Realtors Might Not Have Your Best Interests At Heart

by Millionaire Mommy Next Door on July 9, 2009

in Economy,Real Estate

I made contingency-free, cash offers on three different houses this week. I used recent sold comps (comparables) and price-to-rent ratios to calculate a reasonable price.

All three listing Realtors refused to present my offer to their sellers “because my bid wasn’t close enough to their asking price”.

Even though Realtors are legally required to present all offers, sometimes they don’t.  If I was in the mood for it, I’d get stinky and insist upon it. But obviously, I know these Realtors won’t present my offer in a positive way to their clients. I’d be wasting my time. My contingency-free cash offer might be good for their seller, but the lower price would mean a lower commission to the Realtor…

The Realtors in our local market appear to be in denial about the state of our current economy and still have their heads in the sky about house valuation. Houses are getting contracts, then failing to close because they fall short when it comes time for loan appraisal.

During my housing search, I’d ask the listing Realtor how they arrived at their price. What comps (comparable sales) did they use? Most of the Realtors told me they used “active comps” (houses currently for sale) rather than “sold comps” to set their price!

…so what that those overpriced active comps have been languishing on the market month after month…

Their rational went something like this:

“It isn’t fair that appraisers include foreclosures and short-sales in the sold comps. They haven’t walked through those houses to compare interior finishes and condition with the house we are selling.”

Helloooo? Appraisers have NEVER walked through sold house comps to compare finishes and condition. Why should it be different now? Furthermore, appraisers can’t use active comps in their appraisal report.

Here are some of the other ridiculous things we were told:

“It’s not a house, it’s your home. Your daughter needs a home.”

Wherever you share love and laughter is home. Calling a house a “home” is a manipulation of your emotions for their profit. As I’ve said before, whether you pay rent to your landlord or pay interest to your mortgage company, you are buying shelter.

“You can’t paint your walls when you rent.”

Why not? We rent, we paint! If your landlord doesn’t care for the accent colors you’ve chosen, simply paint those walls back to white when you move out. Or use white walls as a backdrop for colorful furnishings.

“Real estate is local. Our local market won’t continue to suffer like the national market is because….. (fill in the blank with an odd assortment of rationales)”

Yes, local markets do vary. But lending is global and loans are harder to get. As long as credit and lending standards are tight and unemployment climbs, house prices will continue to drop everywhere.

“Mortgage rates are low. Hurry! Buy now before interest rates goes up!”

Think about this one: What will happen if/when mortgage interest rates go up? I’ll tell you: Buyers will qualify for smaller loans. This will dampen house prices even further. We can pay cash for our next house so the higher the mortgage rate is, the lower the price, so all the better for us.

“Rents could go up, but your mortgage payment will always stay the same.”

My response to this one could easily fill a whole ‘nother post, but let me just say this for now: Rents are limited by the amount of money people earn — rather than how much they can borrow. Besides, mortgage expenses do increase over time: think maintenance and repairs, property taxes, insurance, HOA fees.

We are renewing our house lease. We will compare our cost of renting versus buying again next year.  If our local Realtors are still playing these silly games, we’ll focus our search to properties listed for-sale-by-owner. Undoubtedly, house prices will have dropped even further by then, making it easier to win a favorable bid. In the meantime, we are happy to be home.

Read more housing crisis articles:

When Should I Buy a Home? Have We Reached Bottom Yet? What Is The Right Price? written by me
Why Downsizing To A Smaller Home Can Make You Happier written by me
Can’t Sell Your Home In Today’s Market? Here Are Some Suggestions written by me
10 Things Your Real Estate Broker Won’t Say by SmartMoney
Housing Crash News from Patrick.net

{ 68 comments… read them below or add one }

Erica Douglass July 10, 2009 at 12:03 am

More and more I read your posts and become convinced we would be great friends if we happened to live near each other! :) Love your attitude when it comes to this.

-Erica

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Jan July 10, 2009 at 5:28 am

I’m not familiar with US real estate, but isn’t it possible to find the owners and present them your offer if the agents won’t do it? You never know, some of them may be desperate enought to accept it.

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Carla July 10, 2009 at 7:17 am

Did you use a buyer’s agent or did you use the listing agent that was selling the house? The buyer’s agent will work in YOUR best interest and represent you. It doesn’t cost you anything to use a buyer’s agent either. Also, they would have made a stink. :)

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Neil July 10, 2009 at 7:34 am

Hi

Realtors (AKA Estate Agents here in England) a self-interested lot – surely not :)

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Pete July 10, 2009 at 8:49 am

This may be a silly question but how do you make contingency-free offers on three different houses? What if all three accept? Or you made the second offer when the first agent refused?

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dogatemyfinances July 10, 2009 at 9:04 am

I really can’t stand realtors. They’re obsolete, dumb, useless, and talk to you like you are 5.

If you’re really feeling ambitious, around here you can pull the tax records to find the owner of the house. Usually, all it takes is a quick Google search to locate them.

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Millionaire Mommy Next Door July 10, 2009 at 9:14 am

Erica: Thanks! I agree :)

Jan: Yes, I could contact the owners directly, but their Realtor would paint such a poor picture of my offer that it would be a waste of my time. However, I will keep my eye on these properties and if they remain on the market for a few more months, I might contact the sellers. By then the sellers may feel less confident with their Realtor. They could let their listing contract expire, then we could make the deal without having to pay Realtor commissions.

Carla: I had a buyer’s agent present my offers to the listing agents. She included recent sales comps with our offer that supported our price. Yes, she could make a stink, but what is the point when the listing agent is the one who would present the offer to the seller?

She did share some “insider” news about how the largest real estate agency in our local market operates. My husband calls them The Mafia. Our buyer’s agent liked that one :)

Pete: I made each offer at separate times, after the previous one was refused.

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Millionaire Mommy Next Door July 10, 2009 at 9:35 am

dogatemyfinances: I pull the tax records of every house I’m interested in — it’s easily done online in our county. This way, I can find out how much the seller bought the house for and when. I use this information when formulating my offer. So you’re correct, it’s no problem locating the seller.

