Home Buying in 60302>Question Details

Cam, Home Buyer in 94043

Dual Agency - Buyer Needs Advice. Offered over asking. Multiple appraisals came in low. Agent resorting to pressure tactics. Should I walk?

Asked by Cam, 94043 Fri Apr 22, 2011

Background
- First time home buyer
- Pre-approved
- Saw a home that I liked one weekend and decided to make offer with listing agent the next day
- Offered full asking
- Agent comes back following day and says there is competing offer
- I raised my offer and offer accepted following day

Issues
- In a perfect world I would have been happy as I got a house that I feel was good value. Not my dream house, but a house I liked, with potential...however appraisal came in 5% lower than offer price
- Multiple appraisal reconsiderations denied
- Agent is not being helpful at all. I know it is tough to be neutral, but at a minimum, I expect some hand holding for a very qualified first time home buyer that has never been through this. Appraisal results were outside all of our control, but agent has some duty to advise both client with the goal of closing the deal in a fair way and earning commissions from both sides
- Instead, this agent is resorting to bad advice or pressure tactics


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29
Marion Digre’s answer
BEST ANSWER
The lower appraisal is unfortunate for you and the seller and not all that unusual now. In the last year, I have seen a few appraisals come in "light" because even when the value seems like it is there, the recent comparable sales are not there to prove it. We've been successful in challenging some appraisals. We don't have cookie cutter type homes in Oak Park and sometimes an appraiser who is not familiar with the area just needs some help on determining the adjustment to make for location for different areas where the comparables are located or they may need to be pointed in the direction of some more suitable comparables. However, it seems that you've already tried to get a reconsideration on the appraisal and that isn't working. So, the only options left are these: 1) you agree to make up the difference in cash. 2) the seller agrees to sell the house at the appraisal price 3) you meet somewhere in the middle with you making up part of the difference in cash and the seller making up the other part of the difference by lowering the price. 4) apply for your mortgage with a different lender which will get you a new appraisal (if this was not FHA financing, in which case this house would be stuck with this appraisal for 6 months). If one of those four other options is not going to be agreed to, you really have no other options left. You may as well just have your attorney give notice of your inability to get financing, get your earnest money back and move on. I'm surprised the seller is not willing to try to work something out with you versus rolling the dice with another deal and another appraisal. The easiest thing to try is to apply with another lender. Yes, you will be out of pocket for the second application/appraisal fee if this doesn't work but it sounds like you really want this house. If none of the above works and you end up looking for another house, just remember there are plenty of fish in the sea these days. In 21 years of working in the Oak Park market, I have never failed to find a client another house that they were happy with when the first deal fell through. Best of luck to you in whatever you decide.
1 vote Thank Flag Link Fri Apr 22, 2011
I like Eric and Alan's answers. I think at a minimum if you questioning this agent now and feeling this uncomfortable and yet you clearly want to make this deal work somehow a call and/meeting with the designated broker is in order. They should be able to step in and help you here either themselves by looking into the details of the situation and helping problem solve or getting you your own representation within their office so you are reprented by your own agent. Either way the broker will be aware of the issue and will want to resolve the issue for you as it is in the best interest of the office both in upholding duties of his/her agent as a dual agent and for the office to get the transaction closed.
1 vote Thank Flag Link Fri Apr 22, 2011
if you have a very strong and good appraiser adding different comps makes no difference to the value. it basically is a waste of time and money. If you have an appraiser that is no good it is easy to push that appraiser all over the board.
Web Reference: http://uneappraisals.com
0 votes Thank Flag Link Fri Apr 22, 2011
I think your chances of drawing a different appraiser with a new loan application are very good. The appraisers all have the same pool of comparables sales to draw from. However an appraisal is an opinion of value and a different appraiser might use one or two different comps and also their adjustments could be different. I don't know what the chances are that the valuation would differ enough to make a difference for you. On the other issue of whether or not to contact the broker, I think you could benefit by having a chance to vent a bit. The main benefit of this will be to the broker and agent. The broker would have a chance to hear what is going on and to help the agent with some education about how to deal with a situation like this. Going into the fourth year of a very challenging market, some agents might be having a hard time not seeing the dollar signs and seeing the needs of the client instead. The broker would have a chance to point out ways in which the agent could have been more helpful to you and to remind the agent that if they give the best possible service to each and every client, the income will follow in increased sales and referrals. I'd recommend that you have the discussion. It is true what Anthony commented that laying out all of your options does not present a conflict in a dual agency situation.
Web Reference: http://www.OakParkHome.com
0 votes Thank Flag Link Fri Apr 22, 2011
It can be tricky in a dual agency situation. Hindsight being 20/20, you probably should not have agreed to the dual agency, especially considering you are a first time buyer and want "hand holding." But you didn't know this agent was going to be a crappy dual agent.

