Sellers Instruction to listing agent

Michele M. Hunt November 6, 2012 at 5:20pm

Hello Gary,

I completely understand why a seller and/or their agent would require this verbiage...however, I represent several investors that nearly ALWAYS have multiple offers out on other properties, and fully intend to close each and every escrow; it would be impossible for my investor buyers to include that verbiage on any contract, and would actually prohibit them from purchasing that particular property.

As a short sale specialist that has closed dozens and dozens of short sales since the 1990's, I have been burned by other agent's buyers that back out at the end of the process because they wrote on another house that was directly competitive with my listing, forcing me to start over again with a new buyer (I currently have TWO of those situations I am dealing with.)

When the suggestion was made at a local AOR meeting to devise a form to prohibit buyers from making more than one offer at a time, one of the attorneys for the California Association of REALTORS stated that it is NOT unethical for a buyer to have multiple offers on different properties at the same time, as long as they intend to complete their sale; therefore, there will never be such a form. I agree with that decision.

A seller, however, DOES have the right to make that stipulation...and their agent has a fiduciary duty to protect their client's interest. Whether, or not, the agent is the one that recommended that verbiage is arguably beside the point...if they believe this is in their seller's best interest, then they are fulfilling their fiduciary duty.

Of course, this does not help you in your situation...your buyer will have to determine whether or not they decide to comply with the seller's wishes. If not, they just need to move on to a different property. This is a consequence of our current economy, and nobody is really to blame in this.

Good luck.

Ricardo E. Giacomán November 5, 2012 at 7:50am

I think that as another agent puts it, sellers can say whatever they want, but it can be solved just by requiring an EMD when the offer is accepted by the seller and not by the bank. And the ptential buyer has to be wiiling to wait at least 90 days from that acceptance for that money to be refunded. This way, buyers will not be playing games and submitting multiple offers to see if one of them will stick. It is frustrating to work for months on a short sale to find out that the buyer already is in contract with another offer.

Bill Sloss > Ricardo E. Giacomán November 5, 2012 at 8:09am

With all due respect do you think any buyer would be dumb enough to allow you to tie up their money for 90 days while you continue to market the property against their interest? Please.

"It is frustrating to work for months on a short sale to find out that the buyer already is in contract with another offer."

Then get the seller to agree that once they sign that ends the gathering of offers and marketing the property also ends. Sellers agents cant have their cake and eat it to. As a good faith buyer when the seller and the sellers agent want to blatantly disregard my best interests when Im trying to help them then I have no problem whatsoever letting the seller risk losing their incentives and descending into bankruptcy. Its not a perfect world and Im not the one sweating the bankruptcy and needing the short sale. If every buyer and buyers agent put that contingency in the contract we'd have no realtors crying about getting hosed by buyers. You know that as well as I do. You dont take someones money in good faith and then before the ink is dry go out and try to subvert the buyers good faith by drumming up other offers and continue marketing and then cry when things dont go your way. Lets all act like adults when the offer is presented. If the seller executes the contract knowing they really dont want to honor that contract but will use the security it supplies until something better comes along thats as close to bad faith as Id want to get. The ultimate question is will you honor the contract you sign? By having the provision for continued marketing and offers sooner or later someone is going to file a suit and end that practice by going after someones E & O. Or both E & Os for not properly advising the buyer. Its a risky game play it at your leisure and own risk.
- Ricardo E. Giacomán > Bill Sloss November 5, 2012 at 8:31am
  