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julie July 10, 2009 at 10:28 am

hi,
I would present the offer to the sellers by myself, explaning the offer to them and see what they say, and then report the realtor to the realtor board, ethics committe, and your state licence department. You can get an attorney to write up the papers possibly for less than the commission fees. I am sick of people refusing to do their jobs just because they make less money, what if your doctor only would do surgery if it was the highest paying and refused to to all the little preventative surgeries.

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Patrick July 10, 2009 at 12:09 pm

Awesome post. It’s great to see such cogent arguments presented by someone who knows what they are talking about.

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moogs July 10, 2009 at 1:09 pm

Great and timely post. However, I would not hold out much hope for improved negotiations with FSBOs.

We are right in the middle of a contract now with a FSBO who refuses to see the reality of the housing market where we live. We are not trying at all to “lowball” them — we made several very fair offers before they were willing to come down just a little off their asking price, which in my opinion (backed up by comps and market data) was way too high. Additionally, they have made it clear that this is a firm offer for them, despite any problems we find in the inspection. They also seem to hint that if it appraises low, they will not be budging.

I can understand this sort of posturing in a seller’s market like we had a few years back. It is sad and frustrating to deal with someone who refuses to see the realities of today. The bottom like is that, when you are purchasing a home through a bank, which we must, nobody’s opinion of what the house is worth counts except the appraiser’s and therefore the bank’s.

I’ve come to learn that the logic that FSBOs will sell their house for less because they don’t have to pay a realtor’s commission is flawed… They fully expect to get that 6% themselves!

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AnnMarie July 10, 2009 at 3:25 pm

It might worth making a bit of a stink. Some of us don’t care what our Realtor says. We’re knowledgeable sellers and will entertain any offer we get. I sure hope our agent doesn’t not show us some of them! (Maybe I should go talk to her.) Say, want to buy a house in Oshkosh, WI? We’d love a no-contingency offer, although it does still need to be within our selling range–but that’s basically above what we paid for it 8 years ago (and we’ve put a LOT of work into it. As in over $30000 cash and lots of labor and we hope to maybe get $10,000 more than we paid 8 years ago).

Anyway, I’d consider pushing harder to get the offers put in front of the people.

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Jerry July 10, 2009 at 4:10 pm

Our overseas landlords are different that what we were used to in the States – just the suggestion that we want to paint the walls has lead to a huge upheaval. People are just of a different mindset in SE Europe, I guess. Fortunately, we just pointed out that we can always paint the walls white again (like you mentioned), and there’s no need for some huge insurance rider over paint on a wall!
Jerry

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Sandy E. July 12, 2009 at 1:27 pm

I don’t trust realtors, and will share some things, but first I was surprised that you made contingency-free offers. I realize you don’t need a contingency for financing or for the sale of another property, but why wouldn’t you have a contingency for a home inspection? If you backed out of a contract without that, you could lose your deposit. And it’s important that the home be thoroughly inspected by qualified professionals for your protection. Maybe your husband is qualified, for electrical, heating and plumbing, roof, etc., but what if there’s a mold problem and you wanted to back out? Also, depending on what’s discovered, it gives you leverage to further negotiate the sales price, or have the sellers fix the problems at their expense.

Realtors should always use SOLD comps before presenting an offer, and while they are right about today’s market (i.e. foreclosures, short sales), that unfortunately is the reality now and what home sellers need to realize. If it’s a problem for them, then they should take their house off the market and wait until prices go back up later. (this is a good example where before we agree to list with an agent that we ask them, will you be using active comps or sold comps when determining what a fair offer might be). I wish that home sellers would go ahead and pay the approx. $250 to get their homes professionally appraised before they put it on the market. This would eliminate a lot of confusion.

Here’s a tip: Call the other realtor anonymously – always. In other words, get their number off the For Sale sign that’s in front of the house, and just say that you are driving by and saw the sign and was wondering what the sales price was and then ask them if they know if the sellers are flexible about their asking price. Also ask if they have received any offers on the house yet. One time I called and the other realtor told me “oh they are very motivated to sell and are willing to go $20,000 off their asking price.” You will be surprised what info you can glean. (The other realtor knows that too, but later will act like they renegotiated the price down for you when they didn’t, or they won’t tell you to wait and see if your offer is higher, then more commission for them).

Most realtors are interested only in what their % is, and if it’s lower on some properties than others, they will say discouraging things about the those houses in an effort to steer you toward the houses where their commission fees would be higher, and encouraging things if the commissions would be higher. If you see a For Sale By Owner house while en route and ask to see it as well, again, they will find so many “faults” with that house, to steer you away from it, while they show you the house, which they are obligated to do. Usually they will avoid those houses altogether by using different routes to show you properties on their list. A lot of them will show you properties their companies have listed for sale because then they won’t have to split the commission with another realtor, and again say glowing things about those listings.

One of my most frustrating experiences as a buyer was when I found my dream house, and the realtor was reluctant to present the offer because her commission was less than other houses, but she did. Two days passed and my realtor said she had not heard from the sellers. I drove by my dream house, saw the # on the For Sale sign, called it and told the other realtor that I was the lady who presented them the offer. He said that he had been calling the realtor for the past 3 days but each time he called, the receptionist said “I’m sorry, she’s in a meeting.” My realtor would not take his call! He said the owners got frustrated, and the day before I called, they decided to rent the house to a friend. What a horrible yet true example of how realtors can hinder you and not help you.

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Millionaire Mommy Next Door July 12, 2009 at 2:15 pm

Sandy E: Thanks for your input. By “contingency-free”, I was referring to financing approval and sale of another property. I did include the home inspection requirement with our offer.

Today, I looked up the seller’s name (for the house we are most interested in) from our county’s online Public Records. I left the sellers a voicemail asking them to call me about the sale of their home. I plan to tell them we made an offer and their Realtor refused to present it. I hate going around the Realtors and causing a stir, but hey, they are getting in the way of a possible sales transaction. I’ll let you know what happens!

