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You're correct, the job of the buyers agent is to get the best deal possible for the client. However, realtors have a code of ethics that require them to be honest with everyone associated with the transaction.
When you lowball, how can I honestly tell the seller that this offer is a reasonable offer that they should accept? I cannot do that and remain ethical.
Buyers keep repeating the mantra that agents want to get the most money for a house because they make a higher commission.
Sellers on the other hand say their agents want to reduce the price so they can sell the house to get their commission.
Neither is correct. The difference in the commission between the listing and selling price is miniscule. The agents job is to negotiate a deal that is acceptable to the buyer and seller. That takes an ethical agent that has the skills to negotiate on a win/win basis so that a deal can be made to the satisfaction of BOTH parties.
Right now you are the buyer, and you want a steal, so you're seeing things through a different set of glasses.
Once you buy a home you will be a seller, and your attitude will change. If a buyers agent comes to you with a lowball offer, you will want to throw him/her out of your house for insulting you.
However, I suspect that most agents who present lowball offers do not ask to present the offer to the sellers agent and the seller at the same time; and for good reason. It's probably much safer to fax the offer to the sellers agent and avoid the wrath of the seller.
I have a home for sale in California, and it's listed with an agent there. I currently live in Arizona.
Recently my agent forwarded me a fax with a lowball offer. The home is listed in line with the comps at $1,348 mil. The lowball offer was at $990k. Here is what the buyers agent wrote:
"Here's my client's offer -- see what you can do."
The agent was not being dishonest. But he did not do any work. He did not do any negotiating, nor attempt to justify the price. He couldn't because he was in a very weak position. We countered at full price, and they walked, as we expected.
That was the second low ball. The first one came in at 1.050. Again, my property is priced in line with the recently sold comps and the active comps.
The offer was faxed in the same manner, and I asked my agent to arrange a conference call so the agent could explain to me why he felt that I should accept this offer.
The agent did not know I am a real estate agent. He first asked if I was aware of the California market. I said no, tell me about it. He gave a general gloom and doom picture that included the areas of CA that are worst hit, but did not include the area where my property is located.
He said the market is down and that his client is looking at what the value will be one year from now. I asked why don't they wait until a year from now and make an offer if the home is still on the market. He said they need a home now. I asked him what comps he had used. He said: "we used comps all over the area". Well I lived there for 30 years and know every house in the community, and the comps we used were of like houses in the same community. He flat out lied. (violating the required ethics of honesty) I asked him to send the comps to me and he didn't.
Doesn't that sound like great negotiating skills? First he misrepresented the market to me, (no honesty) not knowing that I was well aware of the market in that area; and then his only defense of the offer was that his buyers expected to buy my home today at what they guess the price will be one year from now.
As I said before, if you want to lowball, have at it, but I won't be your realtor (by mutual agreement, I know). If my clients want to negotiate a fair price within a reasonable within the ball park of the current market value range, I will work to get them the best deal I can. But I won't go and lowball 8 homes with them. No commission is worth my being dishonest.
So you think it should be against the law to abide by a code of ethics that requires all parties be treated with honesty? Interesting.
The Realtor Code of Ethics states: "When serving a buyer, seller, landlord, tenant of other party in a non-agency capacity, Realtors remain obligated to treat all parties honestly."
In your case the realtor is representing you in an agency relationship which requires other fiduciary duties including honesty. The seller is in a non-agency capacity with your realtor and s/he is required to treat the seller honestly.
If your agent tries to negotiate a price for you and states to the seller that the current value of their property is less than it actually is, then that is a violation of the code of ethics.
Being dishonest could be construed as misrepresentation, which may amount to fraud, and I would not be willing to risk being sued by a seller for fraud for being dishonest and misrepresenting the value of their property, all just to get you a lowball price and earn a commission.
You're absolutely correct. What transpired a year ago has no bearing on today's value, no matter which way the market has changed.
