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?
You have a lot of integrity and I agree with you wholeheartedly. If everyone in our industry practiced your ethics, the industry as a whole would have a much better reputation!
Thanks. It makes me feel good that there are other agents that get the big picture.
Basically you can have a serious issue of fiduciary responsibility in dual agency. See the California Dept of Real Estate Bulletin
Ultimately, you have an issue that if you have the listing that you have a "higher" fiduciary responsibility to the Seller under subagency in the listing agreement. Probably best to not list it and use a single party transcaction however, most "banks" require the property to be listed.
It will not surprise me that agents will get sued over the timeline of the "marketing" aspect of the short sale for "market value" of the property.
Especially if you are in a non-deficiency judgement state, you are not doing yourself or sellers any favor by taking the highest offer. First off, why is a home being underpriced by $43,000? The short sale pricing should ideally reflect the full market value for its condition and situation. If your buyer is getting a loan, the property is going to have to appraise. When you lose your buyer, which often happens, now you have potentially put yourself and your seller in a bind to try to replace an offer amount that the bank has already started working with. That just creates more work to deal with. It is nice to know how high buyers will go in the event of a bank counter offer, but the best offer on paper in my opinion would be cash right on the market mark and no higher. Chose someone who is willing to go higher if necessary and who is willing to wait and will be there for you when approval comes. Most often, those are the buyers we have been lucky enough to come across before the listing hits the mls and have "pre sold" to. I also like to know what's going on on both ends of the transaction. That way I have a heads up on what needs to be done if a problem is eminent. Not all agents communicate too well and that makes our jobs more difficult. I don't have a problem with bringing in a buyer ahead of time, granted it is a "good" buyer for the transaction.
All that being said, it's nice to see more of the banks doing their valuation up front and pre-setting the starting price. Most of them are good to work with a timely price reduction if they are simply too high.
Thanks Steve. I appreciate your position and will throw you a curve ball... I do have a fiduciary responsibility to my client before anyone else. If I am able to sell his house at a price that the bank accepts AND is reasonable for the market, I'm going to do just that. If I'm truly focused on helping my client out of a bad situation, that's what I'm going to focus on. You know as well as I that finding a buyer that will put up with the delay's and changes to closing dates are hard to come by. When you have a buyer that's going to perform and is in for the long haul... it's worth moving that kind of a deal along to a close rather than risking your client's success on the possibility that something better is around the corner. From your client's perspective, it's all the same. If it's their primary home, they write off any deficiency against what they owe. If the deficiency is $50,000 or $75,000, there's no difference. Why would you put your clients success at risk with an offer that's been accepted by the bank. I've personally had several initial offers fall through only to have to reduce the price further to find another buyer. In this market, if you get a good offer for your home and the bank accepts it.... then close it. It's the right thing to do for your clients, the bank and the community.
If its an offer that the Listing Agent feels will be acceptable to the lender, than unfortunately its an offer worth putting under deposit. If the offer is too low .. they might just be wasting their own time and you can get it when it comes back to active. It's not illegal or unethical in my opinion if the Listing Agent believes strongly the offer will lead to acceptance. I call that Good Work!
Normally, the BPO determines the final price unless it's a cash deal then a buyer may over pay. Unless the deal you mentioned was a cash deal, how were you able to get 43k over list price? Did you miscalculate the market or were you using the low price to drive multiple offers?
If I double end any deals I tell the buyer they can offer whatever they want but if the have a low ball offer they better be prepared to pay higher market value. In my area not many people are paying above market value for any property because values continue to drop. REO's here are a joke. If you don't have an "in" with the listing agent, your're not getting any properties for your buyer.
Ultimately unless you get a cash buyer, the sales price will be restricted by the BPO/Appraisal. The cash buyers I know here think because they are buying cash they should get a discount.
We see a lot of this in my area also. When I'm doing a BPO and have to use these listings I not that when put in mls property was already pending lender approval. Most are under normal price range.
Unless I really need an offer to stop foreclosure (and I avoid being in that position) I usually list a little high, and build in my reductions on my status change forms at time of listing. Then, within a few weeks, I am where I need to be pricewise, and it shows the bank I didn't sell it on day one. If I do sell it on day one, so be it. The issue with your scenarion is appraisals. If you list at fair market value, and get above list by $40,000, it had better be all cash, or the appraisal is going to bring your value right back down where it belongs.
I wouldn't purposely over-price the listing if you can justify a lower price. However, I agree that sometimes the property is inferior to the comparables and sometimes you have to give it a few weeks to let the market decide the price.