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A confederate offer is simply a valid offer to purchase made by a business partner or trusted friend of the buyer, and is made using a separate agent from the buyer's agent. The three agents involved are not aware of the relationship between the parties of the two offers, and there is no need for them to be aware.
This approach has been very effective for moving transactions forward where there is a price gap between the seller and buyer, and the parties have not been able to reach a compromise. The receipt of the confederate offer makes the buyer's offer price look more favorable and puts pressure on the seller to accept the buyer's offer, or risk missing out on the transaction. The fear of missing out can be a strong motivator for some people, especially those that get emotional about real estate transactions. This approach would be ineffective in hot real estate markets where there are multiple offers on properties, but I don't purchase investment properties in hot real estate markets.
A confederate offer is simply a valid offer to purchase made by a business partner or trusted friend of the buyer, and is made using a separate agent from the buyer's agent. The three agents involved are not aware of the relationship between the parties of the two offers, and there is no need for them to be aware.
Right. We understand what it is... fraud. And would be a violation of the Code of Ethics if the Realtors did know about it, so it is both smart and kind to keep the agents in the dark. Doesn't make it *right*.
Right. We understand what it is... fraud. And would be a violation of the Code of Ethics if the Realtors did know about it, so it is both smart and kind to keep the agents in the dark. Doesn't make it *right*.
Where is the fraud? It is a real and fully legal offer using a real estate agent and all the appropriate forms and processes. If the confederate offer is accepted, which I have never had happen, the confederate completes the transaction. The seller gets the amount of the confederate offer, which they willingly accepted, and all the real estate agents get fed. The seller does not have to accept the confederate offer, just like they don't have to accept any offer. The seller is free to make their own decision.
I understand that real estate agents who are not accustomed to working with sophisticated buyers don't like this because it puts the buyer in control of the transaction.
When an other agent, tells the listing agent he/she is going to be writing up an offer, and it is relayed to the agent making another offer, it is only fair they be told. The listing agent, believes an offer is in the making.
But:
1: When writing up the offer, there is something that the listing agent knows will keep the offer from being accepted. The agent finds the potential buyer has been unable to get pre-approved for a loan, and does not qualify for financing is a common one.
2: The sale of their existing home, has just fallen through and they will be unable to buy the new home until it sells.
3: The buyer was moving to the area for a new job, but failed the background check or drug test, and will not get the job after all.
These are just 3 of the more common reasons that the person that wants to buy a certain home, ends up not making an offer they had told the buyers agent they were going to make. And there are numerous other reasons that happen every day in the real estate business.
Telling a selling agent an offer is coming is the only fair way to handle things. If the agent does not get an offer made soon, the property can be off the market by the time they get one in.
The public does not realize that every offer that an agent tells the selling agent is coming in, may very well be the truth at the time they make such a statement, but the offer may never materialize for numerous reasons. If they do not tell the other agent that someone is supposed to be bringing in an offer, and the agent takes an extra day to get the offer in, their buyer gets angry they were not told there was a need to hurry and make an offer.
An agent cannot control offers that are made on a property. They cannot control a potential buyer who tells them something like coming in to make an offer, and does not do so. I was an investment broker, but did list some homes that were not investments, and they were sold by other agents. I have seen the time when I opened my office in the morning, that within a short time I have seen as many as 6 offers brought in on a hot property, and could not present the offers till after 6 p.m. If another agent called, they were told there were offers waiting to be presented to the seller, but any additional offers could be submitted up to 5 p.m. when the office closed.
None of the offers may have been acceptable to the seller, and when the home stayed on the market, people may think that there had been no offers, and were just told that to get them to make a higher offer. This would not have been true, but people like some of those on this thread would have believed it to be true.
All an agent has to go by, is what he is told about offers coming in. If he tells the caller the offers are coming in and they don't materialize, the buyer assumes he was being lied to to get a higher offer. If he does not tell them, so they can hurry up and get an offer before the seller is available to have offers presented, they feel cheated and blame the agent for not letting them know they needed to hurry if they wanted to make an offer.
No matter what, the agent is always a bad guy in a lot of the public's opinion. If things go well, and they get a fast sale, or their offer is accepted by the seller, they agent is a fantastic agent and worked for their best interests. If they do not get the sale or property they wanted, the agent is a terrible agent no matter how hard the agent worked to get them a sale, or a home purchased.
So now it's a sign of sophistication to commit fraud? Really?
You know it's wrong if the agents working on such offers can't be told what's going on because if they knew, they wouldn't do it.
Its a fine line - if the other offer intends to complete the contract, I don't think it could be characterized as fraud.
Ready, willing, able - its legal. Its a gray area in terms of ethics, but I don't think it would be unethical, especially not from the other buyer or the agent who is just writing an offer, and I am pretty certain its not illegal.
I don't think it would be that effective though unless the seller had already rejected an offer or two in that lower range. Most sellers are dead set on what they want to receive.
Its a fine line - if the other offer intends to complete the contract, I don't think it could be characterized as fraud.
Ready, willing, able - its legal. Its a gray area in terms of ethics, but I don't think it would be unethical, especially not from the other buyer or the agent who is just writing an offer, and I am pretty certain its not illegal.
I don't think it would be that effective though unless the seller had already rejected an offer or two in that lower range. Most sellers are dead set on what they want to receive.
The unethical part is the attempt, by Buyer 1, to play some kind of head game on seller.
Only buyer 2 knows how ready, willing and able they would actually be to go forward if seller chose them.
Perhaps you're interested in exploring this.. maybe someone else is, but I'm not. The original topic was whether agents can or should make up false offers.
No, they shouldn't.
My Code of Ethics doesn't cover what kinds of shenanigans non-agents can get away with, but I don't think I need to spend a lot of time thinking about it.
Perhaps you're interested in exploring this.. maybe someone else is, but I'm not. The original topic was whether agents can or should make up false offers.
No, they shouldn't.
My Code of Ethics doesn't cover what kinds of shenanigans non-agents can get away with, but I don't think I need to spend a lot of time thinking about it.
Fair enough, and I agree that real estate agents should not make false offers. Just to confirm, the approach I described in no way involves false offers of any kind.
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