The market is what it is at as of any given day. I do not tell people what to pay, or what to sell for. And I cannot tell people that they should pay last years price when the market value today is different.
Just like all realtors, I check the comp's to determine today's market value and work from there. What the market did last year, and what it may do next year has absolutely no bearing on today's current market value.
My job for a seller is to determine today's current market value and get the highest possible price within a given market range (the exact price is difficult to determine) in the minimum amount of time (which is usually the average days on market for the homes that sell).
My job for the buyer is to locate and negotiate for a home at the best price within a reasonable market range of today's market value.
Because I cannot be dishonest with buyers when I'm representing a seller, I cannot tell them that the (overpriced) listing price is in the current market value ballpark.
Consequently, I will not accept a listing for a home that is drastically over priced, for some of the same reasons that I will not work with a buyer that is intent on lowballing. I have a Realtor code of ethics that I am obligated to comply with, and a personal set of high integrity standards that I intend to operate with.
So just as a seller will add a 5% or so range above the market value, in order to leave room for negotiating, a buyer should negotiate from a bottom range.
Over pricing a listing and lowballing are the same in my opinion. Both are unreasonable and I want nothing to do with either.
[/quoteLuckily for us we finally found a real estate agent that understands what it means to represent the buyer. He thinks we deserve to get the best possible price -- when there are 8 we like and likely to be many more to come over the next 6 months. We will take care of him for it - make sure he is fairly compensated for his work, because we know the system won't.
Good for you; I presume you have signed a buyer/broker agreement with him so he is guaranteed to be compensated properly.
Bill[/quote]
with due respect captain bill, i think that it is unethical not to at least give ignorant buyers a snapshot of this falling market!
I agree, and its interesting that you address the "long term" view as well...but don't seem to even include the possibility that in the 'long term' prices will very likely go up.
Real estate runs in cycles, and historically prices trend upwards over time. Even adjusted for inflation, if you plan on buying a HOME to LIVE IN for a long period of time, you will ride out any fluctuations in the market, short term OR long term. Here's another anecdote: A friend of mine owned a house in San Diego in the late 80's and early 90's when we worked together in the Navy. At one point, he was upside down and could not have sold his house even for what he owed on it. Being in the military, he was obviously concerned. Luckily, he was actually able to rent it during the one tour of duty when he and his family weren't able to get a navy job there. In 1999/2000 he was now not only NOT upside down, he netted almost $200,000 when he sold it and retired back east.
My point is that making a housing decision based on "projected value" is always a gamble, sometimes you win and sometimes you don't because ultimately it depends on how long you will own it, and what the market happens to be doing at the time you NEED to sell.
personally i think we are in for a protracted recession, all the fundamentals are pointing in that direction! what this means is that the market will be flooded with distressed sellers. i don't doubt that prices will recover but it is worth bearing in mind that once real estate prices stabilise, the next thing on the feds mind will be to tackle inflation and that means high interest rates. so for those of you who are worried about missing the bottom, there is lots of time and i would only be projecting for a massive drop esp in areas that experienced the massive boom
i just think that is what is wrong with society...you see someone being robbed and all we do is turn our back and say "not our problem." see a child who has nothing to eat and say "not my problem."
i used to think like that until i had kids...made me less self involved. (speaking of my old self, not you!)
are you for real? when the prices were going through the roof, none of the beneficiaries were eager to help me out! i was forced to rent and paid top dollar. you obviously got caught on the wrong side of the fence. i dont intend to make that mistake. i will wait the 2-3 years for the market to hit rock bottom. in the meantime if i see something i like, i will offer in line with what i believe rock bottom will be. if the seller doesnt like it, that's the sellers problem but i dont intend paying $100k on a place i think will be worth $50k in 2 years time.
I Don't know where you like to lay blame, but nobody forced the buyers to pay those prices. The buyers did indeed bid the price up and nobody forced them.
