In a perfect, utopian society everything would move forward smoothly. People would do what they are supposed to do, and say what they are supposed to say. Pandemics would be relegated to the history books, and kumbaya would be sung around campfires across the world.
Manly men could even admit they like 90 Day Fiance and the awesomeness that is Big Ed, without fear of extreme derision and scorn…
Governments would deliver on their promises to provide affordable housing AND free down payments for all…
But alas this isn’t meant to be, and the reality is that we are living in a shit bowl of epic proportions. With this in mind, I want to take a look at the mucky side of the real estate business, and explore the dark underbelly that lurks underneath all those pictures of painfully earnest couples happily posing with sold signs.
Here are some of the dirtiest words in real estate, and the situations that go with them.
Seller reserves the right to review pre-emptive offers WITHOUT notice.
It’s no surprise that many people hold the real estate industry in slightly higher regard than the back alley weed industry, and the above sentence is one of the main reasons why. I think it is just about the most unethical thing an agent can do.
Here’s what should happen:
123 Main St comes on the market with an offer date set for the following week. The remarks to the agents on the MLS listing provide the offer information, something to the effect of Offers to be reviewed September x at 4 pm, seller reserves the right to review pre-emptive offers.
In plain language this means the house has a set offer date, but the sellers are leaving themselves open to accepting an attractive “bully” offer if one comes in before the offer date. This is normal, happens all the time and is completely within the rules. BUT if they do decide to accept the bully offer certain protocols must be followed.
The listing agent must then inform every agent that has shown the property, every agent that has a future showing booked, and anybody that has expressed interest in the property that there is an offer that will be accepted and provide them with a reasonable time frame to submit their own offer. There are varying opinions on what constitutes “reasonable” time but you get the drift. The more time the listing agent can provide will bring in more offers, and more offers will goose the price.
Now, the vile concept of WITHOUT notice flys in the face of good practice AND is a RECO violation (not that that necessarily carries any weight). The WITHOUT notice agent can be saying any of the following:
- They have their own offer on the property and are too corrupt or unethical to give anybody a chance to beat it.
- They are too lazy to inform the other agents and work the phone for a couple of hours to drum up more action.
- They don’t respect their fellow hard working agents enough to allow them to do their job and feed their families.
- They don’t respect their sellers enough to actually do their JOB and sell the house for the most money possible.
As a seller, if you ever see this WITHOUT notice nonsense from your agent please fire them immediately and with extreme prejudice.
Pre-emptive offer received, reviewing tonight at 11 pm.
This one plays off point 1, but let’s set the table a bit further.
It’s 10:23 pm on Saturday night and our hero receives the offer notice from above in the form of an automated e-mail. While it’s true this is preferable to scenario 1 because technically notice has been provided, it’s still low down dirty pool.
Assuming our hero is awake, is not impaired AND receives the notice right as it comes in, that leaves 37 minutes max at 10:23 pm on Saturday night to reach his clients, explain the situation, put together an offer and have it signed and then sent to the listing agent. That’s a lot of dominoes that need to fall just right, and 99 out of 100 times it ain’t happening.
This scenario reflects very poorly on the listing agent. Either they have their own offer and are waiting till the last minute to jam it through, or they are too weak to push back at the buyer agent and demand a reasonable time frame to alert the other agents (which would likely result in a higher sale price). Either way it’s bad business.
The Appraisal came back “light”.
When a buyer agent receives a call from a mortgage broker informing them that the appraisal on the purchase has come back “light”, it is the real estate equivalent of a nuclear bomb being detonated. Here’s the scenario:
Our hero represents Chad and Karen, and after a long search they put together a winning bid of $1,300,000 on a house listed at $999,000. Everybody is ecstatic, bottles are popped and the furniture shopping begins.
Everything is moving forward swimmingly until 3 weeks before closing, when the mortgage agent informs Chad and Karen that the appraisal has come back and the lender has valued the house at only $1,150,000. This is LIGHT, and a potential doomsday scenario. Now it’s time to scramble.
By valuing the house at only $1,150,000 it means the lender will only extend a mortgage up to $1,150,000, leaving a delta of $150,000, and that’s not Monopoly money. The buyers alone are on the hook to bridge that delta. So what does this mean?
In the worst case scenario, the buyer can’t make up the difference and is financially unable to close the purchase. This is the single worst thing that can happen in real estate, as we consider the ramifications.
Because Chad and Karen can’t close, it means the sellers of the house they purchased are in jeopardy of not closing on the house they purchased, and you can see how the transactional snowball starts rolling. This then becomes a legal clusterfuck, which ultimately can end up costing Chad and Karen hundreds of thousands of dollars.
I have only had this happen twice in 10 years and thankfully both times my buyers found a way to close. But I can tell you when the shit hit the fan it was definitely intense, and there were some sleepless nights for all of us.
We have a friend / family member / Uber driver who will sell our home for 1%.
This one is fairly self explanatory, and is always a race to the bottom. Every agent at one point in their career has lost (or passed) on a listing because the seller is fixated on pennies rather than dollars. And the seller always loses, because saving a few thousand dollars on commissions for inferior service invariably costs them tens of thousands of dollars TAX FREE when they inevitably sell for a lower price.
To sell for top dollar, a property will typically require fix-ups, staging, a full marketing package and much more. Are we really supposed to expect that the 1% the agent is going to provide full service, which will result in them LOSING money? Of course not. If they provide any service at all it will be cheap as chips. And that’s if they provide any services, which they usually don’t.
You simply can’t buy filet mignon for the price of a Whopper, and full disclosure I do love me a good Whopper, especially at 2 am with a few onion rings on it and extra mayo.
I have more but the length of this post is beginning to get excessive, so I will save them for a future post. Peace and love, peace and love…