Mastermind was a lot of fun this week thanks to a surprise drop in from our Commander-In-Chief Tom Bosley who always brings it up a notch or two. So if you couldn’t make it, you missed an interesting discussion on a classic open house misstep, our duty to disclose, and a spirited conversation about a potential multiple offer bribery.
First off, we heard from an agent who was showing her clients around one Saturday afternoon. She had several properties booked to look at and a few that she didn’t book because they were having open houses. Just after 2pm, they arrived at the first open house. A crowd of people was standing out front waiting to get in, but there was no one at the home. A few minutes later a rather frazzled agent comes screaming up the driveway, jumps out of her car, apologizes profusely, opens the front door then announces to the group to have a look around while she goes and puts out her signs. She jumps back in her car and drives away. Hilarious. Do you think her insurance would cover her if the owners were robbed blind? Honestly, when I hear stories like this I shudder.
Next, we talked about our duty to disclose. So here is the question, you know for a fact that a certain house has a serious flooding problem. While you don’t have a client interested in the property do you think you have a duty to tell the listing agent? What about other agents in your office? Do you owe a duty to them or is it a case of buyer beware? Does your answer change if you have a client interested in the property? It seems clear that if a listing agent gets wind of any defect, he must investigate thoroughly, figure out the extent of the defect and determine a cost to remediate.
Finally, we talked about a very interesting scenario. Imagine two buyers sitting in their car while their agents are inside the house taking turns at the negotiation table. One buyer takes off to the bank machine and returns with $10,000 in cash. He knocks on the other buyer’s car window and offers him the money to rescind his offer. Just to be clear, it didn’t actually happen, but it opened a wild debate at our meeting. The idea is interesting. Buyers are scrambling as hard as ever to win bidding wars but is this a winning strategy? So, the question is, could it actually happen? Do buyers have the ability, outside of their relationship with an agent, to influence other buyers? Thankfully part of our job as real estate agents is to keep the process honest and civil. If you have heard of any stories where something along these lines actually happened, please let me know.
Oh and in case you are wondering, that IS Einstien’s face on my body. Have a great week.
I had an interesting conversation with one of the agents in my office yesterday. He is a strong producing agent who is feeling rather frustrated with all the multiple offers going on. Since January he has been in ten such scenarios and lost all ten. If it weren’t for his listings I’m not sure I would be able to talk him off the ledge. Multiple offers seem to be the focus of a lot of discussions around the office (see today’s article in The Star on winning a bidding war, http://bit.ly/HBlh7b ) and while we often talk about Buyer fatigue, the new malady might just be Agent fatigue.
I might just have the answer for winning more offer presentations. It is so simple yet so genius. Sell your clients a FSBO property. Let’s face it, Agents stay away from FSBO’s. They’re not supposed to, but we all know they do. At our company we devote part of our training to dealing with private sellers because, while still a very small segment of the market, agents will come across them from time to time and need to know how to negotiate with a private seller. We should also recognize that, for the most part, FSBO’s aren’t flying off the shelf. Personally, I’ve passed the same three large round blue and green directional FSBO signs for the last 2 months. (Interesting how FSBO’s don’t need to adhere to city bylaws regarding open house signs isn’t it?). It reminded me of an interesting situation one of my agents had a few months ago. She had been working with a buyer for a few weeks and after several failed offers they found the perfect home for sale being offered privately. My agent talked to the sellers and managed to organize the showing with her clients. The house was for sale for $749,000 but her research showed that it was easily worth $850,000 and that under normal conditions (read; massive bidding wars) the house could reach into the $900k range. The sellers said they were trying to get a bidding war going. The instructions clearly stated that all offers were to go to the Seller’s lawyer. My agent’s clients were interested in the house so she called the lawyer to ask if there were any offers registered. His response was “yes, we have an offer on the table for $745,000”. Fabulous. Well it turned out perfectly for one buyer. Sadly it was not ours. That’s a story for another day. The point of this is to illustrate that it is not always in a Seller’s best interest to go it alone.