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Sandy E. July 12, 2009 at 3:06 pm

That’s great. My only worry is what if the seller turns your name and phone number over to their realtor to handle? I hope I’m wrong and they call you directly. Let me know. I hope you get the house that you want to in spite of the realtors. Given what we know, we have to look after our best interests. (I’m seriously entertaining the idea of selling my house in CA and moving to HI to be near friends and family, and would be in a position to make a no-contingency offer like you are doing. While my house is show-ready, I haven’t started the ball rolling yet just because the thought of calling and dealing with a realtor on either end just makes me cringe! I wish us both luck!

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jc July 13, 2009 at 1:00 am

cant wait untill real estate agents are obsolete! i hate them . very uneducated people ! self centered ! lets face it , anyone with a third grade education can get a real estate license!

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azrob July 13, 2009 at 1:28 am

I have been a realtor for over 10 years, mostly for my own investments. (I am a university professor, first and foremost)

Your arguments about the housing market are straight on.
In addition, rents are dropping, so unless a home is a spectacular buy vis a vis renting, why would anybody not wait a bit longer, and let prices drop some more?

best of luck!

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Dan Farkas July 13, 2009 at 6:17 am

I love how people think it’s always about Realtors making less money if an offer is lower than list price. It is quite possible your offer was so low that the listing agent already knows that there is no possible way that the seller can take your offer because they paid much more for it when they bought it and secured their purchase with a Loan. In this case the seller who can’t come up with the difference in cash will have to wait until they find someone who will pay them what they owe. Happens all the time. Therefore using comps to back up your offer is a waste of time because the listing agent is doing what she is paid to do. Protect her clients best interests. If you think that any realtor hasn’t presented an offer on a home, turn them into their local board.

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Peter J. Pike July 13, 2009 at 8:24 am

As someone who is involved in the real estate market every day (full disclosure, I am in house counsel to a title/escrow company and I teach real estate classes) I am both heartened and saddened by this blog and the comments.

As far as “house vs home” goes, I have to agree with the realtor, in calling it a home, and I have to disagree with the Real Estate industry in calling it an investment. It is your home, and it is not an investment – at best, a house is a piggybank. You don’t break it open, take out the money and they expect to be able to put that money back in once it is broken. You are supposed to leave the money in the bank (or in the house) until you get rid of it (break the piggy bank or sell the house). If people looked at buying in terms of “do I like the house/neighborhood, etc.?, can I afford it? will I have to sell (not need or want, but have) sooner than 5 – 10 years? These are the reasons to buy a house and make it a home. Not because you believe that you are going to make money.

As far as appraisal vs broker’s opinions on the value of a house, my belief is that the real estate agent can (should and must) give you the best idea of what your house is worth. Appraisers can only look at sold comparables. Realtors can look at everything (and it is everything, that gives you an idea of what a realistic price should be). When someone asks me what do I think a place is worth, I ask them to “check their gut”. Does the price pass the “that makes sense” test, or is it “are you nuts?”. I can’t remember the last time I did not answer “are you nuts” (at least in general to the prices being asked, even now I believe that prices are high).

Finally, I am saddened by the poor quality of real estate professionals that everyone seems to have run into. I know of plenty of agents who work hard, give their customers good advice and help people through a very difficult process (even if you are buying a house “all cash”, the myriad of proceedures that you should go through are mind boggling). I admit, that I also know of more than a few realtors who don’t have their customers’ best interests at heart, but there are always a few bad apples that give a bad name to everyone in an industry (even lawyers!)

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John Macedo July 13, 2009 at 8:27 am

Hi…

First, Great site!

Second, I’m curious to know how many other people feel that realtors are partly (if not by a lot) for what has occurred to help get us into this mess, as they are the ones who really make the deal go down including knowing many of the appraisers who would then appraiser higher upon request?

Add to that, many people I’ve met don’t realize that the standard 6% can be negotiated (I’m in NJ) and that when you agree to pay 6% (of the total sale price of the home) it’s no where near 6% at all? For example… If you had a home that sold for $400k and you owed $200k on your mortgage, then your profit would seem to be $200k, however, your realtor getting their 6% is on the total price therefore, it’s actually $24k to them, FROM YOUR PROFITS! That comes out to 12% commission, not 6% as some would think.

And one more point to add to that, what’s bad about this is, if they negotiate to make the sale and then come back to you, the seller, with, “This person won’t move on $400k, they will do $365k right now and personally, I think you should take it…” You’ve just lost $35k of YOUR money and they only lost a mere $2,100!!!”

And if you were unfortunate to have little or no equity in your home, then what? If your profit margin was a mere $40k on a $400k home, what are you walking away with then?

Point is, there should be a flat rate system, say $2,000 per 1,000/sq. + whatever acres or something? Because what is the difference, truly, between selling a $250,000 , $1,000,000 or $5,000,000 home? Simply the profit that goes to the brokerage and the dishonesty that comes with greed all around it.

Thanks again for this site… looking forward in reading through it!

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John Macedo July 13, 2009 at 8:34 am

HI again…

I tried telling friends to get out of the housing market back in late 2004 / early 2005 and to rent instead. They laughed and said, “You are throwing your money away by renting!” I said, “If you lose your job and can’t find another, is that house of yours (with a mortgage like most) an asset or a debt?” They just look dumbfounded at that.

PS – I did my due diligence and sold my house at the peak of the housing market in late 2005, netting the largest amount for a condo in the place my ex and I lived while we were married. I say ex because she was so mad at the 13 room house I (not we) walked away from, a day before closing, which was listed for $420k. That house has since dropped to $305 in value, the money I invested was half presented in the divorce for over $85k and well… she never said thank you, nor admitted that I was right.

PPS – God blessed me with a steal of a deal, currently renting a 5 bedroom, 3 bath, 2 car garage, with a basement, on an acre in the nicest part of town, furnished, with a Steinway and more… and only pay for gas and electric… the security, water, sewer and landscaping is picked up by the landlord… for $1,200/month! :) Add to that, any repairs or enhancements I’ve made (new carpet, wall fixtures, carpet) gets picked up by him.

