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 Stephen Pringle on
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Smitty, I put the property on the market based on the sold comps, condition of property and overall market value of the house. I have been selling Real Estate for 11 years and I know this particular neighborhood very well. In our market we do have a lot of short sales and I have done my fair share and have also sold close to 200 hundred homes. Our price points are higher than most of the country and that is partly why $43k over asking is not that uncommon. There were a lot of agents who responded to this post that said they were also in a market where properties were receiving multiple offers but they still thought there was no issue with pre selling their listings to either their own buyers or to their office. Amazing.
This home was a 2 bedroom 1 bath and there were 3 and 4 bedrooms selling for only 10k more on the same street in better condition so my $279k price is where any agent would have put the price. This was a short sale and the owner owed $675k on the house. Our market is probably a lot different than your market because we have no inventory and tons of buyers. As soon as it was listed I got multiple agents wanting to bring me their offer. It was fairly obvious we were going to get multiple offers from the beginning as it is with most properties here under $600k. I also had at least 3 buyers at the open house tell me they wanted me to represent them because they wanted to be sure they got the property. Since I never do dual agency I told them to find another agent to help them or I could refer them to someone ethical. The seller could have taken the first offer that came in which was at asking price on the first day. The seller and I discussed it and he understood that it was in his best interest to make sure the property was properly exposed for the brokers open and the public open house in order to pick the best offer. We ended up with 11 offers. The highest was $322k and it also had the best terms and buyer. There were offers all over the place but the seller was certainly glad he waited the 7 days.
Because there were comps to support the $279k price if the seller would have taken that first offer it would have appraised and would have easily closed at that price.
Obviously not all markets are the same and not all seller situations are similar but it seems like letting the market dictate the market value makes a whole lot more sense than some agent who thinks they know what the market value is.
I do think the practice of selling listings prior to putting them on MLS, unless it's an emergency seller situation, could keep prices lower than they would normally be and could ultimately affect the seller in the long run not to mention the bank and the neighborhood comps.
After it closed I thought about the other sellers who might be calling me on that street and I felt a whole lot better knowing we got them a higher comp for their home and since it was $43k higher possibly they wouldn't have to do a short sale or may be they could even refi to keep their home.
I like thinking about the big picture and not the short term gain. We are all in this together so lets all work hard, be honest and do what's right for everyone.
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Permalink Reply by Smitty on
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Ok so again, what works for YOUR seller may not work for EVERY seller. I'm in a market saturated with distressed property. That's great that this sale worked for you, however I have only twice seen an offer over list where I am. I have an AMAZING property right now under contract, ocean front, that I can't seem to give away. It's the LOWEST comp in town and I don't like to list AS the lowest comp, but I can't seem to get a buyer.
So, what works for my sellers, may not work for your sellers. I'm BEING HONEST! Not once here was I not honest. You are making huge assumptions about other people's listings. I do what I can in the best interest of my sellers. Your market dictates a multiple offer situation. I can count on one hand how many times we've had multiple offers. I also list according to comps. I don't WANT to be at the lowest end of the spectrum because then bank approval gets difficult. I don't mind being LOW but LOWEST is difficult.
If someone in your market, gets a property under contract within an hour, you cannot assume anything sneaky or underhanded went on and this thread is riddled with those types of "assumptions" - We do the best job we can for our clients and I do believe there are bad apples in the bucket, but overall, I see TONS of agents helping homeowners out of difficult situations every day. It's not up to you to make the decision on what is best for their sellers.
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When I see properties closing for a lot less than they would have because the agent pre-sold it to their own buyer or to someone in their office without marketing it properly I have a problem with that. I do think that the arms length addendum should apply to dual agency in a short sale.
I am just waiting for that seller to come back and sue their own agent (if they had a tax or deficiency judgement) for a lack of exposure to the market and a total disregard for a standard of care. No brokerage would want to defend that case.