  I do that when needed. There is always a way to have your buyer back out of the offer. I.E. If the Bank wants more money and your buyer doesn't want to go any higher, it is in the seller's best interest to cancel the contract and return the deposit before they can take another one. That will end that contract so the seller can move on and get a higher or better offer. I just got an offer accepted; the seller had about 18 offers. Some all cash and some 20% or 30% down; my client is FHA. I spoke to the agent and told him that in order for him to see that my buyer was serious, my client would deposit 5k and was willing to wait for 90 days and if the short sale wasn't through or we didn't have a final response by then, we would move forward with the offer withrawal and get the deposit back. I've written at least 12 offers and we haven't gotten any accepted because we keep getting outbid. My client decided that if that's what it takes to get the house he wants, then, be it. Here in the Bay Area, every property gets at least 15 to 20 offers in the 1st 7 days that it is on the MLS and of course FHA and VA go to the bottom of the pile when it comes to choosing offers, specially when the seller has many offers to choose from.
- Jeff Payne > Bill Sloss November 5, 2012 at 8:15am
  
  Bill , as soon as the contract is accepted, it is a contract and in my area the status gets changed to pending. Depending on the short sale addendum, the property may or not be marketed after accepted. I recommend that buyer agents have their buyers ask that no other offers be accepted and have that in the contract.
  - Bill Sloss > Jeff Payne November 5, 2012 at 8:27am
    
    I agree completely Jeff. But if "you" clarified the finalization of the contract with the signing and no further marketing and seeking offers you would have far less running buyers. Im sure you realize if I want House A and that deal wont get finalized by the seller depite a signature I have no guarantee the contract will be honored. House B looks pretty good and the only one protecting my interests in reality unless the buyers agent insists on the provision you speak of is me. Im a buyer and need a house. If a buyers agent agrees to represent me and doesnt insist on that provision that agent is negligent. You watch someone is going to get hit for that sooner or later and its a winner. "You" agree to act in my best interest and dont? Ante up.Thats bad faith. Its so much easier to set it all out right away and avoid the aggravation. Thats why you have buyers problems. Not honoring the intention of the contract is now an accepted practice by using that addendum.

Bill Sloss November 5, 2012 at 6:32am

Ill tell you my experience with a Florida sellers agent on a short sale.

Obtained a signed contract on a BOA short sale a distressed property. Months go buy and out of the clear blue sky I was advised the note was sold. Was a little surprised. Put in another offer on the same property with the new lender with the SS addendum. This contract gives the lender rights and specifies same in the contract. It gives the lender the right to approve the contract.

The sellers agent tried to structure the contract and despite being asked to provide a certification from the lender showing their approval failed to do so. The selling agent refused to disclose the lender or grant authorization to talk to the lender. I talked to the lender who advised they would accept contingencies and agreed with my interpretation of protecting their rights.

The sellers agent executed the section of the contract promising no back up offers would be solicited or would the property be marketed. After executing the contract I had a call placed to the sellers agent about the property and the agent solicited a back up offer.

Prior to finalizing the deal the sellers agent pushed an addendum and hold harmless stating they made no representations as to the property being code compliant and that I was accepting it and that responsibility. But gee why? Because a large extension had been added that was not code compliant or permitted. They knew it and we told them we knew it.

This is as close to dishonesty and fraud as you can get. Th object of that exercise was to conceal the truth by deceiving the buyer. If you want committed buyers dont give them any reasons to question your efforts and honesty.

I walked and inquired later about their interest in obtaining another offer. I was advised if I executed the hold harmless for the realtors and seller they would entertain it. I have other plans for them. Id think the Florida RE Commission and the Tampa Board of Realtors will agree so I can understand Garys frustrations I think thats his point. There should be no reason for the frustrations

Joan Psarros, CDPE, CRS, SFR November 5, 2012 at 5:32am

I have never seen this type of request. However, thinking about it there could be a good reason for doing this. I have had several agents tell me that they have their buyers put in multiple offers on short sales without telling the listing agents (one stood up at a short sale class at our board and was proud of having their buyers put in up to 15 different offers. Meanwhile the listing agents are working diligently to get the seller's bank to approve the short sale. Then you call the buyer's agent only to find that the buyer has bought.
When I am the listing agent I don't have this problem as I have the buyer put the deposit into escrow once the seller signs the contract. At least they will remember that they have money in the game and will let me know if the buyer walks.
Regarding the Code of Ethics it is long and there are some other paragraphs that might be of interest to you: Standard of Practice 16-10