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3rd Generation July 13, 2009 at 11:22 am

I would demand in writing the offers be presented in a timely manner, no matter how sloppily and unprofessionally your used-house peddler (Realtor) would present them. If at that point they refused, I would have documented every conversation, e-mail, letter, etc. I would ask them for their Errors and Omissions insurance carriers name so we could take my lawsuit straight to summary judgement. Sue the Broke, the Major National Company (if one is involved in any way) and the used-house peddler personally. Use the judgement money on a larger down payment on the next house you make an offer on.

Maybe this would get their attention? Maybe not. After all, the NAR is the NAR…

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nickel July 13, 2009 at 11:55 am

In general, I’ve found that Realtors are most interested in making the sale, even if the price is lower than expected. Consider this (assuming 3% seller’s agent commission):

$250k sale = $7500 commission
$200k sale = $6000 commission

While the seller gets $50k less in the second case, the Realtor only “loses” $1500, and is now free to bank their commission and get to work on their next deal. It’s odd that they wouldn’t pitch the offer to their client unless they were under instructions to ignore any offer below a certain amount.

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Dan Farkas July 13, 2009 at 1:54 pm

I am required to present all offers to my seller. Why wouldn’t I? I am not the person who wrote the offer, the buyer’s agent did. I am just doing my job. Who knows, the buyer may take the countered offer after my seller gets to sign it. It may be the start of a great deal for everyone. That’s what it’s all about anyways. Isn’t it?
Another thing is that if it is a “lowball” offer, who is to say it is? I wrote on a house on Sunday that was 20% lower than list price and I presented it with comps that show I am not that far off. The seller has unreasonable expectations for this market. Not anyone involved with this transaction can change the market and what it has done to all of us.

Oh and by the way NAR? Aren’t they they same ones who helped get the $8000 tax credit moving forward? Aren’t they the ones who are stopping the banks from having brokerages? Aren’t they the ones who stopped a service tax from being implimented on the sale of a home? A tax that the seller would need to pay. In Michigan, we already have transfer taxes and revenue stamps that equal about 1 1/2% of the sale price that goes towards to the Government right now. Imagine 2% more if that piece of garbage went through?

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Jim Whatley July 13, 2009 at 2:01 pm

Nice article, I, as a broker run into the problem that people want to be lied too. I just lost a listing because I laid out the real picture to customer about what the can expect and pay to sell their home.

Most people have this false sense that their home is better than any other on the street. It could be true but is it the best for the buyer.

People sell homes but buy houses. You make it a home and all the love and great times that make it home go with you they do not convey with the house. Buyers will make it a home.

What is a home worth? What a able buyer is willing to pay and a able seller is willing to sell for. This is market value.

Find a Realtor who will Represent you and your money.

Peter Pike made some valid comments. I have done business with Peter and sought advice from Peter. Good Guy

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bouncing back betty July 13, 2009 at 3:25 pm

Hi,
I have to agree with Jim, Dan and Peter have said. I too have a Realtors license and no matter what the offer, I have to and do present it to my sellers. I can tell you from past experience many sellers still think their home is worth more than what it can sell for. I agree with Jim, sellers want to be lied to. I had one listing last year, listed at $425,000 at the sellers request.. I had the listing for 9 months, we dropped the price to $415,000 for another two months. Several showings and an offer of $375,000 that was not accepted. The truth of the matter was it was a house worth around $360,000 in our current market, I wanted to list it at $385,000. I lost the listing when it expired and it sold a few months ago for $330,000. At that point, the owners HAD to sell and took the best offer . By this point in time the other potential buyers had found another house.

I hope you find a new home soon!

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ct July 13, 2009 at 3:33 pm

MMND–

I have years of experience in the industry and while there’s no quesiton you can’t trust realtors for many of the reasons stated above, Dan and nickel are correct in that 2 of the most often midunderstood problems are 1) realtors not wanting to present lower offers for fear of losing commission and 2) blaming the realtor for the asking price of a home, especially in a declining market. First, as for 1) above, all else equal, a realtor is going to want a little more commission, but they’re most motivated by closing and if giving up 10% of commission to close the deal and eliminate the uncertainty is necessary (especially when the asking price is in outer space), the realtor will gladly give up the commission. These offers aren’t presented by and large because the realtor is afraid of getting yelled at and/or fired by the seller for “not doing his job,” (i.e., bringing in wildly inflated offers on the seller’s crown jewel). As for 2) above, generally the realtor has nothing to do with the asking price. Especially in a declining market, where most sellers are chasing the market down, since most sellers are extremely unrealistic about the market, it’s a game of trying to get the seller to list as low as possible without offending him and/or losing the listing. Stronger realtors in this market will actually walk away from overpriced listings when they can rather than desperately try to sell an overpriced home for 180 days or so. Most realtors know generally what the home need to be priced at to sell, and before meeting with a seller, try to get a sense of what the seller is looking for before preparing their “presentation” of CMA. Since the overwhelming majority of seller’s have irrational and inflated views of the value of their home, the realtor’s game is always trying to gently break the news to the seller without going so far as to tick the seller off and get crossed off the short list for selling the home. So the answer to your question to the realtor as to how he came up with the price is simple: the seller demands it.

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Millionaire Mommy Next Door July 13, 2009 at 8:36 pm

@Dan Farkas: I checked public records on all 3 properties before making my offers. In each case, my offer was significantly higher than what the sellers paid for the house. But even if this weren’t the case, many sellers are now underwater (mortgage is more than house is currently worth), requiring them to bring cash to closing.

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Ida July 13, 2009 at 8:58 pm

Realtors only care if a transaction takes place. Nothing else matters to them. They feel no remorse for selling people houses they cannot afford. Bottomfeeders.

