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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@George and Stephen,
My question is, if I'm having an open discussion with the sellers regarding my buyer and asking them if they want to accept the offer at hand or put it on the market and wait, where is the issue? Keep in mind we've already had LONG discussions with them regarding deficiency, tax liability and also the sellers have had those discussions with their attorney and accountant. If my SELLER wishes to take my buyer's offer, then I have maintained my fiduciary responsibility. I don't know what is best for the seller, only the SELLER knows what is best for them and we can all throw out hypothetical situations all day long, but in the long run, I have given my seller all of the information I have available to give them, and it is THEIR DECISION to either move forward with my buyer or not.
Seller's make up their own minds, even if my wishes are different. Last month I presented an offer to a seller who in turn spoke to his accountant who STUPIDLY advised him NOT to take the offer because he should sell it in "2012" so it was in THIS tax year. Well, I could only advise him there would be no way we would sell it before the end of December and he should go forward an accept the offer. He decided not to and to wait until January...well, the lender set an auction and now we are scrambling to get a sale date postponed.
I can only give my sellers the information, but if they accept, agree, deny then I have to respect THEIR DECISION because THEY know what is in their best interest. I know my WISHES for every short sale, but it doesn't mean I get my wishes.
So, tell me, where is the issue if I've had a long discussion with the seller about my potential buyer, and do they want to go forward with my buyer or throw it up on MLS to see what the world has to offer? If they say, 'No, we don't want to wait, GREAT" then I am not acting against my seller. "If they say, we'd rather put it up on MLS, and chance it." Then that's what I do.
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Permalink Reply by Jeff Payne on
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Well said Smitty. We often get too wrapped up in this stuff and forget the seller is who decides on what offer to take, we can only advise them and we know they do not always take our advice.
Just for disclosure, I rarely double side short sale listings. Actually I rarely ever work with buyers, all of my buyer leads that are generated go to a buyer agent who works only with buyers.
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Permalink Reply by George on
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Smitty,
I have a feeling that some of the disconnect in this thread is due to the fact we're all in very different markets. Well priced short sales, especially in the starter home ranges, are a hot commodity in my market. And it's hard not to get a little suspicious when we see one come on that isn't given any real exposure, and then it closes with the listing agent doing both sides. Even if you happen to be a super ethical agent who really goes to great lengths to give your seller all sides of the info, you can't say that's the case in all of those deals.
You're right of course that it's the seller's call ultimately. And you might be a good agent, but I don't think you can say there is absolutely no conflict of interest on your part if you're talking to them about accepting an offer from your own client, and that means you will have a house for your buyer and will make the same money without the time and effort of doing any marketing.
We're talking about how homes come on MLS and are basically already contingent, or as Mark said earlier, within three minutes they are. If you already have a buyer in place, then why are you listing the home on MLS at all?
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George, anyone who is paid on a sale can be accused of a conflict of interest. Money is a motivation and ANY sale, not even a short sale, could become a conflict of interest. Right now you are purely speculating on things that you have NO factual infomation on. You have no intricate knowledge of any of these sales other than numbers. Maybe there are hundreds..thousands of listing in your market that go under contract within hours. To me, I see a listing agen that did their job. You can't possibly know if there is a conflict on those sales, unless you know something intracate about it.
We list on MLS because we HAVE to. It's a requirement of the sale, much like affidavits, addendums, etc. We are required to have the property on MLS so we do it. We do many things we don't necessarily agree to.This is a true story. I had a Wells Fargo short sale that I listed at what I considered FMV, and had a buyer on hand. I discussed with my sellers got approval and went forward. I submitted my short sale only to have the appraisal come back $50,000 over list. The negotiator rejected the sale and told me to relist at the appraised price. So I discussed with my sellers (after SHOWING the lender why and how I came up with my pricing and them not budging) and we agreed to relist at appraised value. So, what happened? The house sat well over 12 months while I did gradual price reductions. NOW, it's at the same price I originally listed it and I got the SAME exact offer I originally submitted with a different buyer and the lender WASTED 14 months of my sellers time, draining them more and more financially. I don't care what market you are in, if you overprice your sale this is what happens. How many short sales there are on the market have nothing to do with premarketing a property. My sale got approval yesterday. No deficiency, and it's a primary home so no tax ramifications. We just wasted a sellers time...well over a year. They are outraged that WF didn't take the first offer. So, again, you have NO idea what is happening on the list agents end and it's upsetting quite possibly that you didn't have a chance to put an offer on a property, but again, unless you have intricate knowledge of that sale, you are merely speculating on any conflict or issues.
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Smitty,
I haven't suggested at any time in this thread that in every situation where a short sale listing agent double ends a listing without exposing it to the market there is anything shady going on, or that I know the details of every transaction. There are undoubtedly cases where all turns out well for the seller, and I'm sure that a lot of agents in those situations are trying to do a good job for their clients. But by the same token I don't see how you could be comfortable claiming that there are not cases where agents less ethical than yourself are manipulating the situation to their advantage.
I agree that there are inherent potential conflicts at every turn in our business, and my point is that we should do what we can to minimize them whenever possible.
Your example about the WF short sale is a sad story, and nobody wants to see a seller in that situation get screwed like that, but that's not what we're talking about. We're talking about listing agents taking an offer from their own buyer when there would likely be a better one out there, and a week on MLS would show whether that's the case or not. Identifying and submitting the best offer (in price and terms) would be in the best interest of the seller, not to mention the bank that's taking the loss and other homeowners in the neighborhood who will be impacted by the low comp, while the only ones who would potentially have anything to lose would be the listing agent who would rather double end the deal and his or her buyer who would like to have the inside track on the house, and who might get a better deal than if the home were exposed to the market for even a week and would rather not have that competition.
