Dear Monty: A sad real estate story
By Richard Montgomery
Reader Comment: We lost out on buying our dream home when we didn’t understand the significance of what you recently wrote that there are “…no standardized rules in the industry” and that “the nature of the real estate transaction and how the sales develop is very fluid.” We had first made a written offer on the house we wanted for less than asking price, which was rejected by the seller. We had our agent verbally communicate increasing offers, a practice he said was standard in the city.
Meanwhile, another potential buyer wrote an offer and also started negotiating. We didn’t find out until too late that the listing agent was presenting only our competitor’s verbal increments to the sellers, and didn’t tell them we were willing to pay more. Needless to say, the seller sold to the other party.
It turns out we were the unwitting victims of a boycott against our agent because he was from an Internet real estate “disruptor” company that had been robbing clients from brick-and-mortar companies in the city. When we cried foul, our attorney confirmed that while agents are required to present written contracts to sellers, they are not legally obligated to follow up with the verbal give-and-take that’s needed to firm up a deal. Please share our sad story to help educate buyers and sellers.
Monty’s Response: Note to readers – I have redacted the city and the name of the real estate company where our reader’s agent is affiliated. I did so because this same sad story is happening today in many cities, with many real estate agents, in many sections of the country.
I am sad to hear your dream home was not to be. It is likely that you will go on and find another dream home you may like even more.
Your agent was partially correct when he stated agents would increase offers verbally. I requested an agent known to me to be well educated, active, and honest in your market to comment on your situation (I provided no reference to company affiliation or participant identity), and here is the response:
“It is common practice for agents in our city to work deals verbally back and forth in negotiations all the time. As soon as they reach an accord, they adjust the contract with the agreed upon terms and both parties execute it. Typically, counter offers are done verbally and followed up with the counter in a text or email so that there is a paper trail. However, I have never seen verbal offers done in a multiple offer situation as there would be no proof of the offer and it would be one agent’s word against the other. Verbal offers are NOT binding in our city or state.”
Not being present, I do not know enough about all the circumstances or the play-by-play. It is not clear when the second buyer surfaced, but at the moment your agent learned there was another potential buyer, the point you were at in the negotiation then should have been recapped in writing, and any subsequent counter-offers should have been in writing. A query about variable rate commissions was in order.
1. Did the agent know the rules but took a shortcut to save his time?
2. Was the agent not well-versed in handling multiple counter offers?
3. Was the agent uninformed about the law, the protocols, and the consequences?
4. Did the agent allow a stronger agent to take the shortcuts?
While none of these possibilities may be accurate, as there are others, on the surface your agent’s response seems disingenuous. With today’s technology, oral offers should be obsolete.
About the competition
On the agent’s explanation, the company he is with has been in your local market for over ten years. Like every other type of business, real estate companies have been pilfering talent and clients for over a hundred years. The agent’s company is just one of many disruptors using new techniques and technologies fighting to expand their brand. One of the benefits his company emphasizes is training agents, which is very appealing to new agents. Most real estate agents would be more interested in seeing their listing sold than they are about which real estate company brings the buyer.
One must wonder if the family that bought the home was a client of the listing broker? That would tie into this Dear Monty article at http://bit.ly/2x0zWyy that you referred to in your comments.
Richard Montgomery is the author of “House Money – An Insider’s Secrets to Saving Thousands When You Buy or Sell a Home.” He is a real estate industry veteran who advocates industry reform and offers readers unbiased real estate advice. Ask him questions at DearMonty.com.