it by government standards. and it's that way by nature. And that's OK, It's about the bottom line. To the bank we owe fairness and honesty. I think the banks tend to get their money one way or another either way; mortgage insurance, government bailouts etc. To the neighborhood? By who's opinion? This seems like a real moving target.
-
Permalink Reply by Marcy Spieker on
-
You summed it up very well!
The banks know very well what the situation is and what they are doing. They know a whole lot better than we do. They certainly don't need us to be concerned about their profitability.
I have had sellers finding themselves in this horrible situation through no fault of their own. People who are in the 60's who have been totally responsible all their lives, saved and had to go through their savings to live. They should be preparing for retirement and instead they are starting over. They are devastated. They don't need anything more than to move forward and try to rebuild what is left.
I insist all my sellers meet with an attorney before entering in to a short sale. I want them protected every step of the way. That being said, I also want to protect me. The attorney appointments serves to do both.
-
-
I think the point some of us are making, including the original poster, is that in many situations the ethical way to handle a short sale is to expose it to the market rather than the listing agent double ending it without giving other buyers a chance to even bring an offer. Nobody is saying it makes sense to let a house sit on the market for months, or that by any stretch an agent would ever be more concerned about the bank's profitability than his client's well being.
I think it's pretty hard to argue that in many cases putting a short sale on the market for even a week is going to be harmful to the seller. It could easily benefit the seller, and be the fair thing to do for the neighborhood as a bonus. A lot of agents seem to think they have a crystal ball with which they can determine the correct value of a home when as we all know, a home is worth what a buyer will pay for it on the open market.
If you have an upcoming short sale listing in an area where a lot of buyers would likely be interested, but you give preferential treatment to your own buyer client so that he is getting a deal he likely wouldn't get if you actually put the house on MLS and he had to compete with other buyers, then you're not acting ethically. You might be right that the bank will take the offer you send them, but that doesn't mean you're doing the right thing, And that kind of behavior is exactly the kind of thing that contributes to the public's negative perception of real estate agents.
-
Permalink Reply by Smitty on
-
Again, George you are making assumptions all over the place. Who is to say if a property is listed and under contract within an hour the agent even double ended it? I work with brokerage of over 400 agents and they may premarket within their own firm. If they bring in a buyer with another agent of the brokerage, that is not a problem, NOR is it a problem if in the off chance I have a buyer that will put in an offer on the same property. You can't say that my buyer wouldn't offer the same as any other buyer out there. You are only assuming that and you really have NO idea.
It seems like you are blurring the lines between pre-marketing and dual agency, of which neither are illegal, or unethical unless you have not given proper disclosures to the seller. You also keep forgetting you are to act on BEHALF OF THE SELLER. If the seller agrees to an offer "premarketed" no one here should be going against that.
What contributes to negative "perception" is the amount of people screaming fraud, unethical, scams, schemers, who have absolutely no knowledge of such activities and are seeing a situation from an outside angle. They don't have any direct relations with the fraud they are touting. They are merely perpetuating more fear in people. Unless you are directly involved in sale that is fraudulent or unethical in some manner, you can't sit here and paint with a HUGE WIDE brush because you don't "LIKE" the way some other agents do business. It doesn't make it unethical NOR fraudulent.
-
-
OK Smitty - I'll bite.
Have you done any B of A shorts recently?
Did you sign an agreement with wording like this?:
"“the subject property has been listed on the local multiple listing service at fair market value to provide open market competitive bids to present to the seller as per the terms of the seller/agent listing agreement, and that the marketing is in fact and ‘in spirit’ seeking to maximize the selling price of the property.”
How can you sign that doc with a "pocket" listing?
Please, rationalize away...
-
-
What's to rationalize? I don't do pocket listings. Nor am I against them, and just because other agents do do pocket listings, I'm not going to sit here and throw out the "red flag" because again, I don't have any knowledge about their sale.
Mark, do you even have a miniscule concept of how many addendums, affidavits, ALTS, etc., I've signed??? First, as I'm sure you're aware the lender is NOT a party to the transaction, so there are many schools of thought on how they can even enforce making buyers, sellers and agents sign something and hold it to law considering they are not party to the transaction, but ok, that aside, keep in mind one key component of that statement "as per the terms of the listing agreement" AGAIN, IF I'M SO lucky to have a buyer for a property or another agent I know may have a buyer for the property, I have a FULL DISCUSSIION with my homeowner about the pros and cons of accepting the offer. If they accept the offer, I have a clause in my MLS agreement or an addendum to the agreement SIGNED BY THE SELLER (AGAIN THE LENDER IS NOT PARTY TO THE LISTING AGREEMENT EITHER ) stating they are accepting of an offer within minutes of listing on the MLS. So in reality, I am following the "terms" of my listing agreement with the seller. What is so hard to understand about that?