Anyway, this has been an interesting discussion but I think at this point everyone has pretty much made their case, and there's no way we're all going to agree.
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George,
"We're talking about listing agents taking an offer from their own buyer when there would likely be a better one out there, and a week on MLS would show whether that's the case or not." Again, we don't know that. It's speculative. We don't know what a better offer is at the point we list, we don't know if there will be a higher, all cash, no contingency better term offer for the seller. No one can tell the future, so if I have an offer that I believe will meet the lender's NET, I'm not going to "chance" my seller's future if the seller agrees to accept the offer. At the worst, the offer gets rejected, and we put it back on the market and get another offer in. At the BEST which happens 99% of the time for me, the seller gets the property sold in the quickest time with the best terms possible for them.
My WF story is awful, yet true. I'm not going to take chances on MAYBE something better will come in. I like my odds now, because I have done this long enough. I feel sorry for any buyer that comes along after the fact but again, me even listing the property is just a requirement of the sale. I don't necessarily like pocket listings but to each their own.
I didn't claim there aren't cases of unethical behavior, but realistically if you look hard enough at something, you will find flaws. If you look up short sale fraud on Google there are thousands of blogs, sites, opinions dedicated to how much short sale fraud is out there and there has been ONE known conviction of short sale fraud. Again, I'm not saying it doesn't exist, but I try to look a the whole picture instead of focussing on one part of the puzzle that I don't like. I see many people focussing in on that one part that they don't like or doesn't help them instead of looking at all these transactions as a whole. Did the seller sell their home with the terms that got them out of the mess they are in? If the answer is yes, then I say job well done. -
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Permalink Reply by Tara Samney on
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George - I haven't had the fortune of already having a buyer in place before putting it on the MLS- but our MLS gives us 48 hours to get it up after a signed listing agreement. I could see if it was in a hot area and the sign went out right when listing signed but before it officially got uploaded something could come in.
Our board also allows the listing agreement to be written so that the listing firm has so many days to try to sell it before it goes on the MLS- it's not a pocket listing if the listing agreement spells this out. I could see if you got a buyer in this time frame you are still required to put it on the MLS...and could change it to pending right away (which is not wasting anyone's time by having them show or get excited).
Listing agents also owe it to their sellers to spread the word as much as possible about their listings- even if it's just a property my be hitting the market to drum up interest. I even tell my sellers I am spreading the word around my office and agents I know and they get excited by that. In my market I see the strongest offers the 1st week b/c in certain locations there are not enough properties for sale that are within budget of a certain buyer. Once an offer comes in and goes to the seller- it's the sellers decision whether to accept it or not, not the agent to convince them they will get a higher offer to keep it on the MLS (and let the offer to expire) thinking they may get a higher offer when they likely won't. if the first offer is within comps, looks good contingency-wise and with good escrow it's the seller's decision to accept.
The seller owns the home- not the bank and can market appropriately. If the listing agent gets a buyer of his own before MLS even requires it to be listed- more power to them! Seller gets out of the house, no foreclosure, increases market actvity- and as long as price is market value or close- I hardly think we are in a market where we are selling over market value (or at least I am not). I only wish I had that connection of buyers that I could match to every listing. I strongly do not believe that keeping a listing up longer results in a higher offer in fact in my short sales where the buyers walk- the second offer is always lower....in my market the offers are always a greater percentage less than market value the longer they sit past 2 weeks.
Also, you are making the assumption the listing agent is convincing the seller client to take a bad offer b/c they found the buyer. That doesn't make sense- if it's not a good offer the bank won't accept and it is just a waste of time. I've seen the scenarios and usually the agents have buyers hounding them every week for something that matches their criteria and to ask around before it hits MLS- and they tell them how they are trying to sign somehow up now whose house may fit- yeh, I could see how it happens. Many of these buyers are unrepresented (not their client- just have a list of agents they regularly hound)- just because the listing agent signs them up doesn't mean they are going to get the full 6% from the bank anyway.
Without know what the listing agreement states- you do not know what the seller and agent agreed to. Plus, putting sales in the MLS helps everyone in regards to comps.
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Permalink Reply by Tammy Davis on
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I know everyone has a different market...here, my short sale listings are not listed at below market. I price them the same as I would a traditional sale.
With very little inventory to choose from...even a short sale listing will receive multiple offers.
That may be why I rarely battle a lender over a BPO.
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Tammy, I have to ask. If properties typically get multiple offers, why would you not see what you could get rather than taking one before exposing the listing? In a case where you weren't scrambling against the auction clock, what would your seller have to lose by waiting a week after putting a home on MLS to accept an offer?
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Why do I care, or why does the seller care about multiple offers? If I have listed the property at fair market value (which I feel comfortable it will appraise for)...and I get a full price offer from one of my buyers...why would they not accept it?
Like I said..I only need one good offer, so does the sellers. The goal is to get it sold and closed.
Not to get a bidding war and the ultimate highest offer doesn't appraise..I wouldn't want my sellers set up for that disappointment.
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Fair market value is what willing buyers will pay for a property not what you think it is
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Stephen, I don't disagree. A seller does not hire me to get FMV for their home in a short sale. They hire me to find a buyer as quickly as possible and to make sure that buyer and the offer, combined, are capbale of getting an approval.
You have to understand that highest and best is NOT always the highest $$$, but the highest offer with the proper terms and the proper buyer who understands how a short sale works.
Question, do you ever double side a transaction? Regular sale? REO? Short sale? Have you ever had a pocket listing? Ever have someone who says I would sell my house if......... fill in the blank.... and you found a buyer for it?
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