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Millionaire Mommy Next Door July 13, 2009 at 9:35 pm

@John Macedo: Welcome here. You share some interesting perspectives, thanks! I am so sorry to hear that you and your ex couldn’t see eye to eye about renting vs buying. To be honest, after I did my research and calculations and decided it was better (in many ways) for us to sell our property when the real estate market was frothy, it took my husband some convincing. He now thanks me (profusely), but at the time, he had his doubts.

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Millionaire Mommy Next Door July 13, 2009 at 10:15 pm

@CT: you wrote “Since the overwhelming majority of seller’s have irrational and inflated views of the value of their home, the realtor’s game is always trying to gently break the news to the seller…”

My question for you then is, Why wouldn’t the listing Realtor use my offer to break this news for him?

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Millionaire Mommy Next Door July 13, 2009 at 10:25 pm

Hey folks, let’s keep the insults directed towards Realtors out of this conversation. Many of my personal friends are Realtors and they are fine people. The industry might have it’s issues, but let’s not hurl nastiness around. Debates are great, but please play nice here.

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Jim Whatley July 13, 2009 at 10:52 pm

If I were to hire a broker to help me buy a house. I would set up a program that the more he saved me the more he could make. In most state your broker can be present when the offer is presented. This may be awkward but this is real money we are talking about.

I would rather make a customer happy about a deal than make a few more bucks. I would love to be know as the broker who helps people save the most money.

People love to talk about the deal they got, not the deal that got them.

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Dan Farkas July 14, 2009 at 6:32 am

@ida do you have any idea how many times I write up an offer on a place on behalf of a buyer knowing that they cannot afford it? The answer is many. Why? The buyer demands it! If I object to a buyers purchase then I am the bad guy, and the buyer goes to another agent to write it up. It’s happened several times. Most of the time when I write an offer, I don’t know how much you make a year, that you have seven car payments to make a month, the best buy card that you pay on, ECT. Most of the buyers tell ME that they can afford it.

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Dan Farkas July 14, 2009 at 6:38 am

@ Jim. It’s amazing how many buyers don’t care how much they spend on a house. I get ten calls a week on foreclosed homes from buyers. Of the few I start working with, most of the time we will start looking at foreclosed properties that are priced 40-70% of what homes we going for two years ago. Many have drywall holes, dirty carpet, and the “wrong” paint color on the wall. It only takes a few of those to start looking at non-foreclosed houses which are usually more expensive. Many buyers have zero imagination and cannot look past the carpet and paint.

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Curt July 14, 2009 at 2:40 pm

Jen,
What about building?

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JB July 14, 2009 at 7:07 pm

I have had two homes on the market in the past year in two different cities at opposite ends of the state (long story, and only one of them was purchased, the other was inherited and must go to fulfill the Will). The current realtor for the far-away house has been trying to convince us to lower the price to insulting, based on “verbal offers” that turned out to not be offers at all (just random chatter from lookeeloos who wouldn’t have bid on it in a good economy let alone now).

We maintain that we will hear ANY offers, and WE will decide what is reasonable. We may surprise the buyers and take it. However, I’ve found that there is a new trend in which a non-foreclosing home is expected to be priced out as if it were an impending foreclosure, which only brings out the “vultures” (those who believe, and have sometimes said, they are “doing us a favor” by taking a $100,000 home off our hands for the generous offer of $20,000).

I’m not sure where the origin of blame lies, but I’m sure looking forward to when the market shifts and the economy improves and sales can get back to “normal”.

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Chad @ Sentient Money July 15, 2009 at 9:50 am

“I’m not sure where the origin of blame lies, but I’m sure looking forward to when the market shifts and the economy improves and sales can get back to “normal”.”

Everyone is, but this isn’t happening any time soon. Especially in the real estate market. Wait until the savings and unemployment runs out for everyone who has lost their job in the last 1-2 years. Only then will we actually see how bad this economy really is.

“Oh and by the way NAR? Aren’t they they same ones who helped get the $8000 tax credit moving forward? Aren’t they the ones who are stopping the banks from having brokerages? Aren’t they the ones who stopped a service tax from being implimented on the sale of a home? A tax that the seller would need to pay. In Michigan, we already have transfer taxes and revenue stamps that equal about 1 1/2% of the sale price that goes towards to the Government right now. Imagine 2% more if that piece of garbage went through?”

NAR is also the same organization that said real estate never went down, a house is a great investment, always buy as much house as you can “afford”, etc…etc. They are also notorious for providing false economic measurements that paint real estate in a positive light (Barry Ritholtz’s blog outlines tons of these). As a renter, who rents because it is the best financial decision in my area, I do not appreciate the $8,000 tax credit. All this does is take money from renters and give it to buyers, which in turn artificially keeps housing up.

This doesn’t mean all real estate agents are dirty (some are, some aren’t). It is just another example of an organization that has lost sight of providing long-term quality service/products and replaced it with a short-term make money at any cost approach. Unfortunately, this appears to be the prevailing attitude in our economy at this time.

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Scott July 16, 2009 at 11:54 am

Having recently gone through a condo sale myself, I kinda have to disagree with you that selling agents don’t want to present offers out of self interest. To my knowledge, my selling agent presented me with every offer or potential offer or nibble at the worm. And I KNOW she was desperate to sell something because I’m sure her income has dropped like a rock this past year. “Nothing’s selling”, she would say. My agent was a motivated seller, I was not. That’s kinda funny to me.

A couple of weeks after listing our place on MLS, my agent called me saying basically the following: “I wanted to let you know that I received a call from another agent wondering if you’d be interested in selling it for $X. I told them probably not, but I wanted to tell you about it and see if I should call them back.”

It was a low ball offer, >$80K under asking, and I told her not even to bother with the paperwork on that offer. My wife and I spent the next two days being mildly insulted that someone out there thought they could get our place for a steal.

My agent did the right thing. It wasn’t an offer worth putting down on paper, but she told me about it in the off chance I would entertain it. She knew me well enough to know I wouldn’t entertain it, AND told me about it anyways.

