Sticky situation - help please! (short sales, real estate, foreclose)

[neeshera]

We toured a house a few months ago with a realtor and the house was listed by another agency then. Subsequently, there were a couple properties that we had liked and had put an offer on, but felt the agent hadn't been very effective in the transaction process. We told her so, albeit gently and politely. She told us, if that is how we feel, then she may not be the agent for us. We felt, she was politely dropping us as she may have become tired of finding a house for us. In this slow market, there are hardly very many houses available for selection in the area we like so it has taken us longer than expected to find something we like.

Anyhow, here is the sticky part now. We recently took a second look at the same house we had seen with the previous realtor, but this time we did it on our own. The seller's agent had asked us if we had an agent and we had said no, which was the truth as we currently are not working with an agent. When we had first seen this house, it was occupied by a family. However, the seller's agent was presenting it to us as a bran new house which was never lived in. We knew the truth was far from it.

We have no problem if the previous realtor who showed this house to us first earns a commission from this sale. In fact, when she decided to drop us, I was said that her efforts for all these months were going to be a waste. But we are hesitant to bring her in the picture because we are afraid her skills may botch this transaction for us as well. We really like this house and would not want that to happen. We have not mentioned to the seller's agent that we have seen this house before with another agent and she is hoping she will be able to act as a dual agent. If we do give this information to the seller's agent now, we are afraid she may get irked and may try to get this house for another buyer who is competing with us to get the bid. By the way, this house is a short sale and all offers are going to the bank through the agent. If she gets upset with us, she may choose not to present our offer to the bank. On the other hand, we do not want to create bad blood with the previous agent and have her fight for her commission as she was the procuring cause.

We don't want this house to slip out of our hands but feel our options are like choosing between the devil and the deep sea. What is the best course that would keep everyone happy? We have no intention of doing anything underhand or unjust to anyone.

[knat_2]

I would pick one of the two Realtors (probably the seller one) and tell him/her the truth. Tell them you really want the house and you have seen it before with another Realtor, who no longer represents you. Then I would ask her/him if the original Realtor should be brought back into the mix or does she/he think she/he can handle the whole process.

Knat

[nikitakolata]

How do you think your previous agent could botch this transaction for you? I'm not clear on that.

Personally, I would be very weary about letting the selling agent act as a dual agent in this transaction, especially since he/she has already lied to you by telling you this is a new house when you know differently. The selling agent must know that is false, and lying about it is not ethical. If you get involved in a dual agency situation with the selling agent keep in mind that the agent is no longer able to represent your interests; you have to do that on your own, which in my opinion, basically defeats the purpose of having an agent at all as a buyer.

Also, the selling agent is required by law to represent your offer. If he/she gets so bent out of shape because you show up wanting to be represented by an agent, then you could probably make an excellent case to have their license revoked. There is nothing wrong with you wanting to have representation in the transaction as the buyer, whether you go back to your previous agent or find another person you trust to do it.

I'm a Realtor myself, and I wouldn't be comfortable in a dual agency situation as a buyer or a seller.

[middle-aged mom]

Did you execute an exclusive buyer's agency agreement with the former agent? If not, you are likely good to go with any agent you want.

Short sales are often very frustrating for all parties and most short sales do not proceed to closing. Buyers often become frustrated with the process, protracted time period and eventually their own agent, for things beyond anyone's control. The seller has to demonstrate their own destitution to the lender and qualify for the short sale.

It is common for there to be more than one lender involved and all have to agree to the short sale. If there is PMI, the lender may be in a better financial position to let it foreclose and if not, they will need a sign-off from the insurer, too. And all of this can take months to work out. There is nothing certain about a short sale.

Offers include price and terms. Are you paying cash or will you need financing? Someone in a position to offer cash may be viewed as the stronger offer, even if the offer is for less money. If financing is involved, have you been pre-approved for a mortgage, meaning your income and assets verified in addition to your credit score?

I personally do not care for dual agency situations because the only one served is the listing agent . That you are already speculating that if the listing agent is not a dual agent, she may give priority to the other bidder ( assuming there is another bidder) is the tip of the iceberg. These sorts of conflicts of interest are unethical and unfortunate.