Marion and the other agents give good advice below, and your response to these indicates to me that your agent didn't present you with these options, which he should have, because an agent telling his client the options does not violate the dual agency agreement. Additionally, if you feel pressured, then your agent isn't really being neutral. I never pressure my clients at all. I give them my advice, but I always remind them that it's their money and theirs is the final decision.

I do have advice for you, YES! talk to the agent's broker, and even ask to be reassigned to another agent. Your original agent isn't supposed to disclose any potentially confidential info to his seller, even if you stop working with him (although it sounds like he may, since he is loyal to the seller).

Regarding being out of time: you can always extend the contract. Talk to your attorney. Your attorney will basically demand an extension and threaten canceling the contract, which you will need to do.
0 votes Thank Flag Link Fri Apr 22, 2011
You are receiving good information from the listing agent as to the list price of the house. The appraiser as to the appraised value of the house. The loan officer as to what you can afford. You are the only one that really really understands your financial wherewithal and what you can do. If you really want this house then a good loan officer will give you options to make the deal work.

Now it is up to you to decide what you want to do. Maybe the loan terms may not be exactly what you want up front however, with a little time maybe you could turn that around to be more in favor of what you want.
Web Reference: http://uneappraisals.com
0 votes Thank Flag Link Fri Apr 22, 2011
Thanks Marion. You have clearly listed out my options for me.

I'm interested in knowing more about going to another lender. While I think my lender out of all agents involved in this transaction deserves the business, others have also asked me to consider this. However, my loan contingency period is just about up, so i don't think I have the time to go through that process again. I also don't really know how going with another lender increases my odds of getting a higher appraisal than my current one. What if the other lender also contracts with the same agency and I get the same appraiser? Also, the bank has already gone back for 3 re-considerations which has been denied. Finally, I looked up this appraiser. She lives in the area, so I think she is knowledgeable.

I'm also interested to know if you see any value to discussing my feedback on this agent with the broker now or after the transaction. I don't feel this agents work or lack of reflects well on the agency. Being neutral in dual agency is fair. Not helping to education first time home buyers, throwing out ridiculous ideas like 2nd mortgage, and pressure tactics like another offer out there is not professional.
0 votes Thank Flag Link Fri Apr 22, 2011
Once again I am confused.
0 votes Thank Flag Link Fri Apr 22, 2011
Or if you need 20% for a downpayment that means you would need $4,000 more to close at 5% less on a $100,000 sale.

Not sure what your loan officer is doing. This 5% difference may not be a broker issue or sales price issue. It could be a loan officer issue on what type of program will best fund your deal. Maybe you are calling the wrong agent. Call your loan agent and see what he can do if this deal is real and is still alive and you really want this house.
Web Reference: http://uneappraisals.com
0 votes Thank Flag Link Fri Apr 22, 2011
John,

3% was only the earnest money deposit to make an offer. My offer was based on putting a total of 20% down. The 3% would be part of the 20% down...but at the moment is just to show the seller that I'm serious about my offer.

Yes, I understand that the listing agent must be neutral. However I don't consider asking the buyer to take out a 2nd loan at a very high interest rate, telling me there is another offer so I better at quick, or telling me another agent said she should have listed it it at an even higher price is being neutral.
0 votes Thank Flag Link Fri Apr 22, 2011
If you made an offer for $100,000 and gave 3% because you thought that would be your down payment that would be $3,000. If the appraised value is 5% less at $95,000 that would be a down payment of $2,850. That difference is $150. That is just for the downpayment that has nothing to do with closing costs.