My take is that agents are desperate for a deal at any price. In that way, they may not have your interests at heart when you receive an offer well under asking because they don’t mind if you take it. They WILL try to get you to take an offer just below your bottom line because that IS in their best interest. A commission check is a commission check, and a quick sale is a quick sale. As someone said, it’s not that much money difference to them personally, and they can move on to the next deal.

Also, think about the 6% for a second. The buyer and seller agent split that at 3% each. Then the brokerage (Re/Max, Century 21, whatever) takes more than half of that. So an individual agent only gets about 1% of the sale price. So the difference of $50,000 only means a paltry $500 difference to them. A bird in the hand is worth two in the bush.

It’s funny seeing this from the other side of the table. You tried to buy properties for WELL under asking, and according to your analysis it was a fair offer. You feel put out because your well-under-asking-fair-offer was flatly rejected. The offer was only fair to you, to the seller it was completely unfair and borderline insulting.

Best of luck on your house search though, and I enjoy your blog.

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Millionaire Mommy Next Door July 16, 2009 at 8:52 pm

@Scott: Thanks for offering your story. Sounds like your Realtor kept you well informed and left the decision-making to you. Kudos to her.

Regarding price: My intention was never to be “insulting”. I did my homework first, and offered a fair market price. I asked the listing Realtors for the comps they used so I could evaluate their asking price. They refused; one simply stated abruptly, “I know it’s priced right”. Period. So I asked my broker to present recently sold comps to back up the price I offered the sellers. Why wouldn’t the Realtors present my offer with the comps? Rather than the focus on reduced commissions, perhaps they didn’t want their sellers to know they hadn’t done their homework…?)

As an aside, I have NEVER used a Realtor to sell my own properties: I sold each of our homes and a rental by owner. I had appraisals done and ran sold comps to arrive at market price, stuck a sign and a brochure box in our yard, and did the showings myself. I showed buyers the homework I had done. I was informed, buyers were informed, everyone was happy. In each instance, I received my full asking price.

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Sandy E. July 17, 2009 at 10:09 am

I don’t understand, for the life of me, why your realtor would refuse to provide you with the comps they used. I was looking through some notes I had that say when you find a home you want to buy, ask your agent to print out a list of similar homes in the same neighborhood over the last 6 months sorted by active listings, pending sales, and sold homes. You should also ask your realtor to provide property tax data for each house you like. Based on your experience, when I go house hunting in the future, I now realize the importance of asking these questions unfront with a realtor, before they show me any houses and before I agree to work with them. I will also ask them how they present offers.

(I have sold 2 homes by myself in the past, and surprisingly, the sales went very smoothly without any problems. Aside from the one page contract, and lender input, It is the Title insurance company that does the paperwork, and people should always shop around for one and compare prices, and look for the best deal. If you use them a second time, for the same house, they will also give you a discount, which only makes sense because they have all the information. (I have been surprised at the amount of paperwork I had to sign to protect the realtor – paperwork they generated for themselves, that aren’t an issue for a For Sale By Owner).

Also, it’s good to be aware that sometimes agents will price a house too low, to sell it fast with minimum effort on their part, or they will price it too high to get your business, knowing they could always drop the price later.

Lastly, go over your closing cost statement with a fine tooth comb on your closing day. (I’m aware they have to disclose this info ahead of time), but at my last closing, there was a $500 charge that was not on the earlier disclosure statement and should not have been there and was in error! I can’t remember right now, without looking it up, what it was for, (6 years ago now), but I refused to sign, and was actually horrified that they tried to sneak this in. Anyway, everyone left the conference room, and phone calls were made, and they did some additional paperwork where they removed the $500 charge, and we then did close that day. In the future, I will bring my preliminary closing statement to the closing and compare it with the one at closing.

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Millionaire Mommy Next Door July 17, 2009 at 10:43 am

@Sandy E: To clarify, I had MY Realtor included recent sales comps along with my offer to the LISTING Realtor. It was the LISTING Realtor who wouldn’t share with me the comps he used to arrive at his asking price.

Good point about checking the fees at closing for errors.

When I sell real estate, I hire a real estate attorney that specializes in FSBO (for sale by owner) closing transactions. Last time, his fee was $500. He and his office handle all the details: he conducts a conference call with buyer and seller to answer questions, confirm the details of the agreed upon transaction, puts together the contract, holds the earnest money in an escrow account, hires the title company, etc. Buyer and seller meet in his office for the closing. Simple.

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Sandy E. July 17, 2009 at 11:32 am

Oh thanks for letting me know that distinction. I guess the Listing Realtor works for the seller, so is under no obligation to show you the comps. he used. To expedite the sale of a house though, you would think that he would gladly provide that information, unless he priced the house higher to get the listing. In other words, both Realtors have access to the same MLS information.

I’ve never used an attorney before. The Title Ins. Co. held the earnest money in an escrow account for us, and that’s where both parties met for the closing. But since you mentioned it, I think that $500 is a small price to pay, just for peace of mind for the Contract alone, and I’m going to see if I can’t find an attorney here on the West Coast. Thanks for your tip; I appreciate it. I can have my house professionally appraised before I list it on the market, plus see what my competition is at that time, and I can require pre-qualified buyers, and I should be good to go. (Your website is very helpful to get this kind of information out there).

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bubbleRefuge July 17, 2009 at 2:13 pm

Here in south florida, the realtor-mafia-complex does things that probably would shock people in other parts of the country. For Example, REO listings are distributed to brokers who have relationships with the banks who own them. Often enough, the banks do not pay the customary 3% listing and 3% buyer agent commission. As a result, listing agents will lie to buyer agents about the status of a property. They’ll say, “I already have 10 full price offers in.” Other times, they simply don’t respond to inquiry’s. The award the listing to a buyer of their choosing or until the listing agent can find a buyer which he can represent as both the buying and listing agent. How does that grab your folks? How would you feel if you’ve been waiting 4 years for this bubble to pop and when it finally does, you can’t buy bargain basement REO’s because the real estate agents are stonewalling or engaging in skulduggery.

