There’s always something to howl about.

At What Point Does an Agent Become a Criminal?

I wrote an offer for a young couple who wished to purchase the home they were renting.  The buyer and seller had already discussed a price of $400,000 before agents got involved.  (The seller thought it wise that both parties be represented, which is when I came into the picture along with an agent for the seller.)  I comp’d the home and the area: $400,000 was a stretch. But the buyers liked the property, wanted an extra large master bedroom (which this home had) and wanted to avoid the cost and hassle of moving.  Fair enough; I’ve fulfilled my responsibility of providing accurate and professional counsel regarding value and the buyers have made an informed and justifiable decision.

We wrote the offer for $400,000 with 3% seller concessions for the repairs that the seller had already acknowledged.  The listing agent scoffed.  It seems she had advised her client the property, with a little cosmetic improvement, would sell for the mid $400s.  Brilliant.  Real Estate is by no means rocket science, but the ability to properly value a property and understand comparables is a skill and not every agent is adept.  I sent along a 3 page analysis of comparables and pricing to buttress our offer.  Seller came back at $410,000 with $10,000 in concessions.  Once again I advised my clients that, in my professional opinion, the price was greater than the value, but the mitigating factors were enough for them to justify accepting the contract.  Which they did.  I agreed to a 2% commission as my work load was less and the listing agent admitted to me that she was working for only 1% as her work load was greatly diminished.  And we all lived happily ever after, right?  No…

In California, the standard contract calls for the loan contingency to be removed in 17 days.  (This bit of paint-by-numbers idiocy came about during the hey-day of real estate when anyone with a pulse could get a loan.  In the current economic market, it’s only purpose is to expose which agents are inexperienced and clueless enough to put their clients at risk.)  The buyers needed roughly three weeks for their funds to fully season so we countered on that point while accepting the net price of $400,000.  Seller (relying, I assume, on her agent’s advice) declined to extend the loan contingency.  My buyers are logical people and chose not to put their earnest money at risk.  Offer was dropped and we began a search of near-by homes.

Cut to the present: my clients are closing today on a home in much nicer condition, with a pool and a quieter street.  They paid $410,000 and their financing worked out just fine.  The home they were living in and wanted to buy?  The seller took the listing agent’s advice and dropped a few thousand dollars into cosmetic improvements, then listed the place at $450,000.  It’s been over six weeks and here’s a snap shot of the MLS listing as of yesterday:

(The buyer to whom this agent refers in the Remarks section made an offer, did the inspection, saw the problems my client was already intimately aware of and had accepted… and walked away.)

So, let’s tally the damage in relation to the offer my clients made: I’ll estimate $2000 out of pocket in updates, selling agent commission of 2.5% is $2000 more than I accepted, estimated listing agent commission of 2% (and 2.5% is more likely) means another $4000 cost to the seller, and of course the asking price is now lower than our actual offer… with no buyer in hand.  Let’s be generous and assume an eventual buyer will pay only slightly less than list price (but still more than my original valuation) on a property that’s been Active for twice as long as the average, accurately priced property in this neighborhood.  Final price of $390,000 is a final hit to the seller of $10,000.  We won’t count “cost of carry” or the “opportunity cost” caused by delaying whatever plans the owner had.  Total thus far: $18,000… and the house is still on the market.  I’ll reiterate the question from this article’s title:

At what point does this agent stop being simply an incredibly incompetent agent and start being a criminal?