Also, Wells Fargo tried to do something similar in their addendum too. "“It is the listing agent’s fiduciary responsibility to present the highest and best offer to the servicer.”"
When did things change and I have a fiduciary responsibility to the servicer? umm I definitely didn't get the memo on that one. This is why I know you haven't done a lot of short sales. I know many of the addendums ... believe me, and Wells Fargo literally wrote in their addendum that agents had a fiduciary responsibility to...wait for it.. Wells FARGO!!! Really? Their addendum was set up similar basically trying to hold agents accountable for getting THEM the highest offer.
First off, we've already established that short sales aren't like tradtional sales and they they are NOT fair market value. “The fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.” This definition was affirmed by the United States Supreme Court in United States v. Cartwright, 411 U. S. 546, 93 S. Ct. 1713, 1716-17 (1973).
Now, take the definition of a short sale“Distressed property” is defined as “real property that suffers a reduction in its market price because of pressures operating on the owner, such as threatened foreclosure, divorce, settlement of an estate, or fear of economic changes that might decrease the value.” (The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD, 2007.)
So I have to ask a question back to you? How can I certify FAIR MARKET VALUE on a property that doesn't fall within a fair market value definition?Banks can try all they want to insert outlandish language in to their contracts. It won't hold up. I either sign the addendum and cross out a section I don't agree with and initial it (again after all, it is a contract right?) OR per my lawyer, send it in because they could not hold water in a court of law.
-
-
Smitty,
How would you ever know if your buyer or the buyer from your firm is the best for the seller without properly exposing the listing to MLS?
Dual agency in some states is illegal and for a good reason. It should especially be illegal to represent a buyer and a seller in a short sale because there is too much power in the hands of the listing agent to sell the property for under market value not to mention other problems.
How do we know if an agent isn't selling the property to their high school friend for under market value and taking advantage of a vulnerable seller?
Do you think that the agency relationship between the dual agent, seller and buyer has any conflict with the arms length addendum?
I think if you have time to pre-market your listing to your office you have time to put it on MLS and market it properly which only benefits your seller.
We all know there are times when we need an offer yesterday in order to save our sellers from foreclosure but most of the time I have had enough time to expose it for at least 5 days in order to get the best offer for my seller. It's the right thing to do for the seller, the neighborhood, the bank and the economy.
The next time I go to a listing appointment in the same neighborhood that I just got $43k more for the home I just sold, may be that new seller won't be as short because the comps in that neighborhood are much higher because I exposed the sold home properly.
None of us are saying that all agents who pre-sell their listings are doing something fraudulent. We just want what's best for our sellers,as I am sure you do, but I think it is in everyones best interest to expose (time permitting) the property and let the buyers and the market determine market value. .
-
-
How would you ever know if your buyer or the buyer from your firm is the best for the seller without properly exposing the listing to MLS?
1) Because of experience. I've done well over a hundred sales and I usually know what a lender will take for an offer before I even submit it. Now do we ever TRULY know what is BEST? We don't. Just like I don't have a crystal ball that tells me the future, I have NO idea if ANY offer will fly. I have no idea if I list it on MLS for a day, week, month or year WHAT will happen. So I can only use my best judgment as I have done countless times. My sellers all have an attorney that represents them so if thier attorney signes off on the offer, paperwork, addendums, affidavits, ALTS than I'm doing my BEST at trying to make sure my seller is covered. My experience has led me to this. I don't take chances. I'm not just going to submit some low ball offer if I don't think it has some reasonable chance at being approved..why go through the hassle, and yet, it's really not up to me is it? It's up to the seller. If the seller wants to take some low ball offer when it's on the MLS and waste everyone's time, I HAVE to abide by their wishes dont I?
I'm not getting into the dual agency discussion. Short sales typically always sell under the price of their traditional fair market value counterparts. It's just how it is. Circumstances prevent short sales from being sold like traditional sales...so basically YES, agents sell short sales all day long under fair market value...dual agents, regular agents, facilitators..yep all day long.
Again Stephen you are making assumptions. You have no idea what will benefit my seller. you are trying to treat a short sale in the similar manner as a traditional sale and a short sale seller cares about a full release, satisfaction of debt, and no tax ramifications...they don't oftem make a penny on the sale so their desires and needs are not necessarily to get the HIGHEST offer.