If you are having trouble with that difference then are you sure you can afford to buy a house? Did your loan officer give you a good faith estimate?

In your note you reference the agent as your agent. It appears to me the agent is the listing agent and you are asking the listing agent to act as a dual agent. That can put that listing agent in a precarious situation. Since he does have a fiduciary responsibility to the seller and now to the buyer. That can be difficult to negotiate without getting into trouble. Are you asking too much of this listing agent?
Web Reference: http://uneappraisals.com
0 votes Thank Flag Link Fri Apr 22, 2011
I guess first of all, this is not unusual given the market conditions. Many distressed property sales are dragging the comparables down, and since appraisers need comparables, the value of properties in reasonably good condition has been deteriorating because of an absence of market data and declining median price. It is not unusual for almost every deal near the top of the price point for an area to have appraisal challenges.

In the situation, it sound like the seller really doesn't have many options. If they don't sell it to you, the appraisal doesn't go away. Those are their cards. If the appraisal was an FHA appraisal, it may stand for as many as 6 months whether you're the buyer or not.

At any rate. In this situation, you need an avocate to sort through the crud. Your agent doesn't seem to be gracefully navigating the dual agency situation, so I would encourage you to lean on your attorney for help. If you don't have an attorney, and you're in a dual agency situation, GET ONE.

The gap doesn't seem like it's very big (5%). If the seller can't meet the deal out of an overplayed hand, you can't help that. The agent should be able to point out to the seller the issue of the appraisal being the problem, not the buyer. Theoretically the seller has an issue with the appraisal not you. By asking you to do weird, complicated things (like a second, which I'm almost certain the underwriter wouldn't allow). If the seller will be short at the new price, there are even more complications.

Run this through an attorney. If the agent isn't living up to your expectations or their responsibilities, get a new one for the next round.

Wayne Beals
Keller Williams
312 77 BEALS
312 772-3257
wbeals@kw.com
http://www.waynebeals.com
Web Reference: http://www.waynebeals.com
0 votes Thank Flag Link Fri Apr 22, 2011
Tell your agent to negotiate at appraised value or NO DEAL ... due to unable to meet Financing requirement (hopefully your agent competent enough to put it in there in the first place). And stick to your decision.
0 votes Thank Flag Link Fri Apr 22, 2011
Sandy,

If the dual agent tries to negotiate and seller does not budge, I would be perfectly understanding and feel good that my agent tried. Best she could do is to advise me that the seller would not budge and it probably wouldn't be in my best interest to get a 2nd loan at an outrageous interest rate to fund the difference...and that she would help me look for another place.

I am very well qualified and it will just be a matter of time before I do buy a place. I would like to work with an agent that will do their best to negotiate a fair deal for me and advise me when something is not in my best interest. It doesn't seem fair to me that this agent gets full commission for just writing up and offer and really doing little else but pressure me. This agent hasn't even called me in almost a week and we're almost up on the deadline.
0 votes Thank Flag Link Fri Apr 22, 2011
John,

Sorry for the confusion. What I meant to say was that I would have trouble coming up with the cash difference between the appraisal price and my offer price. That amount had the appraisal not come up...was mostly financed with the original bank loan...so i did not have to have that cash on hand. Now that the bank will only loan up to 80% of the appraisal value, I need to come up with the cash difference to close the deal.

Also, no one has said that they wouldn't refund my earnest money deposit. It's just that this is my first time and I'm just learning as I go along here. Since my agent is neutral and I'm exactly trusting given the pressure tactics I outlined, I don't feel comfortable asking this question to the listing agent at this time. I just want to know what my options are.

Also...thanks to all of the experts that have been so kind to offer their advice. I just wish my own agent could be as candid. This is all I'm asking for and am not getting from my agent.
0 votes Thank Flag Link Fri Apr 22, 2011
Not really sure what you are asking. Since you said you raised your offer and it was accepted the following day. Then you have said that 5% really is not alot of difference yet your offer was higher than the appraised value. Yet you are saying you would have trouble paying the appraised value that appears to be lower than your offer. Then why did you make a higher offer than what you can afford!

