More B.S. (“Bait & Switch”)
from the Foreclosure Banks
The water cooler is long gone, but that doesn’t mean Realtors don’t engage in “water cooler talk.”
One of the hottest topics at the moment is foreclosures.
Here’s how it appears to the (above) average Realtor — OK, me — who’s had some passing involvement representing would-be Buyers in foreclosure deals this Spring, and has compared notes with a number of colleagues:
–A handful of Twin Cities Realtors appear to have “cornered the market” as listing agents, simultaneously representing anywhere from dozens to hundreds (no typo) of foreclosed homes.
–A small but growing number of foreclosed homes appear to be intentionally priced dramatically below market.
There’s nothing wrong with pricing conservatively — I routinely warn my Selling clients of the risks associated with doing the opposite.
However, there’s pricing at or slightly below market, to create a sense of Buyer urgency and elicit more than one offer — and then there’s pricing 30% – 50% below market.
The result, as you might expect, is a feeding frenzy: I’ve now seen — and participated in — several deals where there were more than 15 offers on a single home.
More B.S. (“Bait and Switch”) from the Banks
That’s not savvy marketing; that’s financial bait and switch. It’s also a violation of Realtor ethics, and likely, state law. (Note: technically, a listing on MLS is not what attorneys call an “offer to sell.” Rather, it’s a solicitation of an offer.)
Some more details:
–The sales process accompanying many multiple offers is not exactly a model of clarity, punctuality, or fairness (or so it would seem to someone who’s handled more than 100 deals).
To put a finer point on it: often times, the whole process smells.
The listing agent is uncommunicative about the status of the property, any required municipal inspections, or the timetable for responding to offers.
The deadline for submitting offers is either unclear, or not enforced.
The prospective Buyer must get pre-approved by the bank selling the foreclosure, even if they have their own financing (from a more reputable lender) lined up.
Even after the bank has accepted an offer, the listing agent’s front desk is often unaware(?), and confirming new showing requests. (“Hmm . . . if we leave the door ajar, maybe an even better offer will materialize.”)
Nothing is more annoying to a busy Realtor — or their client — than wasting your time on a property that you subsequently find out was already sold when you showed it (MLS rules strictly prohibit this, by the way).
Conflicts of Interest
Of course, the biggest issue of all regarding the conduct of foreclosures in multiple offers is, who won (and why)?
Surprise, surprise, in many situations the winning bidder is represented by . . . . wait for it . . . the agent representing the bank!
This is called dual agency, and is fraught with conflicts of interest. Perhaps that’s why 42 states — but inexplicably, not Minnesota — prohibit it.
Even when the winning bidder is represented by another agent, it’s hardly evident how — or why — that bid won.
I’ve represented one client now who, in the span of three weeks, has lost out on three multiple offers, each time bidding anywhere from 10% to 30% over asking price, within 48 hours of the property hitting the market. Other Realtors tell me they’ve participated — and lost — on even more multiple offer deals.
Is this just sour grapes, or, is something else going on?
“I’m Never Going to Tell. Hang me”
It’s certainly possible that the bank chose the highest and best offer, after carefully weighing the various offers’ financing, closing dates, and other key terms.
However, given all the murkiness surrounding these deals, you certainly wonder.
The biggest question on the lips of the Realtors representing all the runners-up — many who also offered well over asking price: exactly what offers did the bank actually see?
The potential for mischief — or worse — in foreclosure deals reminds me of a favorite joke:
A posse hunting a bank robber finally apprehends the suspect. However, he doesn’t speak English, so the head of the posse has to find an interpreter. Through the interpreter, he tells the robber, “if you don’t tell us where you hid the money, we’re going to hang you.”
The interpreter relays the warning to the robber, who blurts out (in Spanish): ‘I hid it under a big oak tree a mile west of town.’ The interpreter pauses a moment, then tells the posse leader (in English): ‘he says, ‘I’m never going to tell, hang me.”