As far as your drug dealer analogy, not a bad analogy except I think it backs up Bill's point. Nobody forced someone to start taking drugs. The dealer may have supplied, but the individual must take responsibility for getting addicted.
this blame game is quite silly. no one is to blame. i agree that nobody forced anyone to pay anything. i am also not forcing anyone to accept my lowballs!
Now, ain't that the truth. You can often times tell a seller time and again what needs to be done with the pricing when offer after offer comes in and they are all low. Does it comp out? Sure. Will it sell? No.
As for other Realtors saying "you are giving it away" that too is true. I had a house in contract and the seller came in upset, said he wanted to change Realtors that the other Realtor had told him he was selling to low. I explained to him the consequences of killing the contract and also asked him if she could sell it for more, why didn't she? It's been on the market for some time, no? So, where's the buyer? I then called the Realtor and explained to her the consequences of interfering with a contract.
We closed.
i'd bet my life savings that the seller you are referring to is thanking his lucky stars that he even got out of this market! good on you for sticking to your guns and introducing another seller to the REAL WORLD
No they don't. They do believe the prices will fall further next year. And they will believe it one year too many. Happens every time.
we all know that the whole pit we are in was brought about by lax monetary policy. when i read the statement like the one above i wonder if people actually realise how deep an economic mess we are in! once the economy starts to stabilise, the next thing we will have to look forward to is higher interest rates as the fed tackles the inflation that all of these bailouts will certainly lead to. it is my guess that once the market hits rock bottom, it will stay there for an extended period. prices will always go up and down but i sincerely doubt that there will be another real estate boom like this one in my lifetime.
Good for you; I presume you have signed a buyer/broker agreement with him so he is guaranteed to be compensated properly.
Bill
with due respect captain bill, i think that it is unethical not to at least give ignorant buyers a snapshot of this falling market![/quote]
Robbo, I'm not sure how your statement applies to my post. I was the seller, and I was represented by a CA realtor. I was lowballed a couple of times during that transaction and rejected the offers. My house sold a couple of months ago at the current market value to a reasonable buyer who wanted to buy at today's price.
I agree that whoever an agent represents should be given a picture of the current market. I do that, however, I do not make predictions. I have no idea when the market will change. On a weekly basis I study the statistics to try and see if there is a trend in the changes that I see, but I only report what I see. I an not an economist, so I do not make forecasts of the market.
My position is quite simple. If one wants to sell today, then they should sell at the current market value.
If one wants to buy today then they should be prepared to buy at current market value.
If a buyer believes the market will be at bottom in two years, then wait two years to buy.
If a seller wants 2006 prices, then wait until the prices get back up there.
I've told buyers that I will not make extreme lowball offers to individual homeowners. I'm willing to make low offers that invite negotiation, but I'm not going to make an offer that's 50% below the listing price (assuming the home is listed in the current market value ball park).
I will make an extreme lowball offer to an REO or Short Sale because I'm dealing with a bank that has no emotional attachment whatsoever to the home. They have a piece of inventory that they want to get rid of.
However, if the offers get so low that there's no chance of them being accepted or negotiated, then it becomes a waste of time and not worth the effort.
In my opinion, a buyer who wants to buy (today) at what s/he perceives to be a price that will come about in 12 months is as unreasonable as a seller who wants to sell at a price that was here in 2006.
funny how realtors have lost the ability to predict the market. during the boom all i heard from realtors were predictions, "prices in this part of town are going up, up, up!"
capt. bill, i have never met you so i don't know if you are one those realtors, but my message is simple. IF you were one of those realtors that spoke of the market going up, then you have a moral obligation to tell clients where you see the market trend going now ie down, down, down!
with regards to my last response to one of your posts. my response was only made to the first line of your post namely,
"However, realtors have a code of ethics that require them to be honest with everyone associated with the transaction."
forgot to delete the rest
If you'll go back and read Bill's posts you'll see he's an excellent Realtor. I have no doubt his clients are well treated and well informed. Bill is always very ethical in his posts.