Sounds to me like you may need the assistance of an attorney if you put 3% down and the seller does not refund earnest money. Or you could always have an experienced broker help you make offers as a buyer's agent rather than winging it with the obstacles of a dual agency.

I really can not tell you nor advise you what to do since I am not an attorney. And I am not sure what you really want to do.
Web Reference: http://uneappraisals.com
0 votes Thank Flag Link Fri Apr 22, 2011
I'm so sorry that you are having a bad experience.

Be sure you understand your contract and contingencies. We can not give you legal or representation advice as that is outside of our scope of authority.

The advice to have the agent's Broker step in is a good idea. Dual agency is difficult because the listing agent has a signed Listing contract with the seller which states they have a duty to represent that seller, basically get them the most money. Now dual agency creates a neutral agent who in the best world only passes a paper between both seller and buyer without advice and let them decide.

There very well may be another offer. I tell my buyers to try and not focus on what "might be" but what they actually know and what they want. If you want this house you have some options. However, those options are going to be limited by what you can afford and qualify for. By focusing on that you can make a decision to walk or attempt to move forward.

All the Best to you.
Web Reference: http://www.terrivellios.com
0 votes Thank Flag Link Fri Apr 22, 2011
If the home doesn't appraise and you are within the time-frame to cancel per the contract you would be entitled to your earnest money. Everything you outlined above is exactly why I caution people against dual-agency. Even the broker will have to be neutral in dealing with this situation and it's usually the buyer who looses out here. There are so many deals and properties available that you may want to develop a good rapport with a buyers agent and start shopping again. You should really like what you are buying, feel good you are getting a good deal and not end up with a bad case of buyers remorse after you sign on the dotted line.

If you instruct the dual-agent to negotiate for the appraised price and the seller isn't going to budge then what do you think you should do?

Good luck,

Sandy
0 votes Thank Flag Link Fri Apr 22, 2011
John,

Percentage-wise 5% isn't a lot between appraisal price and offer price, but in our case it is significant because we used all of our resources to make our best offer that was over asking. The terms under which we would have to borrow the difference would not be be a sound financial decision on our part.

I also think there is more that the seller, agent, and buyer can collectively do to close the deal vs. making the buyer get the short end of the stick.

If nothing else, this has been a great learning experience for me as a first time homebuyer...
0 votes Thank Flag Link Fri Apr 22, 2011
John,

I had put down 3% earnest deposit. I hope I get that back if I walk.
0 votes Thank Flag Link Fri Apr 22, 2011
Because this is Dual Agency the agent is required by law stay neutral and act as a mediator. Depending on the 'pressure tactics' and 'bad advice' they may be violation of agency law and could open themselves up to a lawsuit.

Here are some considerations:

1) Have an attorney. I suggest all my clients have an attorney even if there is no dual agency, but especially in dual agency situations. They can give you advice and guidance you need. Fees vary by area, ours typically run around $400 for the Buyer in a real estate transaction.

2) Ask to be released from the dual agency and obtain your own representation. The listing agent could get a referral fee from your new agent and you can get the advice and guidance you need. The origional agent is still obligated by law not to disclose confidential information to the seller about you.

3) Know that the bank will not loan on a home for more than the appraised value. You do should not have any obligation to cover the difference IF your contract doesn't state so.

4) Depending on the loan you have applied for, that appraisal may stay with the property even if this property comes back on the market. This may be the reason multiple appraisals are denied. You have the upper hand, not the seller.

All the best,

ERIC NURMI REALTOR(S)
RE/MAX Realty Associates
http://www.EricNurmi.com
0 votes Thank Flag Link Fri Apr 22, 2011
The deal is not done until title passes from the seller to buyer. If you really like this house, and it does not close your offer could be reconsidered.

5% difference is not much at all between contract price and appraised value. Most likely you will need more money to close. Why would you want to pay more appraisal fees for this house?

Did you put down any money with your offer?

