By Linda O'Koniewski, CEO, RE/MAX Leading Edge
Should you trust your real estate agent?
Not blindly.
Your real estate agent appears to be very professional and competent. You selected him because you felt he would do a great job for you. The agent’s past clients are satisfied and happy with his performance. Gosh, he sells a lot of real estate so he must be good. You picked a winner to represent you, right?
The problem is that most Sellers never know when their agent has betrayed them, or lacked the skills to get them the best deal, or worse, was more concerned with how much money they made on the transaction instead of how much money the seller captured.
Why? Because agents who are self-serving, lazy or incompetent fail to tell their Seller clients that they manipulated a deal to get both sides of the commission.
Or, here is a scenario that appears to be quite innocent. An agent might suggest that a Seller accept the highest offer. What could be wrong with that?
But has the agent gone back to make sure that none of the other buyer candidates would be willing to pay more or make their terms more attractive? I’ve seen agents recommend a Seller accept a cash offer that was lower than another offer. Now this might be the right move, or it might not. Certainly cash is king and is solid. But why wouldn’t an agent go back to the cash offer and negotiate to see if the cash buyer might increase their offer price to at least match the highest offer?
Or, if the highest offer was being financed with a bank that has a fantastic record of closing on time and a buyer who has a strong down payment and a great financial profile, why would a Seller not want more money if the risk was truly low unless circumstances dictated that cash was more important than a better sales price? Yet we see agents leave money on the table regularly because some agents just don’t have the skill set and strategies to create the best offer for a Seller.
And it happens every day.
Years ago I had a buyer who was obviously shut out by the listing agent who had their own client for the property. When I challenged this agent she responded, “Sometimes the Sellers don’t want the most money.” Really? I’m sure its true in some special circumstances that require a quick closing. But it’s rare. Really, really rare.
And I knew for sure her clients didn’t even know my Buyers were willing to pay more. I’m not even sure if her Sellers knew we had an offer for them. The problem here was that this agent is a really nice lady. She is sweet and works hard. She is very well liked in the real estate community. Unfortunately when this happens we chalk it up to the way the business is. We all moved on. The Seller didn’t get the most money for his house, and the buyer willing to pay the most money didn’t get the house they wanted.
I presented a full price offer to an agent I considered a friend. Our social circles overlapped. I had been to many events at his house and he at mine. That offer was dynamite. No home inspection contingency and no financing contingency. He called to report that the Seller had accepted another offer. My buyer was disappointed. But it happens. Weeks later I noticed that the home had sold for significantly less than the asking price. I couldn’t help but notice that he had sold it himself. I was burning. It took me months to calm down. I invited him out for tea.
I asked him as a friend would he tell me how the transaction went down. And he did. He reported that he had taken a higher offer and that the Sellers were thrilled to get more money and naturally accepted it. I asked him why he hadn’t told us there was another offer or why he wouldn’t have wanted to see if my buyers would have paid more money considering their terms were obviously superior. My deal was a slam dunk for the Sellers. When he responded I realized that this smart man, who held a job before selling real estate that requires a lot of brains (which I won’t name so I don’t publicly identify him), had never really contemplated that going back to my offer would have been a smart negotiation for his client. Was he blinded by getting both the listing and buyer sides of the commission? Was he in a company where he wasn’t trained to actively create the best offer for his client?
I know he felt fully justified in taking the highest offer. I was stunned that when the Buyers wanted to renegotiate over inspection issues, this agent didn’t reach out to see if my Buyers were still interested in a full price, no contingency offer. If for no other reason than to keep his own Buyer from shaking down the Seller for money when there was a willing Buyer who wanted the home and would pay more than what was now on the table.
I walked away convinced that the agent felt fully justified in what had happened to his client. I walked away dismayed that the industry is full of people who just don’t get it. They don’t understand that it isn’t about soliciting offers for your client and picking one that looks good. They don’t understand their job is to masterfully anticipate future problems and guide the Seller to an offer that is likely to have the best outcome.
Jaded real estate agents have come to expect this kind of bad treatment and blatant disregard for the Buyer and Seller. And when this happens the Seller loses the best offer, the Buyer loses the chance to get the house they want and the agent who had the best Buyer loses out on a professional fee. Shame on our industry.
Just ask the Buyer who put in an offer and is disappointed that the listing agent never told their agent there was a competing offer and didn’t ask that Buyer for their highest and best offer. After all, why should they? “Those Buyers had a chance to make a good offer and didn’t. Too damn bad for them, they had a chance and they blew it. If they were willing to pay more they should have made a stronger offer.” I hear that kind of crap all the time. What about this agent’s duty to encourage a stronger offer?