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Dan Farkas July 17, 2009 at 5:30 pm

@ bubbleRefuge. Your right with the part about banks who do not pay more than three percent. Offen enough we have to pay a percentage to an asset company for the chance to list them. After that the rest of your comment are completely untrue. We don’t wait untill we have a buyer so we can grab both sides. Often enough we have people that call me (somehow) to tell me that they have been waiting for a house to come up before I even know about a house!
Much more often there is ten offers on a property and they all get submitted! I know because I sell a ton of REO’s and I know that is how it happens from a buyer and sellers agent perspective.
What is happening is that it still shows active on the MLS until seller signed docs are back and that takes about a week to a week and a half. That’s when the banks allow us to turn in a pendind sale and remove it from the MLS.
It doesn’t surprise me that in todays instant gratification world combined with the ability to post something on the Internet and have it appear two minutes later that you would put the effort to “tell everyone how it is”. It doesn’t surprise me that you got it completely wrong either.
You can’t buy one single property to buy in south Florida because of realtor’s stonewalling? I call bullcrap. Last time I was in Ft. Myers in May, I could tell there are a ton of properties sitting there empty. Too many in fact.
The reason we don’t respond to inquirys all the time is because there are a hundred people just like you. Yup, everyone thinks the best way to get a REO property is to call the listing agent. Yet, the listing agent is busy entering all ten of those offers, doing bpo’s, occupancy checks, organizing trash outs and re-keys along with setting up contractors to fix the roof you asked for in your last offer.
Bubble, you have no clue.

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bubbleRefuge July 20, 2009 at 8:12 am

So you think I’m making this up? Why would I do that? This is exactly what my real estate agent is telling me is going on. I have a friend who was trying to put an offer in on a REO and the listing agent continued to stonewall and delay the submitting of the offer to the bank. My friend got the deal only after he began threatening the listing agent with a complaint to the realty board.

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Dan Farkas July 20, 2009 at 8:23 am

I sell reo’s everyday. Never once have I stonewalled a buyer so I could double dip the deal. I’m not calling you a liar. I just think when you say that you can’t find one single property to buy in south Florida to buy, that’s going too far. Michigan was the leader in foreclosures until the state of Florida took the top spot.. I have had no problem in finding my investors or buyers a property here and I can’t imagine I would have a problem there either.

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bubbleRefuge July 20, 2009 at 8:32 am

Yes I am engaging in hyperbole but yes real estate agents in Miami-dade and broward do stonewall. I have seen it first hand

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Dan Farkas July 20, 2009 at 10:58 am

Thats the worst part. You may encounter some issues with some agents in every part of the world. The problem I have is in this world we live in, when someone posts something so biased and negative on a website, the rest of the world can look at it and since the internet knows all ( “that’s what the internet told me “) it becomes a truth, when it couldn’t be farther from it.

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Catie August 25, 2009 at 11:52 am

As a realtor … and a very good one … I am saddened at what I am reading on this blog.

1) First and foremost your offers should have been presented to the sellers … it is the responsiblity of every listing agent to present every contract that comes in … even if they already know their client may balk at it.

2) It is NOT a contingency free offer if you have a home inspection. Contingency free means just that … no contingencies.

3) A realtors commission does not really change that much if the offer is less in the grand scheme of things. Let me explain this to the mass public.

Typical commission is 5.5% – 6% which must be split between both the listing and selling agent. So really the commission is 2.5% or 3%. Of that 2.5% or 3%, the agent must split that commission with their broker … which is anywhere from 15%-50% depending on how much volume they produce for their broker. So for a sale of a $250,000 home the commission would break down as follows:

6% = $15,000
3% for the listing agent is $7,500
3% for the selling agent is $7,500
Out of that $7,500 … the agent may have to give anywhere from $1,125 to $3,750 to their broker … leaving them with only $3,750 to $6,735.

So if the house sold for $50,000 more, the agent would really only walk away with another $750 to $1,275. And this is all before taxes. Remember, we still pay taxes like everyone else.

4) The tax record doesn’t tell you what the seller owes on the house … it only tells you what they originally paid for it. The seller could have finance their kids college with the home, or paid medical expenses, or had to take out a loan because they lost their job. So although you may think they may be making money … they could have used their house as an ATM card and owe much more than that tax record can ever tell you.

Those who have said they don’t trust realtors have obviously not worked with the best of us. The public has no clue we work 24/7 … are at everybodies beck and call … can work with clients for months and never get paid … and many people feel are time is not valuable. As if we do not have families we would much rather be with then driving people around for months looking at hundreds of houses only for that person to walk into a model home and buy a house without representation.

The best realtors are the most honest and straight forward people I know. Like all professions, their are the bad ones … but a good realtor will keep you out of trouble and is worth every penny they make.

I have been in real estate for the better of the past decade … before that I was a VP in marketing making plenty of money. I just wanted to work for myself. I am proud of the business I have built and I have an extremely long list of very satisfied clients.

I hope someday you find a Realtor you can truly trust.

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Stu September 1, 2009 at 7:57 am

Catie, I just made a large offer on a piece of land that is adjoining to our property’s. We have been coddled by both the financial institution and the Realtor for the seller to make this work. “Don’t get an attorney, Don’t get a buyers Realtor, we need this to go through and will help all the way till it’s yours. Well, after soliciting us all Summer and phoning practically every day, we finally signed a purchase agreement and have heard nothing since. I feel they are taking our offer and using it to refinance or show proof of its value. I deliberately added in the agreement that the offer is that of sentimentality, not at all close to the low actual market value hoping they couldn’t do this. But, we are in the dark and very hurt. Isn’t there a commission that oversees Realtors? Forgetting to mention they delibrately did not inform us of a second mortgage, a mechanics lean, unpaid taxes and assessments. We found these things on our own. Thanks for anyone’s time in advance….Stu

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Millionaire Mommy Next Door September 14, 2009 at 12:32 pm

Brief update on the three homes we made offers on:
#1 home still on market at same asking price. This property has been sitting on the market for about two years now.
#2 home still on market. Recently dropped their asking price by 2%.
#3 home pulled their sign. Waiting to see if record of sale shows up in local public records and if so, at what price.

