Question for you real estate agents (Gilbert: bank owned, for sale, insurance)

[ReadyFreddy]

Do listing agents get that many deadbeat types who ask to see a listing and then can't afford it or never had any plan to really consider it? I often just contact a listing agent to show me a house, since I keep a running MLS search going myself (via a family member/appraiser's MLS). Holy cow, sometimes it's like pulling teeth to get them to book a showing.

Today I had one that had right in the listing remarks that they wanted a pre-qual letter from BofA to show the place. Ok, so I got one. Then he said he wanted it from a specific loan officer! Then he said he wanted it emailed from the bank, not my paper copy! This is to SEE the house. A $129k, vacant, bank owned house. I've gotten professor jobs easier ("Just have official transcripts sent when you think of it.") I told him, "Forget it. I'm not jumping through hoops to see this house at this price. I'll call a buyers agent." And I did, and saw the place within the hour, no hoops.

I had another showing on deck for tomorrow with a listing agent but she hasn't called back today with a time, as she said she would.

No more dealing with listing agents for me. I thought they'd appreciate having one less hand in the pie.

[Captain Bill]

Originally Posted by ReadyFreddy

Do listing agents get that many deadbeat types who ask to see a listing and then can't afford it or never had any plan to really consider it?...

...No more dealing with listing agents for me. I thought they'd appreciate having one less hand in the pie.

The banks will usually require a pre-qual from their bank, such as B of A, Wells Fargo, or others. That's because they want to sell you their loan. The listing agent is wise to not bother showing the home to someone he isn't representing unless they get the pre-qual first.

Homes that are in this price range sell very fast, and the listing agent knows it'll get sold in this market. If she does a lot of bank owned listings she is too busy to bother with buyers.

The job of the Listing agent is to Market the home to attract other agents to bring their buyers. Many listing agents only list properties and do not work with buyers.

The job of the Buyers agent is to bring buyers and help them buy the home.

A buyer will usually look at many homes prior to making a decision, and a buyers agent working with a buyer learns what the buyer is looking for fairly quickly and can advise the buyer whether some of the homes they see on the mls are worth even viewing.

The listing agent does not know the buyer and has no way of knowing if the buyer is qualified to buy this house or if it even fits his criteria. So in many cases the listing agent will consider a buyer calling as just a waste of time for him/her and the seller. Some who work with buyers also, will know that this house is probably not for the buyer but will show them the house hoping to get a buyer client.

Also, remember the listing agent represents the Seller, not the Buyer.

If a buyer without an agent wants to buy the listing, then the agent must talk to the seller to make one of two decisions.

• Work as a Dual Agent, or
• continue to represent the seller and work with the buyer as an Unrepresented Buyer.

Is the seller (and buyer) willing to have the agent operate as in a Limited Dual Agency? If the answer is yes, then both seller and buyer must sign that form.

In a Limited Dual Agency, there is a conflict in the fiduciary duties of Loyalty, Obedience, Disclosure and Confidentiality. The end result is that the listing agent cannot advocate for either buyer or seller. S/he can show both parties comps, but cannot offer advice to either on how to structure an offer, how much to offer, or how much to counter. In effect the agent has become a neutral party to the transaction who will just guide it through escrow if a deal is made.

Many sellers who fully understand the representation they have lost in a dual agency will not agree to it. In many states, Dual Agency is illegal; and I would not be surprised to see Dual Agency become illegal in AZ within the next few years.

In an Unrepresented Buyer situation, the seller remains the exclusive agent of the seller and does not represent the buyer. So the question arises as to who is going to do the work of a buyers agent for the buyer? Usually the buyer is going to need assistance in getting and filling out, and explaining forms and all the other work that a buyers agent does for the buyer behind the scenes. That creates extra work for the listing agent.

In AZ we have the Law of Agency. An agency can be an Express or Implied Agency.