funny how realtors have lost the ability to predict the market. during the boom all i heard from realtors were predictions, "prices in this part of town are going up, up, up!"
capt. bill, i have never met you so i don't know if you are one those realtors, but my message is simple. IF you were one of those realtors that spoke of the market going up, then you have a moral obligation to tell clients where you see the market trend going now ie down, down, down!
with regards to my last response to one of your posts. my response was only made to the first line of your post namely,
"However, realtors have a code of ethics that require them to be honest with everyone associated with the transaction."
forgot to delete the rest
Robo, I may be mistaken, and if I am, I apologize in advance, but it sounds like you're on a mission to discredit realtors for some reason. So may I suggest that if you want to challenge my posts or the posts of others, that you read and understand the posts and quote exactly what the other poster said, and in context with what they are saying.
I want to further clarify that code of ethics statement. When a realtor represents a client, s/he has a fiduciary duty to that client which includes Loyalty, Confidentiality, Accountability, Obedience, Disclosure, and Reasonable skill and care.
The realtor owes Honesty to all persons in the transaction.
Nowhere in the realtors training, licensing, or code of ethics, does it say that the realtor must "predict the market", whether it is up or down. That is because we are not trained to predict the market, nor can the market be predicted to any degree of certainty by even the economists.
Certainly, when we are dealing with a buyer or seller, we must provide our clients with the current market information, including recent comps. In addition we should (not required) provide our clients with the statistics to show the current market trend. That information is valuable to the client in determining how to price their homes or to make their offers.
From that information it is up to the client to determine the price they are willing to sell for, or willing to pay for a property.
I never predict the market. About once a day someone in a store or bank, or some other place will ask me how is the market, and my response today is, the market in this area is still in a decline, and during the past 4 months we have seen a slight increase in the number of homes sold, and a slight decrease in the inventory. I don't know if that trend will continue. I check the stats each week.
I've heard this next mantra over and over, and now I'll respond to it.
Quote:
Quote from Robo:during the boom all i heard from realtors were predictions, "prices in this part of town are going up, up, up!"...
...you have a moral obligation to tell clients where you see the market trend going now ie down, down, down!
First of all, what you said above, is that a realtor stated what the trend is, and the trend was increasing prices. It was not a prediction that prices would continue to increase, just as a statement by a realtor today that the market is declining is not a prediction that prices will continue to decline, nor for how long.
Just as today, there are no realtors that are saying anything other than the market is in a decline.
On this forum, I've only seen some non-realtors doing predictions, and none of them are the same. Everyone has their own idea of where they want the market to go, and that becomes their prediction.
A realtor cannot take a client by the hand and make him/her buy a home. Nothing they can say will cause that. Not today, and not during 2005-6. It is the buyers that come to the realtors to buy a home. The realtors advertise so the clients can know they exist and find them.
The buyers during the boom years were coming out of the woodwork to buy homes so they would not miss out. That market was greed driven, just as the California gold rush, and the Alaskan oil rush. People follow the money. The cheap mortgages facilitated their greed.
The would be investors came out of the woodwork and were buying everything in sight. Builders finally restricted sales to investors.
Buyers would come to realtors to find them a house to bid on. Realtors didn't have to go find the buyers. The realtors had a hard time finding homes for their buyers, and when they did, there were a dozen bids on it. Many realtors actually did very poorly during that time because they didn't have any listings, and they couldn't find any to buy, and lost most of the ones they bid on. Other realtors did well.
It is not the job of the realtor to predict the market, or to tell an intent home buyer that they should not buy. They will just go next door. A lot of people got caught up in that fever. Many realtors bought homes during that period of time, and I see a lot of short sales that are agent owned.
So while there are some Monday morning quarter backers on this forum who say they predicted the market would change, well, hindsight is always 20/20.
The job of the realtor is to provide a CMA, assist the buyer to find the property they want, and to guide them through the negotiation and escrow process. It is not to predict the market.
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