I do not understand what you mean when you say you are concerned that the former agent might botch the transaction. Buyers have no control over a short sale situation.

[neeshera]

Nikitakolata, does it really matter in this case if we have the seller's agent do our work as well? This is a short sale so the seller should be happy there is an offer to show the bank and also our offered price is not too far from the asking price. It is basically the bank that will accept or reject our offer, not the seller. We do intend to have our own real-estate attorney. So don't you think our interests will be well taken care of? The seller's agent will basically be just presenting our offer to the bank. We also plan to bring in our choice of a home inspector and appraiser. So does it really matter if the seller's agent does the work for us? What happens to the other agent who first showed the house to us?

Thanks!

[neeshera]

Middle aged mom, we are pre-approved for this place and would like to pay 40 to 50 % down. I am not sure how the first realtor can botch it up for us but she doesn't seem to be very open in her communications and it always feels like we are in the dark about the whole process. She is also relatively new in the business and not that experienced. Would it be unethical of us not to mention to the seller's agent the first showing we had with the previous realtor? Would it be unethical to hire a new buyer's agent even though the previous agent is, what is known in the real-estate lingo, the "procuring cause" for this property? Can she go after the new buyer's agent for her share of the commission? Oh the unintentional mess!

[middle-aged mom]

Being the one who originally showed the home, is not procuring cause.

The agent with procurring cause is usually the one who, through a series of uninterrupted events, represents the buyer in the purchase of the property. When was the last time you had contact with your former agent?

Did you execute a Buyer Representation/Brokerage Agreement with the former agent? Was it property specific? Did it have an expiration date? It matters. It's the broker, not the agent, who may go for the procurring cause thing, if it has merit.

As an aside, are you aware of how much mortgage debt is owed on this property versus your offer? That moreso than the difference between the asking and offer price, matters. Some short sales are listed with very low prices to create excitement within the market for the property and often results in a multiple bid situation. These properties often sell for more, sometimes, substantially more, than the asking price. And again, despite it all, there is no certainty that any property will close as a short sale.

Should you get the house, your lender will order the appraisal that will be used to determine value, even though you are paying for it. Neither you or your lending officer have any input on which appraiser is used.

[neeshera]

Middle aged mom, here are the answers:
1. Our last contact with her was a little over a month ago.
2. We do not have any sort of a written agreement with her. She does have a written agreement with the agent who referred us to her (my sister who lives in another state) to share a portion of her commission as referral fee.
3. The list price of the short sale property is the same as the amount owed to the bank. We have offered 40K less than the list price. So if the bank accepts our offer, the bank's loss is only 40K.

[neeshera]

Correction: We haven't actually made an offer but that is the amount we plan to offer.

[nikitakolata]

Well, personally I agree with Middle Aged Mom; the only one who benefits in a dual agency situation is the selling agent. If you read the dual agency section in the real estate contract you will see that there are a lot of potential conflicts of interest. Once you enter dual agency, the agent isn't able to offer you any advice as far as suggesting a price to offer at, the contract details, etc. Having an attorney is great, but it's even greater to also have an agent on your side that represents you and only you in the transaction. Particularly since, as the buyer, you are not directly paying an agent to help you, I don't see why you wouldn't want your own representation in the transaction. The seller pays the same commission regardless, the only difference is whether or not the commission is split over two agents or paid entirely to one.

In my opinion, having a good agent would be an asset. Then, instead of you hassling the selling agent for details or updates, the agent will be doing that for you. That is their job. If your previous agent was not doing that for you, then you need a different agent, I agree. But, the selling agent in a dual agency situation isn't looking out for your interests the same way your own agent would be.

Of course you know that the short sale process is going to take time and ultimately the decision is up to the bank, not the selling agent. I just don't see why a person wouldn't want that extra professional looking out for them, since three sets of eyes (agent, attorney, inspector) are going to be better than two. Your agent should do research on the property to help you present your offer in the best possible light; a dual agent will probably not do that for you... to them, the highest dollar offer is the best one (because it results in the best commission), yet you may have additional flexibility, secure financing, etc. and those things should be pointed out to show you as the best buyer for the property.