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?

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Jeff, if you have a buyer and you pre sell your listing to them without exposing the property you will never know if you could have gotten a stronger offer either on price or terms. Agents who do this are not letting the market price adjust naturally instead they are potentially keeping prices lower than they would be if you exposed it to the market.  Double ending your own listing obviously benefits you. You never know if that buyer in your pocket will even end up buying another place with you. 

You and I both know that  the banks BPO's are not a perfect science and not a reliable way to determine market value.  The property that I brought on would have appraised at $279k based on the comps and also at the $322k number it sold for. 

We have a duty to our seller foremost but we also have an ethical duty to the community and the banks involved. I always try to explain to the seller the benefits of exposing the property for a short period of time and they always agree with the reasoning. They usually do care about getting the best offer either on terms or on price especially if there is some doubt on whether or not there will be tax or legal consequences.

 I am waiting for the lawsuit where the seller goes back and sues their agent for double ending their property and selling it for it under market value. If the seller does end up having some tax or legal judgements after the fact I could see a judge and jury siding on the side of the seller for the agent not handeling the deal with the proper standard of care. Most brokerages would settle that case for sure and you would lose in the end.  

Stephen, I totally understand what you are saying here, I really do.  The flaw in your arguement in my opinion is market value.  The short sale sellers that I deal with most always just want this done, find them a buyer and get this thing closed.  The sellers do not care about market value, the bank does.  That is why the bank does their due diligence and makes their decision.   I have not duty to the bank, just as they have no duty to me.  Double ending is perfectly legal, nothing illegal or unethical about it (for the record, I only work with sellers but understand that it is perfectly legal in my state for an agent to double end the deal).  What would be the basis of a lawsuit if the seller recieved a full release with no deficiency and had no tax liability?  Can not imagine how or why a seller would sue for that, especially when they agreed in writing to hire an attorney during the short sale.  Who would be able to determine the agent sold the property under market value, the bank? the seller? the agent? 

We can all sit here and what if this entire thing to death.  Bottom line is that it is NOT illegal or against the Realtor code of ethics to double side a transaction. 

How does a property appraise for 2 different values? Again I will speak for myself and Im sure most of the agents here that deal with mostly distressed sellers that we are working in our sellers best interests only and if that includes having a ready, able, and willing buyer for a property so be it. Its a shame that because an agent represents both sides of a deal is "unethical" Everybody is ultimately in this or any business to make money. I dont know about you but when my distressed seller is at the closing table and all deficiency is waived and most judgements are gone and maybe even get a bucks for themselves that I would hardly believe  they are coming after me civilly or criminally as a matter of fact they send me more referrals than anything.

Just out of curiosity is this property that sold 40k over list a short sale or distressed in any way or in an area where distressed properties are predominant?

Stephen-

We DO NOT have ANY duty to the banks involved.  We are certainly not able to save the communities.  We have a duty to our seller and our seller only. 

Our job is to get the seller out of their house with no recourse possible from the banks. 

What is the issue with double siding a transaction?  If you are honest and ethical and disclose thoroughly,  then the buyer and seller can determine if they are comfortable with it.  It should be THEIR decision.  If you're not comfortable with it then don't.

That would be my same point. How is it filling my pocket to be a dual agent? If I have a seller and I have a buyer I am going to make a commission from each sale. So, if I bring the 2 together and sell my own listing did that increase my earnings to 3 commissions?  It's still the same 2 commissions I would have earned whether another agent had brought me a buyer for my listing and I would have sold my buyer another agent's listing.

Approaching the issue from a standpoint of, "what is easiest", or "what is fastest", or "whatever I can get away with, they(the lender) can fend for themselves" is a shortcut - it's butchery and "hackery" of the highest degree. 

If you owned the home, free and clear, you *would* get the highest price possible.  Sure, if your kid had a brain tumor and would die if you didn't get cash today, you would take a lower price - but..  you would still get as much as you could for *your own* property. 

You are *professionals*, engaged in the *business* of selling real estate - even if you *could* get a quick, "easy" sale, *as professionals*, there should be a teensy-tiny bit of pride in your work. 

Taking the first offer and selling for less than the *true* market value are the tricks of those who are not skilled in their own trade - they are the tricks of those who are making a "fast buck" on the backs of their own clients.  Whether the client realizes it or not. 

Very well said.  Thanks Mark.  Good to know there are agents out there that get the big picture. 

Mark, again, you make assumptions based on your opinions and nothing else.  When was the last time that you actually sat down with a bank executive and discussed the short sale process?

Also, I fail to see how you think short sales are being sold for less than market value just because someone double sides it or does not market the property for a certain amount of time.   If the property were under contract for UNDER market value, the bank would catch that when they do their appraisal.

If I owned my home free and clear, depending on the situation I would have the luxury of taking my time and waiting out the market UNLESS I was under some sort of distress and had to sell fast.  Again, another what if and another assumption based on nothing.

short sales ARE being sold for less than market value (27% nationwide-Campbell Surveys) but that is with the lenders full knowledge.  It really does not matter who lists the property or for how long.  The bottom line is that the lender or investor will make their own decision based off of their interpretation of the market.  Period.  Full stop.  End of story.

Joseph, I agree with you.  I think that market value for a short sale is lower than a normal sale.  FMV for an equity sale in my area is about 10% over what a short sale will sell for.  I guess when I am talking market value I am talking about short sale values....  My point, like yours, is that the lender makes the call on what they will accept. My job is to send them an offer they will accept.

 

Part of why they are being sold for less than market value is that some agents are not exposing them and are selling them for less than they are worth. I think the banks would care if they knew how rampant this problem is.  Do you think the bank or investor wouldn't care if they got an additional $43k?

Stephen, the problem is rampant?  Not in my area.  I live in a small area with a tiny MLS that is easy to monitor, I spend a great part of my day on the MLS and rarely see short sales, if ever, go under contract in one day.  Average days on market for a short sale here is 45 days before it goes to contract.  Average for equity sale is 125 days. Average for an REO is 2 days.  The banks dont even follow the rules that you want to see because they want these properties off of their books and fast.   With our average sales price, a $43K over  or under market and or  contract price would a 28% swing and would certainly be found when the bank does their due diligence.

Keep in mind that a bank owned property sells for less than a short sale in my area an a short sale sells for less than an equity sale, the three are not equal.

My point in all of this is that you want to say this is rampant and happening on a regular basis.  Do you have any proof of how much this is happening?  Should be easily to search on MLS to see.  I would really be interested to see how many of these actually go under contract before hitting MLS or in the first day.  

 

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