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Hoarding Listings?

Has anyone noticed listing agents hoarding REO inventory for their own clients? In California, where we now have only 4.2 months of inventory, we have begun to see bank-owned listings marked as contingent within only a minute of being listed, only to return to the market a month later and immediately be bought by a buyer represented by the listing agent. More than a dozen clients, in multiple threads, have submitted examples of these listings on our message boards. We’re trying to figure out what’s really going on and what to do about it. We thought the Bloodhound community might be able to help.

Meanwhile, our partner agents in the Inland Empire of Southern California are also seeing banks take offers on REO properties that are $20,000 or $30,000 lower than the highest bid, on the grounds that the house won’t appraise for the higher offer amount. It seems like the market is trying to set the price, and nobody is willing to believe it (perhaps for good reason).

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  • 11 comments

    11 Comments so far

    1. Sean Purcell June 29th, 2009 1:52 pm

      Glenn, we’ve been seeing that down here in San Diego for 6-8 months now. The listing agents are committing fraud, plain and simple. They are ignoring their fiduciary obligations to gain both of ends of a deal because the banks can’t stay up with the transactions.

      It’s a little ironic. The banks have created relationships with these licensed order-takers for years to handle their REOs. My experience (and others’ I’ve talked to) is that these “agents” are an embarrassment to the industry. Yet now that they are on top, they are gouging the very hand that feeds them for greater commissions at the cost of lower nets to the bank. No hard evidence to back that up; just watching the same things you guys are: offers trading below highest bids, REO agents passing transactions through straw buyers and so forth.

      All this non-sense hurts the banks directly, but who do you think pays for it in the end? Here’s a better question: banks would love to get into the real estate business. Once they realize how much these real estate “agents” took them for, do you think they’ll more or less interested in entering the profession and driving all of us “thieves” out of business?

    2. Glenn Kelman June 29th, 2009 6:06 pm

      Great comment Sean. But I disagree that banks want to get into this business. That may once have been the case, but don’t you think the banks are going to be limited by the government from the kinds of services they offer? When pressed by potential investors for what kind of companies could ever buy Redfin — it is a standard investor question, and Redfin has no obvious answer — we used to think that banks might be a fit since they already have an extensive retail presence. But most if not all the folks who invested in Redfin concluded that we were more likely to have to grow on our own (which is fine by us).

    3. Greg Dallaire June 29th, 2009 8:47 pm

      Glenn and Sean,

      We struggle with the same problem in Green Bay Wisconsin we have some big REO lister’s that have a team of buyer’s agents that get first crack at their listings.

      The other side of the coin is this isn’t it our as a selling agent to sell their properties? Maybe the banks are ok with selling them right away and believe there is value in it. I don’t like it as much as anyone else because I want my clients to get these opporutnities.

      As long as the client is aware of what’s being done and there ok it with isn’t it there right to make a decision.

      I’m really torn by this and i’m starting to see it come up more and more. Makes for an interesting discussion.

    4. Don Reedy June 29th, 2009 8:50 pm

      Sean,

      I’m really interested in your take on this. Do you have any idea how to prove the fraud, or is it just anecdotal? Is this widespread, or just isolated?

      Next, assuming there is a methodology for outing these bad guys (and gals), then who would be the “Sheriff” to bring into town to clean them up? Is this fraud something that would benefit from the eyes and ears of one of our local newspapers?

      And then, what would be the remedy?

      Glen,

      I read your threads and it appears Denmark has reared its rotten head. But like Sean I ask, is this just chump change, or do you think it rises to the level of massive loan/real estate fraud as Sean seems to suggest?

    5. Glenn Kelman June 29th, 2009 10:02 pm

      @Don: I don’t think it’s a massive fraud, but judging from the comments, it’s more significant that I thought.

      @Greg: thanks for the comment! I doubt the bank appreciates this tactic…

    6. Sean Purcell June 30th, 2009 10:13 am

      Glenn,

      The fact that the banks are still precluded from entering the real estate business does not necessarily mean they don’t want to be in the real estate business.