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Again, Stephen have you personally walked through each of these properties ?You are ASSUMING you know details better than the listing agent. How do you know there isn't a failed septic at $25,000 wack or a roof replacement for $10,000, or boiler or some other issue. You are looking at a listing online and making a snap decision that you could have sold it for more money.
This industry is wide open for lawsuits. Not just for dual agency or premarketing, but anywhere in short sales could there be a lawsuit. We can only do the best job for our homeowners, who sign off on this along with their legal team in my case. -
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Permalink Reply by Jeff Payne on
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How do you know the situation on the properties? How do you know that there was not a substantial lien that had to be satisfied and the buyer agreed to pay it and the bank was happy to be rid of it.
You are the one with the dual agency issue which most likely means that you dont trust yourself.
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Permalink Reply by Greg A Curtis on
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George; Thank you for the clarification.
What your saying makes sense to me in general terms but the original poster was suggesting a bank requirement for short sales to prevent the type of behavior your referring to. To me that doesn't make sense because it would also affect transactions which really did have the best offer first and are completely above board. The type of behavior your referring to is nothing new and as long as there are sales people I suspect the "opportunistic" will try to take advantage.
I'm not quite sure about the ethics in this situation. I think it's a matter of opinion whether it's ethical or not because you presumably would be representing the buyer as well so your duty is to get them the best deal without harming the seller.
The progression of thought would then be, "what about the bank?" "Who is representing their best interest?" And my answer to that would be the banks can take care of themselves. They are obligated to do their homework. Have an appraisal, BPO ect. Truly the banks are one of the leading causes of the current market conditions. They have a big role to play and they are responsible for making sure the sale price is fair. Especially if it's a duel agency transaction. If everyone does there job it should (Generally) be no problem.
I know that doesn't change the feelings of the buyer who feels like they had a right to bid yet didn't get the opportunity or the argument that these types of transactions are lowering the fair market values in the area. But the truth is, this is the real world. Some times people get a better deal than I do. And frankly the market will also take care of itself. It's about supply and demand not a few transactions here and there which determine the market.
Anyway, that's just my opinion.
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Permalink Reply by Tammy Davis on
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I am amazed that a week later this conversation is still generating alot of interest..I love hearing everyone's opinion on this obviously sensitive subject matter.
I know it is being addressed on a short sale website...but I wonder...if we weren't discussing specifically a short sale transaction and were perhaps discussing a traditional sale would you still be upset that the property wasn't on the MLS for several days?
I know that as a professional well professed in short sales...I can hold my head high knowing that I provided excellent service to my sellers. I obtained what the SELLER determined to be the best offer and the bank agreed to. Per my listing agreement the property was placed on the MLS (whether it was for 1 or 30 days, as soon as we had an accepted contract the status was changed). And the sales price we obtained was very close to what the BPO and buyers appraisal came in at. On a couple of occasions I represented the buyers as well as the sellers...it was disclosed multiple times in multiple documents to all parties that I represented both parties. And all of my clients were happy when the deal closed.
Correct me if I'm wrong...but isn't that what we are hired to do?
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Permalink Reply by Joseph Alfe on
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Since we keep going around and around, we are losing sight of the prize. In a proper short sale, before a listing is even activated, it's the agents job to do a thorough and complete market assessment. You should know what market value is before you even take the listing. At that point, if you receive an offer that is consistent with the market, and it's a strong qualified buyer, you should take it. Period. Listing time is not considered. Why wait for a possible better offer? By waiting, you can do more damage to the seller. If it's a legit offer, go for it, no matter if it's 1 day on MLS or 90.
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Again, spot on Joseph!
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you cannot know what "true" market value is, unless a property is exposed to the market. You can have an idea, but not actual knowledge. Are you telling us you're that infallible? You've never listed a property too high and gotten zero offers? Or never offered one too low and had five offers in a day?
You aren't closing short sales in hours, the best braggarts on this forum don't even promise that - weeks at best, months at worst. The one-single-solitary short sale you took that required an offer that day does not justify a half-a$$ed marketing effort on every sale you take on, nor does it excuse insider deals.
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Personally, I think this horse has been beat to death!
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