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Deborah Madey - New Jersey's Blog

By Deborah Madey | Agent in Red Bank, NJ

Whoot! The Listing Contract Expired. Let's Buy It Without The Realtor! Whooo Hoo.. Saving those $$$

Pete, from Harrisburg, PA asked a question on Trulia Voices today, and then removed the question after a short while.   Pete also changed his/her profile to Sally.  I considered Pete (or Sally’s) discussion worthwhile for agents to explore as an agent-to-agent discussion, and am putting a recap here.

Here’s the summary.   Sally (formerly Pete) wants to buy the neighbor’s property for an amount near another offer received but less than the Realtor commission.  The seller had their property listed and received an offer just at the end of the listing period.  The offer continues to be negotiated, although the listing is expired.  Pete (formerly Sally), also claims to be a an attorney, just not a real estate attorney.   Pete/Sally wants the neighbor to sell to him, advising the neighbor should not have to pay the Realtor fee because an offer w/ acceptable terms was not achieved before expiration.  The neighbor is concerned they could owe a Realtor fee.   Pete/Sally, in his/her own words, admit that they wanted to rent first to avoid the appearance of impropriety.

Here’s the thread, with the question removed, and my comments about this:

Law and ethics do not always travel parallel.

PROTECTION PERIOD:  Most listing contracts contain a clause that defines a protection or obligation period.   An earlier poster on the thread supported short protection periods.  For the very dialog on this thread, our company has protection periods that can extend to 1 year.   Here’s how we determine the length of a protection period at our company.  If our firm is going to invest heavily in terms of both time and money, the protection period is longer.   If a property is an unusual property with a focus on a unique or niche buyer pool that traditionally carries a longer marketing period, the protection period is long.   If we contract with a seller for a limited marketing package, we may have no protection period at all in the contract.  In other words, we negotiate fair contracts.   

MOTIVE:  It read to me that Pete/Sally was encouraging the seller to use innocent buyers and the Realtors as pawns to set the benchmark for the highest and best price the property can achieve, and then swoop in to gain at their expense?   Is this ethical?   Hmmmm…  No.  Is it legal?  I am not qualified to give legal advice because I’m not an attorney.   But, I am a broker owner, and I know what flags alert me to refer situations to our company attorney for a legal opinion.  There are flags and questions here.  Does the seller want to work out a deal with the buyer?    Was Pete/Sally trying to dissuade the sellers from doing so?   If the buyers can perform, and their contract fulfills the need of the sellers, then any attempt by the sellers to thwart that contract in favor of trying to sell to Pete/Sally without a brokerage fee is ethically wrong.  It may also legally bind the sellers to pay any fees associated with the listing contract.

WHEN IS COMMISSION EARNED?:  I do not have a copy of the listing contract.    I can tell you that when we work on commission (we don’t always work on contingency), our commission is deemed earned at the time a ready, willing, and capable buyer is produced.   If those terms, or similar to the same, are included in the listing contract between the seller and the listing broker, the seller could owe a commission.

EXCLUSIVE RIGHT TO SELL -  ARE PETE/SALLY BUYERS UNDER THAT PROVISION?   Regardless of the fact that Pete/Sally knew the sellers before the house was listed, the terms of many listing contracts contain a clause for the exclusive right to sell.   Since Pete/Sally had dialog with the property owners during the time it was listed, in my lay person’s broker owner, just an ordinary person trying to make an honest living’s opinion, any dialog Pete/Sally had w/ the property owner while it was listed established them as “buyer” under the existing listing contract.

THIRD PARTY INTERFERENCE - ARE THERE DAMAGES?  WHAT IS TORTOUS INTERFERENCE?  If I were faced with a situation where a seller dismissed a viable buyer in favor of selling to their friend, I would refer it our attorney for legal review.  If the sellers were attempting to act in good faith, but a third party interfered with that process, and the actions of the third party caused a loss or damage to the seller, buyer, or real estate broker, I guess our company attorney would evaluate that situation and any potential liability.

WHAT DO YOU THINK?  Pete/Sally believes that the contract expired, the Realtors didn’t sell it, the sellers owe nothing to the buyers who made the offer, and that Pete/Sally should gain from this exercise.  What do you think?



By Mirri,  Wed May 27 2009, 16:02
My husband I made an offer on a house last night and we were informed today that the seller is trying to sell their home to a friend behind their Realtor's back. This is a very odd coincidence. What concerns me the most is that the seller could be using our offer as a means of negotiation...with their friend. I was told that it's against policy to share another offer with a potential buyer. There have to be laws/regulations to protect the sellers Realtor and a buyer? Right? If the seller wanted to avoid paying the Realtor his/her commission, maybe they should have gone the for-sale-by-owner route. Their actions might end up costing them more.
By Brian Copeland,  Mon Jul 13 2009, 13:22
Wow..thanks for writing this Deborah. Great post!
By Agnes Tabor, REALTOR,  Wed Aug 18 2010, 10:37

The sellers should have been upfront with their REALTOR and you as potential buyers. This is so easily done by including the name of the "friend" as an exclusion to commission in the original offer. No need for cloak and dagger everyone just needs to be up front with expectations and "Put it in Writing".
By Dawn and Jim Ohnstad,  Thu Sep 23 2010, 10:36
Since I am not an attorney, I am not allowed to give legal advice. However, in our listing contracts a commission is owed by the seller if anyone who "made inquiry" during the time of the listing purchases the house. I believe it is the contractual obligation of the seller to inform his agent about the neighbor's interest and let the agent do their job. interestingly, in the scenario given, the sellers would not net any more dollars from subtracting the commission from the offer....Why not let the pro they hired do the job with the "bird in hand"?
By Annette Lawrence 727.420.4041,  Thu Sep 23 2010, 12:03
Sometimes folks just feel the need to demonstrate their cleverness. Quite often their cleverness lands them in a pile of 'Pally.' I truly hope the home owner adds 2 + 2 and realizes they are being placed into a situation of disadvantage.
By Lori Jeltema,  Thu Sep 23 2010, 15:14
Friends of mine told me a similiar story of how they viewed a home and the sellers pulled them aside and said that the listing would expire soon and they should come back without their agent and they would work out a deal. My friends said they felt dirty and wanted to wash themselves after leaving the house. They figured if the sellers were so willing to $&^& their agent, they'd probably do the same to them.
By Leticia Hixson,  Thu Sep 30 2010, 00:09
Unfortunately there are unethical and dishonest people out there which is why we should have a buyer broker agreement.

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