Realtor Whistle-Blower . . . or Tattle Tale?

Pushing the Boundaries -- Literally

What do you do when you see another Realtor break the rules (or appear to)?

And if you do something, does that make you a whistle blower -- or a tattle tale?

Thankfully, the issue doesn't come up that often. But it does come up.

Here are the three most common situations where rule-breaking arises:

One. A home sells with virtually no market exposure, at a giveaway price -- and here's the kicker -- the Buyer's agent is the same as the home owner's (called "single agent dual agency" -- see, "That Sure Went Fast! (Too Fast??)".

Two. The Realtor "borrows" the MLS area number from an adjoining, more upscale part of town.

So, instead of entering the code that includes Powderhorn Park, the listing agent codes the listing for Kingfield, on the other (west) side of 35W.

Three. The listing agent flagrantly overstates a home's finished square feet (funny, the opposite never seems to happen).

"Tattling" or "Keeping it Honest?"

So, to repeat, what do you do?

My answer depends on a couple factors: do I have a client interested in -- or competing with -- the home in question?

Is the agent with Edina Realty?

If it is, I know who to call (their office manager -- or mine). And it matters more, because bad behavior by another Edina agent reflects on me personally.

Could there be a benign explanation?

For example, maybe the agent who was on both sides of the "fire sale" had express permission from their client to sell it, fast, at the best price they could get (but usually you do that loudly, not quietly -- otherwise how do you know it's the best price??).

And last but not least: how busy am I at the moment?

In general, I don't view it as my role to police other Realtors' behavior or business practices.

However, when such behavior harms my or my clients' interests, I see it as my obligation to do something.

As Martha Stewart would put it, "that a good thing."

P.S.: I suppose that the contrary argument would be that sleazy Realtors make ethical ones look good by comparison -- and therefore actually help the latter.

Lying Realtors

Reason Not to Lie #37

Lying is hard, telling the truth is easy. By definition, every good Realtor juggles: multiple clients, dozens of showings, lots of parallel deals at varying stages. It's hard enough keeping all the details straight and presenting them coherently to your client(s); not tripping yourself up in a web of lies would seem to increase the "difficulty factor" exponentially.

--Ross Kaplan, "Freakonomics Rebuttal"; City Lakes Real Estate blog (3/23/08)

Faithful readers of this blog might be surprised to hear me say that, as far as I can tell, Realtors seldom lie -- and good Realtors never do.

There are multiple, reinforcing reasons for that: it's unethical, it's bad business, it's hard to do (see above), it's easily found out, etc., etc.

On that last score -- it's easily found out -- I heard a good anecdote recently about a Realtor who felt the need to "embellish" the turnout at a Tuesday broker open. If you didn't know, at least in the Twin Cities, the custom is for Realtors to tour the new inventory each Tuesday from 11 a.m. to 1 p.m.

Instead of simply reporting to his clients that, for whatever reason, the turnout was poor, the Realtor "borrowed" a slug of colleagues' business cards to leave out on the client's dining room table.

What happened next?

The client wanted to hear the broker open feedback directly from "the horses' mouths," and decided to call the agents directly.

When not one of them turned out to have actually attended the broker open . . . the client did what any client would -- and should -- do: fired the Realtor.

What Offers Did the Banks See?

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.''