• An Express Agency is created when the buyer and agent have signed an Agency Disclosure.
• An Implied Agency is created when the actions of an agent and buyer resemble an agency. The simple act of explaining the contract terms to the buyer (instead of referring the buyer to an attorney) may have created an Implied Agency. In that case the agent would be working in a Dual Agent role without the written permission of both buyer and seller.

• Some agents will work as a Dual Agent.
• Some will work with Unrepresented Buyers and accept the risk.
• Others will not work with Unrepresented Agents due to the potential liability, and
• Others will not work as a Dual Agent because they want to fully represent the Seller who is paying them.

Many buyers want to work directly with the listing agent because they feel the seller will pass on the buyers agent commission savings to them. That is not the way the sellers see it.

If a seller allows the agent to work as a dual agent, and lose some of the fiduciary duties, then the agent has to lower the total commission fee to the seller. In other words the seller has lost some representation, therefore, s/he is paying a smaller fee. The seller is not going to be willing to give that savings to the buyer. That savings is quid-pro-quo for the reduced representation. The seller is only going to negotiate the price of the home.

Any buyer, especially in this market, should use a buyers agent who has much more experience in how sales are going in given sub-markets, and can provide very good guidance on how to structure an offer in the current market environment. It would be very difficult for a buyer who is not working in the market every day to know how to structure an offer that stands the best chance of being accepted.

There are so many ways to structure offers, and structuring it the wrong way can lose the house right away. In some cases it is best to structure the offer so as to not risk a counter offer. Once a seller makes a counter offer, they can withdraw it at any time before the buyer accepts. So if a seller gives the buyer 24 hours to accept the counter, and another buyer shows up with a better offer before receiving the buyer acceptance, then the seller counter offer is going to be withdrawn.

Any counter offer risks losing the deal.

In other cases, where there may not be competition, the offer is structured differently, so as to invite counter offers and use strategies and techniques that will arrive at an end result that will make all parties feel they have won something.

[Zippyman]

I see a lot of postings on the web from people who believe that buying through the listing agent somehow gives them "the inside track" on a purchase, but I've never seen any evidence of that working except in cases where the listing agent acting is questionably (definitely outside the bounds of ethics, and sometimes outside the law). I'm not sure why anyone would want to encourage that kind of behavior.

I personally had a miserable purchase experience with one brokerage that lists FNMA homes for sale earlier this year. I guess the volume they get from that source makes up for the fact that any sane buyer would never, ever get involved in a deal they touch again.

[ReadyFreddy]

Thanks for the input. I guess I'm of the Freakonomics mind that if you don't need them to do your search, what do you really need an agent for at all? I bought my current house with no agent on either end of the transaction and we all did just fine figuring out how to fill out the forms and structure the offers, etc. The title company said they do agent-less transactions all the time and that they actually find it easier, and that it's increasingly common. I have to admit I found it easier and less contentious.

I don't know why this listing wanted a BofA pre-qual when the house was owned by a different bank. Do they insist on a L.O. or title clerk just to drum up biz for their buddies?

I've had agents tell me that dual agency works just fine and there are checks and balances to keep them representing both sides fairly. Actually, I sold a house FSBO to buyers with an agent and they said for their 3% they'd effectively represent us both, I think. That sale went fine. Maybe they didn't represent us both, though, I'm not sure. I know my very first house sale my listing agent was the one explaining how dual agency works fine, but we did have agents on both sides of that one.

[TiredOfyycCold]

ReadyFreddy - I did my own research (always do when I buy a property), but I also picked a buyers agent to work with.

It's kind of a win/win - it doesn't cost you anything and they can set up all of the showings in a day or two - all you do is send them the listing numbers.
Also most GOOD realtors have an automated property search update that is linked to real time MLS - they can send you listings that match a very specific criteria within a day of the listing hitting the market.

They also handle all of the paperwork and other things that you might not think of. As I am out of country, My agent arranged for my home inspection, had my grass cut (at his cost) after I took "possession" but couldn't make it down for a month, followed up with the seller to ensure that items we had requested to be repaired were repaired (and then had the home inspector go back and check), had extra keys cut, contacted the post office to arrange for new mailbox keys as it was formerly a bank sale, and the list goes on and on....

