Not Getting What You Don’t Pay For
It won’t show up in my 2012 sales statistics (or my bank account), but one of the more protracted deals I was involved with this past year was helping a good friend (and repeat client) buy a $63,000 St. Paul foreclosure.
Why no record of the deal?
Because I didn’t officially represent the Buyer — the listing agent did.
I don’t know about other agents, but my experience representing Buyers pursuing foreclosures is that they always seem to lose out — frequently to Buyers who, surprise, surprise, are also represented by the listing agent (a practice called “dual agency”).
That’s especially the case when the property is: a) cheap (well under $100k); b) grossly underpriced; and c) in multiple offers.
Of course, “a.,” “b.”, and “c.” frequently go together.
Given the paltry commission at stake here — less than $1,000 — and the arcane purchase process associated with a Fannie Mae property (the type of property here), the expedient thing to do seemed to step aside, and “free” (encourage) my client to deal directly with the listing agent.
Which I did, he did . . . and ultimately got the house.
While I forfeited a (small) commission, my client got the property he wanted, and I saved weeks (months?) showing dozens of foreclosures and writing (and monitoring) nearly as many offers.
Too, given my relationship with the Buyer, I know that I’ll make up the $1,000 on other, future deals.
Dual Agency Perils
Monitoring the deal from (not so) afar, the surprise to me was how little information and advocacy my friend got from his “dual” agent.
For example: even though the agent owed the exact same duties to both Buyer and Seller (in this case Fannie Mae, aka the government), it was my friend who discovered, doing his inspection, that the home had been vandalized, and stripped of its copper and major appliances.
It’s still not clear whether the listing agent knew of the vandalism, and failed to alert his client (my “non-client”); or, was genuinely unaware.
I’m not sure which scenario is scarier.
Ultimately, the purchase price was renegotiated to reflect the vandalism, and the deal remained on track.
As the closing approached, I reviewed the HUD-1 (closing worksheet) for my friend, coached him on some nuances . . . and assumed everything was a “go.”
So, I was surprised to receive a phone call from him — an hour(!) before closing — asking how he could be sure that the vacant, winterized property hadn’t sustained further damage or vandalism since he’d done his inspection.
Legitimate concern, huh? (especially in this case).
Buyer Walk-Thru Inspection
The issue is addressed by doing a “Buyer walk-thru inspection” — a provision in every real estate contract that I’ve ever seen.
That’s the case even with a foreclosure being purchased “As is” (the Seller isn’t obliged to do anything, but the Buyer typically can walk, i.e., cancel the deal, or renegotiate if the property’s condition has materially changed).
As a Buyer’s agent, I routinely remind my clients of this, and take care to schedule it far enough ahead of closing to resolve any issues.
Except in this case, the dual agent hadn’t breathed a word about it.
Instead, I jumped in my car to drive across town to take a look.
The home was fine — make that, in the same, post-vandalized condition it had been in a few weeks before — and the deal proceeded to close as scheduled.
P.S.: I suppose my other “compensation” was . . . this story (and blog post!).
And yes, I’m happy to provide similar service to any client who’s done 4 deals with me, and referred countless others, as this client has.