Call up your broker and tell him you want to keep looking. You may find a house you like better. This is a buyer's market with plenty of supply. That is to your advantge!
Web Reference: http://uneappraisals.com
0 votes Thank Flag Link Fri Apr 22, 2011
Hi,
I think you should walk away from this deal and find your self an agent that will work for you at no cost to you.
I will be more happy to talk with you more, please contact me if you like.

Steve Blackerby
Coldwell Banker.
630-664-2386
0 votes Thank Flag Link Fri Apr 22, 2011
Thanks Tim. It is just a regular sale. BTW, this is in the San Francisco area. I have posted in the wrong location.
0 votes Thank Flag Link Fri Apr 22, 2011
Is this a short sale or bank owned property? Those are the only properties I have seen that get multiple offers of full price and over. Answer that question if you would first.
0 votes Thank Flag Link Fri Apr 22, 2011
This is my opinion and my opinion only, but I do not like dual agency. I believe it is not in the best interest of either client and the buyer usually ends up at the worst end of the stick. It is legal in Illinois, but is not legal in many states for that reason.

There are many brokers who are willing to help a buyer and represent you alone and your best interests - no one elses. As a first-time buyer, you need help. The listing agent's first allegiance is always going to be to the seller. And even if they try to become neutral, it is very difficult.

And as far as the appraisal, if the seller is not willing to listen to the appraisal and lower the price, then walk away. They won't be able to sell to anyone. Then get yourself a buyer's agent who will work with you, protect your interests and help you every step of the way. There are too many brokers and too many properties out there.
0 votes Thank Flag Link Fri Apr 22, 2011
the perfect example, in my opinion, of why "dual agency" is a bad idea.

Remind the agent that as a "dual agent" he should be 'neutral', not pressuring you. If the appraisal came in 5% lower than asking price, I would insist that the seller either reduce the purchase price, or reduce the price to a number that you and your lender will be happy with.

If your agent continues to pressure you and/or work against you, contact his managing broker, and let them know that your agent is not working in your best interests, and you'd like the broker to put an agent in place to work on your side.
0 votes Thank Flag Link Fri Apr 22, 2011
Alan May, Real Estate Pro in Evanston, IL
MVP'08
Contact
Here is some of the bad advice and pressure tactics that I feel I am getting:

- Take out a 2nd Loan (outrageous interest rate)
- Ditch your loan agent for another (no guarantee of higher appraisal and doesn't seem right)
- Ask seller to carry the loan for difference at lower interest rate, but within a couple of years (no advice on what is reasonable to ask for)

Agent just send me and my agent emails like "Any update on appraisal?". Am I wrong in thinking that this agent is not acting in my best interest or even in the best interest of the buyer to try and negotiate a clean close that can include all parties chipping into close the deal?

Am I wrong it thinking that it is unhelpful to tell the seller:

- You can do whatever you want like ask for lower price, but there is a backup offer with larger downpayment
- Another agent I spoke too thinks that this house should have been listed for a lot more therefore you should be okay with paying even more because this is such a good deal

Thanks in advance...we are coming down to the wire now.
0 votes Thank Flag Link Fri Apr 22, 2011
Here is some of the bad advice and pressure tactics that I feel I am getting:

- Take out a 2nd Loan (outrageous interest rate)
- Ditch your loan agent for another (no guarantee of higher appraisal and doesn't seem right)
- Ask seller to carry the loan for difference at lower interest rate, but within a couple of years (no advice on what is reasonable to ask for)

Agent just send me and my agent emails like "Any update on appraisal?". Am I wrong in thinking that this agent is not acting in my best interest or even in the best interest of the buyer to try and negotiate a clean close that can include all parties chipping into close the deal?

Am I wrong it thinking that it is unhelpful to tell the seller:

- You can do whatever you want like ask for lower price, but there is a backup offer with larger downpayment
- Another agent I spoke too thinks that this house should have been listed for a lot more therefore you should be okay with paying even more because this is such a good deal

Thanks in advance...we are coming down to the wire now.
0 votes Thank Flag Link Fri Apr 22, 2011
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