Ask the Buyers who were very interested in a property and wanted to take time to investigate some zoning and neighborhood issues. Their buyer agent contacted the listing agent and asked to be contacted if another offer came in for the Seller. Next thing you know the house is Under Agreement in Multiple Listing and it’s gone. The listing agent never had the courtesy to call the buyer’s agent to see if those buyers were still interested. That Seller might have had competing offers, but didn’t because the listing agent didn’t bother to stir it up.
Ask the buyer who put in a strong offer on a high-end luxury property and didn’t hear back from the listing agent for a few days. And when the listing agent finally contacted buyer agent Dan, it was to tell him that the Seller was accepting another offer. Dan protested that the agent didn’t even come back to his Buyers to see if they would pay more. Dan knew his Buyers would pay more, but when they put in their offer there was no competing offer. When Dan begged the listing agent to allow his Buyers a chance to increase their offer the answer was, “It’s too late. I’m on my way to have the offer signed.”
Do you think for a minute that the listing agent, who owes fiduciary duties to the homeowner, told the Seller to sign this offer, and said “Oh, by the way, the other Buyers would like a chance to increase their offer, but I figured you wouldn’t be interested since we have this offer for you.” Fat chance. Not if the Buyer who “won” the bidding war was the customer of the listing agent and they could capture both ends of the commission. And that is exactly what happened.
I could go on and on about the agent who listed a property and before she entered it into MLS called a Developer and sold the property in hopes of not only getting both sides of the commission, but the future listings for both condos after this two-family was renovated. The best part of this story is that the house next door sold on the open market just a couple of months later for $125,000 more than the developer paid for a comparable property. The two properties were virtually identical. That Seller lost a lot of money putting faith in a very big agent who was working “in his best interest.”
How about the agents who “sell” their Seller clients on the benefits of accompanied showings so that they can outline and explain all the benefits of the property but either never return calls to buyer agents who want to show the property or can’t seem to make time to accommodate the appointments? Does the homeowner know that people are trying to show the property but are getting blocked or locked out by the agent they hired? No. Why would a listing agent tell the homeowner they are too busy to make all those appointments to show the property?
It doesn’t happen. Properties with accompanied showings are more difficult to access. Think about it. A relocation buyer comes to town and wants to see seven properties. If the listing agent can’t meet the buyer and their agent at a specific time, those buyers see homes that are easy to show. Either with a team of professionals that makes sure showings can be accommodated or where access has been worked out in an easy fashion through a lockbox, concierge, etc. But the homeowner never even knows that someone was trying to see their home. And those relocation buyers pick one of the homes they were able to see that day. That seller who is so proud that his agent accompanies showings doesn’t know that he missed an opportunity with a hot buyer.
Sadly, I could go on and on, and that is the focus of my upcoming book, The Dirty Secrets of Real Estate. But let’s get back to the question. Should you trust your real estate agent?
There are fantastic agents who work tirelessly and smartly for their clients. They can be trusted to do the right thing. But how can you tell?
Ask them how they plan to maximize your sale. Ask them to outline their plan to expose your house to the most buyers? How can they ensure that everyone who wants to see the property will have a chance to see it in a reasonable period of time? What is their plan for reviewing offers? Will the property be presented to the market on a Saturday with no showings until the open house on Sunday and offers presented at 5 that night? Is that maximum exposure to the market? How will your agent plan to create the best offers for you, their client? What signals and advice are they going to give to the buyer’s agent so that your sale can be optimized?
Aye, and there’s the rub. The reputation of the entire real estate industry would skyrocket if every buyer had a chance to see and make their best offer in a reasonable amount of time, and every seller knew that the qualified buyer pool had a chance to see his property and make their best offer. It’s that simple. And yet good agents know how extraordinarily complicated the process can be.
Sellers need smart, sophisticated and savvy agents who know how to maximize their sale price and get the best terms.
As our house counsel, Attorney Robert Bell, has taught me over the last couple of decades, “Agents and sellers have to reorient their brains to the legal reality that the offer is just a stepping stone to further negotiation.” We can’t shy away from it. It is our fiduciary responsibility to work for our seller clients.
Not to work on their behalf and get them the best terms and price is indefensible and egregious. Yet it happens in every market every day. There isn’t a real estate agent out there who hasn’t come across many agents who carelessly disregard even the most fundamental duties to their Seller clients.
Agents need to take a pledge to elevate the industry and do the right thing by their clients. So simple. Yet wildly complicated to execute.
Homeowners, find the exceptional agents out there who are earning their commissions. But never, ever take it for granted that those who are highly successful and have good reputations are always doing right by the client. It just ain’t so.