REALTORS®, acting as buyer or tenant representatives or brokers, shall disclose that relationship to the seller/landlord’s representative or broker at first contact and shall provide written confirmation of that disclosure to the seller/landlord’s representative or broker not later than execution of a purchase agreement or lease. (Amended 1/04)

As I am not a lawyer I am concerned with buyers putting in multiple offers. When a contract is terminated I always have all parties sign the termination of contract addendum. Many agents do not do this and feel it is unnecessary . However, each state is different and here in Florida my short sale addendum that I use states that dates start from the day the buyer is given a copy the short sale approval letter. However, the escrow is due once the sellers sign the contract.

I list and I sell real estate. I work hard and do not use a third party to handle my short sales. I give weekly updates to all parties so they are all aware of what is going on with the short sale process. I have been afraid to calculate the amount of hours I put into my short sales. But, I also do them in order to help people and move our economy into recovery.

I would rather have a listing agent know what they are doing. I personally tried to buy a short sale for my family last year that was listed with someone else. It never closed and is still out there on another of multiple buyer contracts. I wasted a lot of time and money and finally terminated the contract when the seller filed bankruptcy.

I have been selling real estate for 27 years. This is not real estate we are doing but we need to do this to get back to a more normal market. When we list a short sale with different banks (i.e. BOA) they give us requirements that we know up front. They have addendums that are required to be signed. The require part of all buyers' social security numbers, addresses, phone number, etc. This has to be given or the file can not be uploaded. We can complain and cry but in the end we have no choice. The Lenders do not have to follow a Code of Ethics but we as Realtors do. I think we should all just learn how to play well in the sandbox. I added another paragraph for the Realtor Code of Ethics. This is another reason buyer's agents should be careful in putting in multiple contracts on multiple properties. Those are contracts they are having their buyers sign. This is fine if the buyers can afford all the properties if they all get accepted. Otherwise, it is fraud. That is what I think. But, who am I? Just a hard working Realtor wanting things to get back to where the sellers' lenders are not responsible for making a deal happen.

Standard of Practice 1-7

When acting as listing brokers, REALTORS® shall continue to submit to the seller/landlord all offers and counter-offers until closing or execution of a lease unless the seller/landlord has waived this obligation in writing. REALTORS® shall not be obligated to continue to market the property after an offer has been accepted by the seller/landlord. REALTORS® shall recommend that sellers/landlords obtain the advice of legal counsel prior to acceptance of a subsequent offer except where the acceptance is contingent on the termination of the pre-existing purchase contract or lease. (Amended 1/93)

Bill Sloss > Joan Psarros, CDPE, CRS, SFR November 5, 2012 at 6:42am

Im hearing all this talk back and forth.The SS Addendum specifies back up offers and marketing. Its a contingency like any other. You explain it to the buyer. If the buyer accepts it so be it. If the buyer refuses thats that. Write your contract and make it a condition. If Im buying a short sale Im insisting on it. if the seller doesnt want to sell their house its their house to sell. Buyers dont want to get held hostage with a chance to lose a property on a bidding war. They want a house. You either want to sell it or you want to play around. Buyers want a house not games.

You guys made your own mess by allowing the practices to go on. If Im dealing with a realtor and the realtor wants to play games guess what? Ill find another realtor. Its simple put it in the initial contract. Its an accepted contingency or not makes it easy for everyone. No one needs to sweat ethics.
Scott Taylor > Joan Psarros, CDPE, CRS, SFR November 5, 2012 at 6:06am

Excellent point Joan. We always require a good faith deposit apon execution for short sale listings. It tends to marry the buyer to the deal. Of course, they can get out of the contract on financial or inspection contingencies, however, with a binder, they are less apt to jump ship mid stream.

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Sellers Instruction to listing agent

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