Let me state unequivocally that I am not against people selling homes themselves. There are lots of situations where involving a Realtor just doesn’t make sense. In a 2010 NAR survey of buyers and sellers, about half of the FSBO sales typically occur when the seller knows the buyer. Here are some other interesting points from the survey;
• Over 60% of all FSBO’s sell for 10% or more below the market than if they had they had sold after obtaining the services of a Realtor®
• Over 65% of FSBO’s end up in some sort of litigation or legal dispute ending up in court or arbitration and costing them more than the expected savings of selling on their own
• Most FSBO’s take longer to sell than if they had listed with a Broker
What’s the take away here? While the NAR report talks specifically about a very difficult U.S. real estate market, there are some interesting things to talk about with potential FSBO sellers and buyers; namely pricing and future litigation. Remember, if you are offering on a FSBO or mere posting listing it is extrememly important that you offer no advise to the seller. To do so puts you in an assumed multiple representation role. If the Seller asks “what should I sign it back at?” your response should simply be ” I am representing my client and as such I cannot offer you any advise”.
Naturally I would love to hear any stories you might have regarding your experiences with dealing with FSBO’s or mere postings.
If its Wednesday it must mean there is a Mastermind meeting. And a good one it turned out to be for all in attendance. This morning we had a number of good topics so if you didn’t make it, here is what you missed.
1. When doing an Agreement of Purchase and Sale, agents often leave key information blank only to fill in the details, such as price, at a later date. It is important to make sure that the clients initial the hand written inserts. Also remember that listings on MLS often include standard office clauses in the form of a schedule. Remember the top portion of these schedules are often left blank and agents are required to add the names of both the buyers and sellers as well as the address. It is important that these handwritten additions are initialed too.
2. Too Often, agents are working with clients that are a little on the frustrating side. Sometimes it is tough to get both buyers together at the same time, they don’t want to offer on properties with bidding wars. It seems that they are not really committed to buying a property. We talked about overcoming some of these obstacles. First, deal with the decision maker exclusively, but keep the other buyer in the loop. Second, make sure that they have the means to jump on a property quickly; for example, they need to have the funds available for deposits as often we hear “oh yeah, I have the money, it just might take me a few days to move it around”. Third, show them a list of all the properties that they have seen. Point out how quickly the have sold and stress the importance that they need to start offering on properties. There are countless examples of good properties that sell below asking but they will never buy a house if they don’t offer on any. Finally, an agent pointed out that she had success showing clients two types of houses; those that have offer dates and those that have been on the market for a couple of weeks. The ones that have languished on the market are usually overpriced and need a ton of work.
3. The Classic. Seller Jones lists his house for $499K under advice from the agent. Their hope is to generate enough interest to spark multiple offers. On offer night there is only one offer. The buyer agent brings in a full price offer (because he recognizes the house to have that value), with no conditions and the exact closing date the seller has asked for. What happens? the Seller signs it back for $530K because that was their expectation. The reality is that the seller and the seller’s agent are guilty of false advertising. If they want $530k they must do a price change on the property. Believe it or not, more than a few agents in attendance today had experienced this scenario. This is a great topic that might be better saved for future blogs so stay tuned.
4.Finally, we had a lengthy conversation about what to say to people who have their property listed with another agent, but want your advise. Sometimes they call you out of the blue because they know you specialize in the area or maybe they are friends looking for some words of wisdom from a trusted source. The reality is that helping people is in our DNA. Just remember, the person you are talking to is under contract with another agent so you cannot interfere under any circumstances. It’s okay to answer questions about the market or speak generally about properties or buildings but if someone asks you why their house isn’t selling you must decline to answer. Here is a good rule of thumb; always be thinking… what if this conversation was being taped. How much trouble could I get into? Exercise extreme caution. Simply answer that you cannot interfere with another agent’s contract and direct them to get answers from their agent.
Have a great week and don’t forget to check in next week.