Really a whole lot of service for no money on my side (and I recognize that my situation is a bit different). I can't imagine buying a home without an agent as it's all upside and no down.

Good luck in your search for a home!

[ReadyFreddy]

Thanks, Tired. Those are good points! I've only bought one house in the past with a buyers' agent and he was a mortgage broker friend with a license who just did it for a favor, so there weren't any cool 'extras' like you got! I do have an agent now and wish I'd started this way.

I think I've been scared off by hearing of buyers who wound up switching buyers' agents along the way (but before finding what to buy) and the original agent getting in their face about them being verbally(?) contracted to work only with him on their search? I don't know the rules there but if I'm not happy with an agent and we haven't yet found the place, I think I should be free to switch.

I do have an automated search agent email me listings based on searches I set up on my sister's MLS. Totally cool tool! I get excited when I see listings in my mailbox and it sure beats logging in and manually running your search daily to check for new listings.

[Captain Bill]

Originally Posted by ReadyFreddy

Thanks for the input. I guess I'm of the Freakonomics mind that if you don't need them to do your search, what do you really need an agent for at all? I bought my current house with no agent on either end of the transaction and we all did just fine figuring out how to fill out the forms and structure the offers, etc...

...I don't know why this listing wanted a BofA pre-qual when the house was owned by a different bank. Do they insist on a L.O. or title clerk just to drum up biz for their buddies?

I've had agents tell me that dual agency works just fine and there are checks and balances to keep them representing both sides fairly. Actually, I sold a house FSBO to buyers with an agent and they said for their 3% they'd effectively represent us both, I think. That sale went fine. Maybe they didn't represent us both, though, I'm not sure. I know my very first house sale my listing agent was the one explaining how dual agency works fine, but we did have agents on both sides of that one.

quote=ReadyFreddy...The title company said they do agent-less transactions all the time and that they actually find it easier, and that it's increasingly common. I have to admit I found it easier and less contentious.

This is certainly different from my experience. In today's market there are fewer Unrepresented buyers and sellers, and escrow officers have to work harder when they have to hand hold a buyer and seller every step of the way. Realtors know what is needed to get to the escrow officer, and when, and do it. I don't know of any escrow officers who would rather work with unrepresented buyers and sellers that with agents.

The bank in a lender owned property is always going to insist on their choice of title company for closing. The listing agent does not have a choice. The buyer can choose another title company and/or an escrow officer for their title insurance, but the rate is probably going to be higher.

In a traditional sale, the buyer will always choose their own title company, and usually on the recommendation of their buyers agent. Agents will tend to refer a title company that they find to be very responsive, efficient, and fast communicating.

Any agent who does dual agency is going to say it works fine. However, there are no checks and balances. There is only the language in the Consent to Dual Agency agreement that states the Limitations of Duties and the Conflict in the Duties.

As long as the seller and buyer understand that the agent cannot represent both without the inherent conflict in the duties, then they can certainly do it because it is legal. Most of them probably work out fine, but I expect there to be law suits eventually over a buyer or seller asserting that they did not get the representation they had expected; and eventually AZ will stop allowing Dual Agency, like other states have.

The Consent to Limited Dual Agency agreement states:

"The Broker now represents both Buyer and Seller and both parties understand that Broker cannot represent the interests of one party to the exclusion or detriment of the other party. The parties understand and further consent to the following:
a) The Licensee represents both the Buyer and the Seller with limitations of the duties owed to the Buyer and the Seller, such as:
1. The Licensee will not, without written authorization, disclose to the other party that the Seller will accept a price or terms other than stated in the listing or that the Buyer will accept a price or terms other than offered;
2. There will be conflicts in the duties of loyalty, obedience, disclosure and confidentiality. Disclosure of confidential information may be made only with written authorization."...