      My point was only that the direct wrong being done to the banks (and indirectly to so many others) by the REO “agents” who commit fraud just adds to the friction and gives our industry another black eye.

      Don,

      My take is anecdotal, although based on the “broad daylight” nature of the fraud committed, I’m assuming that the bad guys see the candy shop unlocked and nobody for miles in any direction. I know one agent that tracks the REOs and regularly watches them close for well under the high offer (which he, himself, submitted). I’ve heard the nonsense from the REO agents about there being many considerations and how price is only one of them, but it happens too often. All things considered, bankers rarely override net profits in return for 25% down instead of 20%.

      I know another agent who was called by an REO listing agent. she was told that her clients submitted the winning bid and how, over the next couple of weeks, she might notice the property closing for less than her client’s bid but not to worry. They’ll still close for her price afterward (after the transaction has been passed through a straw buyer).

      Both of these listing agents were reported and I believe the Department of Real Estate here in CA is still contemplating whether to send these agents to bed with no TV or to modify the punishment to something less painful. :) There are no sheriffs in the real estate world. This is what I’ve been saying for some time now: coming out of the securities industry I entered the real estate business and quickly realized it’s the Wild West out here.

    7. Greg Swann June 30th, 2009 10:21 am

      FWIW, I have seen REO listings that had this smell about them: 15 Agent Days, 0 MLS Days, but they arrive on the MLS as Sale Pending. That would seem to indicate that the agent is shopping the listing as an Exclusive before putting it on the MLS. I would argue that this, if that is what is happening, is contrary to the bank’s interests, but I don’t know for sure what is happening, nor do I know that the presumed Exclusive listing is not ratified in paper. Stinks all the same.

    8. Erion Shehaj June 30th, 2009 10:27 am

      Glenn

      What you have brought up in this post has been a part of the REO game since its inception. Listing agents send property info to “preferred” clients long before the listing goes public, offer is ready with a shiny red bow on it prior to the debut.

      There’s two things that can be done to fix this:

      1. Take away listing agent ability to take and cherrypick which offers to present by using a transparent online platform for submitting bids by a specific deadline. HUD has already implemented this with Bidselect.com and it works like a charm.

      2. Take away listing agents ability to represent the buyer due to flagrant conflict of interest issues.

      Better yet, do both simultaneously.

    9. Glenn Kelman June 30th, 2009 10:58 am

      @Greg: I don’t know for sure what’s happening either but agree it probably isn’t in the bank’s interest.
      @Erion: love your suggestions to fix the problem, especially #2.

    10. Russell Shaw June 30th, 2009 12:41 pm

      Not only is it happening in Phoenix, a year ago, I saw an REO agent, from southern California, “brag from the stage” that he was doing this to improve his margins.

      Other agents writing offers on his listings had no chance of winning. I don’t remember his last name but his first name was Oscar.

      Fantastic post, Glenn.

    11. mrgoodbar72 July 9th, 2009 11:19 pm

      Interest thread here guys.

      I have seen alot of what you all are saying happen here in the DC area too. But for the most part it is not the agents that are getting massive reo listings. They are too concerned with losing thier massive amounts of income from bank listings too bother with crossing the line for a few extra grand.

      The ones I see doing it are the agents who have alot less listings and have more too gain and less to lose.

      It is incredibly frusterating but by no stretch of the imagination is this a new practice.

      The banks are starting to get wise… I am seeing more and more of them not reviewing offers for the first 5-15 days and also putting thier hotline in the MLS listing to call if your offer is not responded to within 3 days.

      The burden has never been on the Realtors to be honest. This is sales, people… Do you really think the BULK of sales people are honest in any field? If so, I have a bridge to sell you.

      It is more painful that it is our tax dollars though.

      The burden is on the general public and the banks to hold people accountable, research who they are hirering, check lisences, check references… DUE YOUR DUE DILIGENCE. If you see something is amiss, report it to the seller. Eventually they will get wise and not continue to use these people.