Real estate traditions and processes with how listings are managed, advertised and the offer process conducted have changed, greatly, over the past several years - mostly in response to extreme changes in the real estate and foreclosure environment.Â Â Many of these practices were dictated arbitrarily by REO departments, and melted into common practice along the way.Â Â
I feel that, in our client's best interests, it's time to re-examine some of these practices, lest we harm our clients unintentionally.
Practice 1: Demanding that a buyer obtain a pre-approval from the listing agents preferred lender.Â Â
This came about, originally, in response to the plethora of "phony", "worthless" pre approval letters generated by mortgage brokers.Â Â At the time, it was a real concern.Â Â However, the practice has now evolved into one where mortgage brokers often pass along leads to agents who will feed clients back to them in this manner.Â Â This practice does NOT benefit the seller - it benefits the agent.Â As long as the buyer provides a pre approval from a direct lender, proof of funds to close, and reveals their fico score, the seller has enough information to make good decisions about which offer to accept.Â One could also ask for the DU Approval from the buyers lender, and to require that the approval letter state the basis of the approval, for example, a review of tax returns, income, debt and credit file before providing the pre approval. Many buyers are hesitant enough to jump through the unnecessary, and quite frankly, insulting hoops of going through another pre approval process, just to be able to bid on a certain property that they will decline to offer, and move on.Â Â Folks:Â This Seriously Harms your Seller.Â Â If you scare away otherwise good, potential buyers, you have financially harmed your client.Â Â
Bottom line:Â There are better ways to verify a buyer's pre approval status than arbitrarily requiring them to pre approve through YOUR lender.
Practice 2:Â Highest and Best Call:Â Â
IMHO this is like asking people to bid against themselves.Â Â Again, I have seen more highly qualified buyers back away, and/or get firmly stubborn on their price position with this tactic than anything else.Â Â And it backfires, regularly.Â Â By causing an almost "auction-like" frenzy, the fall out rate of escrowsÂ when a bidding period is conducted in this way is unnecessarily high.Â Why is that?Â You get the wrong buyer in escrow.Â Â What your seller needs is the most qualified, most committed buyer who is willing to pay at the top end of fair market value for the home.Â Â What you do not need is someone who, in an act of ill-considered desperation bids above where they logically would have priced this home, only to have second thoughts and cold feet in the days and weeks to come.Â Â What happens most of the time when a failed escrow returns to the market?Â It sells the second time for a lower price.Â
Again...We are potentially harming our sellers!Â Â A better idea:Â Â Cull the offers to the top 5 or fewer.Â Look at the trend, and the fair market value.Â Pick a number that works for your seller, and makes sense with the current interest level, and counter each offer.Â Â Some will accept, others will not.Â Now you know where the commitment levelÂ is.Â Â Now you can choose the most stable, most likely to complete the transaction amongst the top offers.Â Â This feels more fair to a buyer.Â Â When you alienate a buyer with the offer process, you have already shot yourself in the foot should new obstacles and further negotiations need to happen later in escrow.Â Keep the buyer happy and flexible, and keep your seller in escrow.
Practice 3:Â This one should go without saying...but, it happens often enough that it bears mention:Â Don't Give Unwarranted Preference to Direct Buyers where you'll Double End the Commission!Â
The only time a listing agent should recommend the offer from a buyer who goes directly to them, versus one working with another agent, is when that buyer also happens to be the most qualified, highest offer and by all indications demonstrates the highest level of commitment to seeing the transaction to completion.Â Â Â There are lots of buyers out there - and the blogs are chock full of "tips and techniques" to get a good deal on real estate.Â Â Many buyers will go direct, playing upon the presumed greed of the listing agent, and hoping for an advantage in the process - either that the agent will recommend their offer over others, or cut them back a deal for part of the "extra" commission.Â This is sleezy.Â I'm sorry.Â It is.Â Maybe I'm old fashioned, but I tell these buyers, "No - hire me to represent you if you like my service, but you're going to get the same preference, based on the merits of your offer as any other buyer".Â Â I have found that once one steps out on a slippery slope that they can expect to continue sliding all the way through the transaction.Â Â Nobody likes a cheater - and the fact remains:Â Anything someone will do FOR you, they will also, likely do TO you.Â Â Keep it clean, and keep your eye on your seller's best interest - not your own pocketbook.Â