The agent cannot negotiate, nor advocate for either side. S/he must remain neutral.

If buyer, seller are agent are ok with that then it's certainly legal.

But let's take this example: The seller has told the listing agent that although the home is listed for $500,000, he is in such a hurry to move and start a new job in another state with a higher pay, and has made an offer on a home where he got a great deal, that he will accept a minimum of $400,000.

The listing agent acting as a dual agent for buyer and seller cannot share that information with the buyer even though he is also representing the buyer. That is where there is a conflict in the duties of Loyalty, Disclosure, and Confidentiality.

Whereas if the buyer were represented by their own buyers agent, that agent, in talking with the listing agent may be able to get a sense of the urgency, and also in knowing the local market intimately, may be able to negotiate a very good deal for the buyer.

Any buyer or seller has the right to accept dual agency, or to buy as an unrepresented buyer, or sell as a FSBO. I suspect that many of these transactions go off without a hitch.

However, when people think that the biggest job of a buyers agent is to show homes, then they are operating on a huge misconception. There are so many other things that buyers agents do for their clients that will in many cases result in them actually getting an accepted offer on the house they want to buy, save them money, and keep them out of legal trouble, that buyers are not aware of. They cannot be aware of all these things because they are not doing it every day like the Realtors are.

I'm not going into all that here, but I will give one example.

A short sale

• 2100 sf home Listed for $140k
• Good price for the condition
• Good school district in Gilbert
• Bank accepted offer of $135k
• Renegotiated price $$128k
• Final Purchase Price $121.7k

The buyer was happy with $135k
How did I get the price to $121.7?

The home was occupied by a tenant who was not paying rent.

• There was a hot water heater tank leak. Required replacing
  
• The owner would not fix,
• The tenant would not fix it.
• It was causing damage to the carpet inside the house, and I knew it would create a mold issue.
• The owner was trying to evict the tenant, but going about it the wrong way.
• My buyer really wanted this house. He realized the bargain he was getting.

The owner was not responsive to the listing agent, soI asked the tenant if he would replace the hot water heater if my buyer agrees to reimburse them after they move out. I gave the tenant my guarantee that I would give them a check when they vacated, as long as the house was in the same condition as when we saw it. They agreed.

I knew the tenant would trash the home if evicted, so I needed to avoid that. I also got them to agree to move out after one month, and before the close of escrow, because the buyer needed the home vacant prior to doing work on the home.

That was the first obstacle. Had they trashed the house the deal would have fallen through.

Next I renegotiated the price with the bank, telling that the water damage required all the carpet to be replaced, plus the water heater and, the place had to be dried out. The bank agreed.

I held back discussing mold until we got this concession. This is a strategy that, from my experience, I thought would work better by negotiating in increments rather than negotiating the full concession up front. That won't work under all circumstances.

Then I took pictures of the mold on the drywall adjacent to the water heater, and had a mold inspector provide a report that confirmed the mold. However, it would not require a whole house remediation. I had already gotten prices for repairing the walls, replacing carpets, etc.

Next I went back to the bank (through the listing agent) with the mold report and had price quotes that would reflect the remediation if necessary. That is when we got the final price to $121.7k.

The loan application was then submitted in mid August. My client is an American living and working out of the country and I had already prepared him for the extra things he would need.

I had referred him to a loan officer that I know is excellent and works hard to get loans processed efficiently. Unfortunately, the bank she works for had done some restructuring and they were causing delays. Consequently, I had to work closely with the listing agent to assure him that my client was qualified and to get the short sale bank to give us extensions on their deadline (without per diem charges).

The buyers bank was still delaying. The underwriters were not responding to the loan officer, so I asked her to escalate the file. It finally was escalated to a department called "office of the president", and action was taken.

Escrow is now scheduled to close on Monday. This was a very difficult transaction, and fortunately the listing agent was experienced and efficient. Had either the listing agent or me, the buyers agent, had not had the knowledge and experience to work through this type of transaction, it would have fallen through long ago, and even if it had not fallen through, the buyer would have paid a higher price.