Stephen, can you explain to me about this $43,000? You got $43,000 more than list? You got $43,000 more than FMV? Who exactly was the buyer on this sale? Something doesn't add up at all.
Again, what is in the best interest of my seller isn't the same as what is in the best interest of a seller selling with equity. In a negative equity situation, sellers don't make a penny (normally) and they most care about getting it done in the quickest manner with the least amount of issues on the approval. You are assuming you know what is best for everyone's seller. It is a NEGATIVE EQUITY situation and that circumstance is completely different than a seller wanting to "expose" their property to get the HIGHEST OFFER, like an equity seller.
-
Permalink Reply by Jeff Payne on
-
Smitty, you are certainly the voice of reason here. I also question this 43K more than list price. There are so many assumptions I could make there too. "What if" this was truly 43K more than list price and over market value and this offer gets submitted to the lender and gets approved...... THEN the buyer's lender does their appraisal only to get an appraisal back that is closer to list price? What happens then? The buyers lender certainly isn't going to finance anything over the appraised value. The buyer could pay the 43K in cash but most likely that won't happen because why would a buyer pay that much more for a house? Next thing that could happen is the buyer walks because they wont pay the 43K more than appraised value. The bank certainly now believes the value is higher because they had that offer and approved it. This could certainly have harmed the seller in this case.
Again, we can come up with "what ifs" all day long. Seems as though many on here choose paralysis by analysis and are losing out on deals because they spend far too much time thinking of "what if" .
I would be curious if George and Mark tend to work more with buyers or sellers? I could certainly see buyers agents feeling like they are being cheated if they primarily work with buyers and dont work the sellers side of it or dont understand the seller side of it
-
-
I asked a pretty *simple* question a few posts back, and never got a satisfactory answer.
I posted some of the text from a B of A short addendum that you're going to have to sign to close one of those deals.
That text states that the selling agent has made a good faith effort to market the property on the MLS - in very plain language.
The response from Smitty was, "I don't do pocket listings", then "My lawyer says it's unenforceable, even if I did sign it", then "Short-sales can't ever be sold for true market value".
Other comments here infer that I couldn't *possibly* know about a fraudulent deal unless I was a party to the deal... so you can't "see" fraud, unless you're a fraudster?
Convenient, but untrue.
Are you ignoring the terms of that addendum? Knowingly violating those terms because they're "unenforceable", the lender "isn't a party to the contract", or some other argument?
I mean, "open market" isn't hard to understand - it means "pocket buyers" get the same chance to bid as anyone else - and while a short-seller isn't concerned about "netting" anything on the deal, there's no reason to pick a lower offer with equal terms.
I understand very well the idea of acting as a fiduciary to only *one* party in a transaction, but "fair dealing" means you don't get to lie to or mislead people (or lenders) you aren't representing.
And I chose the word "mislead" for a very special reason, it's the term a prosecutor might use in an indictment. "Misleading a Federally-Insured Lending Institution".. Feel free to google those words and report back on what you find - you know, indictments and what not.
Just because you represent the other party in a transaction doesn't mean I should have to count my fingers after shaking your hand.
-
-
If I weren't a Real Estate agent I would want you to sell my home. Spot on Mark!
-
-
OMG Mark. I guess you didn't read my post thoroughly. What part of "I either sign the addendum and cross out a section I don't agree with and initial it (again after all, it is a contract right?)" did you not see? If I don't AGREE with the terms of an addendum, I change, or modify it, OR cross it out all together and initial. This isn't the 10 commandments here. It's part of a contract. OH WAIT, technically it's NOT part of the contract as much as the lenders would like to make it, so if I don't agree to the terms of the affidavit, addendum, ALT, I cross it out and modify to make sure everything is properly DISCLOSED. AS, I wouldn't MISLEAD anyone during the process.
Do you know the keys to civil fraud?
1) Material misrepresentation - Lie2) Material omission when there is a duty to disclose
3) reasonable reliance by the "victimand all of the above must result in DAMAGES.
If ONE of these is missing there is NO FRAUD.
I don't deal with MAY MIGHT OR COULD BE fraud. Your fear tactics are what perpetuate misinformation.
Cite me the LAW that says a listing agent cannot pre-market property? The scary part of this entire thread is anyone can make a fraud complaint, and that's exactly what you are doing. How many times have you contacted the list agent on all these properties that go under contract immediately and done an investigation to see if anyone has intentially MISLED someone? I can tell you I know the answer to THAT, because again you can point the fraud stick all day long but you have NO IDEA what is going on with that transaction. If you don't like it, CALL. CALL and ASK.
© 2024 Created by Short Sale Superstars LLC.
Powered by
**********************************
like buttons