[ReadyFreddy]

I admit even before my latest 'education' I wouldn't consider buying a rented property while out of the country on my own.

The seller has told the listing agent that although the home is listed for $500,000, he is in such a hurry to move and start a new job in another state with a higher pay, and has made an offer on a home where he got a great deal, that he will accept a minimum of $400,000.

But I think it's not that hard to not blurt out "They'll take 400!" when you (1) have a fiduciary responsibility not to and (2) have a personal incentive to get the deal at the highest price to maximize your own commission. (Oh, I just re-read your point about a separate buyers agent might be able to ferret out that info. Good point!)

[Captain Bill]

Originally Posted by ReadyFreddy

...But I think it's not that hard to not blurt out "They'll take 400!" when you (1) have a fiduciary responsibility not to and (2) have a personal incentive to get the deal at the highest price to maximize your own commission...

I understand exactly what you're saying because that's an opinion shared by many who don't understand the implications of not honoring the fiduciary duties. The Law of Agency is a Law , and to not abide by them is a violation of the Law of Agency.

It is a misconception by many that an agent will place his/her interest above that of the client for a small increase in commission.

What they don't understand is that by doing the best for their client, the client will recognize that and the payoff will be in the form of referrals by satisfied clients that are worth far more than the amount of the additional commission.

There is that inherent conflict, but the Loyalty duty requires that the clients interest be place above; and the incentive to do that is referrals from a happy client, and to prevent being sued for something that E & O Insurance won't cover.

Sellers and Buyers are intelligent people; and this is also a very litigious society, where Realtors are always a target.

If, in this example, if the agent did tell the buyer the seller will take $400k. The buyer now knows he's dealing with a dishonest Realtor. And the Realtor has placed herself in a compromised position.

Let's say that the buyer offered $425 and they agreed on $440k. Now, after the transaction the buyer is having a conversation with the seller and says "well I hope you enjoy your new job in Utopia City". At this point the seller will realize that the agent had disclosed some confidential information, and will also begin to wonder about the price.

Is it likely that the seller may sue someone? My guess is it will be both the Buyer and the Dual Agent. The dual agent will certainly be sued and probably lose his case and probably his license.

The Buyer may lose his case for using information that was illegally obtained. Depends on the judge and/or jury. Even if the buyer wins, he loses for having to spend the time and money going to court.

Therefore, most experienced agents will obey the Laws of Agency, honor the fiduciary duties, and not risk getting themselves or their clients involved in a law suit.

quote=ReadyFreddy...Oh, I just re-read your point about a separate buyers agent might be able to ferret out that info. Good point!)

Exactly. The buyers agent is going to try to learn as much as s/he can about the seller. The sharp listing agent will recognize the techniques and deflect the questions and not divulge any information, and try to get info on the buyer.

Many listing agents instruct sellers to leave the house when buyers show up so they cannot get them into a conversation and learn information that can be used to get a lower price. It's a game, and takes experience and training.

All that's required when both buyer and seller have their own agent is that each agent treat all parties with Honesty and Fair Dealing.

No other duty is owed to the opposing party.

Btw, good luck in your house hunting, and have fun. It can be very stressful in this market, so relax and let your agent do the worrying for you.

[ReadyFreddy]

Thanks! I just went and looked at some neighborhoods and some new model homes. I guess I'll know it when I see it, and not being in a giant rush is a big advantage.

Many listing agents instruct sellers to leave the house when buyers show up so they cannot get them into a conversation and learn information that can be used to get a lower price. It's a game, and takes experience and training.

I recall when I sold my first house I asked my agent if I had to disclose bad neighbors. I don't know if he knew what he was talking about but he said, "Potential buyers will never talk to you, only me, and I have to tell them what I know if asked. So if you have bad neighbors I don't want to know." I never thought about them digging into price flexibility, though. I'm not experienced at the game, that's for sure!