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Melissa Tanner January 15, 2011 at 2:42 pm

can you not find a Buyer’s Agent in your area that will represent you and you offer? Why do you keep going through the listing agent? Of course NO ONE can hold a gun to their head and make them take your low offer, but if you have a realtor that can run comps and PROVE they are way off base you have a better chance. Mel

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KMR September 16, 2009 at 4:52 pm

I will have to say as a realtor myself I am pretty disgusted by your local realtor experience. They should have presented your offer. When an offer is cash it is often lower than the asking price, but still a good offer if not better, because it is cash.
If your realtor knew he would not accept the offer he/she should have given you the reasons as to why. Because it was lower than asking price is not a reason, unless she knows that he owes more on the house than your offer price, that would be a good reason.
In my area, prices are insanely low, but the offers are going for more than the asking price. We still get clients that don’t believe us. We tell them that the offer might be too low and wont be accepted. They don’t believe us, so we submit the offer anyway (doesn’t hurt to try.) We do this over and over on different houses till they realize that if they want a house they do have to go a bit higher.
Thats ok though, it is our job. We don’t want them paying more than they want to or buying a house they don’t really like.
I am shocked that any realtor would use active comps. Sold houses are the only way to get the true value of a house.
I am sorry that you had a bad experience. There are good ones out there.

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Emily October 5, 2009 at 10:38 am

Isn’t there something to be said about paying off your home and not having a mortgage. You have to consider that every month some of your mortgage payment will go to principal, so even if your mortgage is the same as a rent payment, its still a better deal in the end, if you plan on staying for a while. Also, there are good real estate agents out there. You need to find someone you like, and who you feel has your best interest in mind. Good luck!

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Boston October 25, 2009 at 8:40 pm

Well, check this out, my wife and I put a home under agreement for $430,000, pre-approved, made the down payment, paid for the home inspection, paid for the appraisal, and then when the loan went to the underwriter, they said the comps did not represent the market value of the home. They said the house was worth $406,000. So that means our agent and the listing agent were $24,000 off ????? So much for hiring a pro. Now the mortgage company swears that no bank will give the sellers more than $406,000 for the house. If it works out in our favor great. If not, we are out $1,000 for the home inspection and the home appraisal. It makes me mad that we can be on the hook for $1,000 because one Real Estate Agent came up with a fake price and another Real estate agent was not able to tell that the price was $24,000 too high. I find out Monday if I lose $1,000. The system is messed up. Any way to sue these Realtors seeing that we signed contracts?

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Melissa Tanner January 15, 2011 at 2:40 pm

I just had the opposite, I told my client their house was only worth 209k and the appraiser appraised it for 231k .. so .. what access we have as realtors is the MLS sale, appraisers can add or take out value by tax records, for sale by owners, and other means of doing their own job. We have no control or crystal ball for people, especially in today’s screwed up foreclosure market. Zillow said my home is worth 174k .. an appraiser said nope 160k. A house is really only worth what someone is willing to pay for it. :) I hope that you had a smart enough and experienced enough realtor to put an appraisal contingency and financing and inspection and all other to protect your earnest money at least. The seller doesn’t HAVE to sell you the home for that price unfortunately so I hope it works out for you.

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steve October 26, 2009 at 12:53 pm

Boston, you want to sue a realtor because they were asking “too much”? Really? Maybe you should sue your lender for hiring an appraiser that didn’t use the right comps? Or, maybe you should sue the appraiser for finding some comps that were too high for your sale to go through. Or, I got it! Maybe you should sue the previous owners of the houses that were used to create your appraisal for selling so low?

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Boston October 27, 2009 at 12:21 am

Steve, you are way off base. I wanted to know if we could recover the cost of the $1,000. The system is messed up right now in this market. Why would you pay $500 for a home inspection before you paid $500 for the appraisal to see if any bank will even write a loan for the amount that you agree to buy the house for? It seems pretty messed up that a listing broker can pull together comps for a house and list it for 8 months, then the potential buyer pulls comps that have to go back 2 months, in a bad market the 8 month old comps are useless. There is no use putting an offer on a house until you get the new appraised value. The buyer puts out all the risk, the seller gets put over a barrell if they “have to” sell, and the Realtors and the mortgage company collect their checks no matter what. Turns out that the underwriter came back at a market value of 410,000. The seller had two choices, sell it at that price or wait out the market………. so much for paying a commission to a listing broker in this market.

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Boston October 27, 2009 at 12:30 am

So you know, the lender used two different appraisers and appraisers are assigned to cases here so you can’t just go use any old appraiser, but I’m sure you knew that, right Steve-o. Apparently the listing broker used colonials to comp out a split level. So yeah I was pretty pissed when I found out that I just spent $1,000 to tell the buyers that the offer we agreed to was off by $24,000………

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KMR October 27, 2009 at 4:34 pm

Boston, I highly doubt that a Realtor priced the house too high on purpose. A Realtor does not get paid one penny if a house does not sell, so they would not purposely price a house for more than it is worth because that would inevitably make it fall out of escrow. No one is going to pay over what the bank will lend.
I don’t know your area but within the 8 months the price of the house could have gone down or not (it all depends on your area.) If your Realtor was experience she should have lowered it according to the market, plus lowering the price is based on how desperate you are to sell.
What often happens that causes situations like that in my area is the banks appraiser doesn’t know the area and almost always appraises the house wrong, due to that. We can choose are own appraisers in my area, but on occasion a bank requires us to use their appraiser and it often ends up being an appraiser that doesn’t know the area.
Sometimes a Realtor can depute the appraisers appraisal to the bank with their own comps and appraisal. It all depends.
It all comes back to the fact that a Realtor does not get paid if a house does not close escrow. Realtors can be working with the same people for a year or more (driving them around or paying to advertise their house) and if they never close an escrow all the Realtor gets are memories and an empty pocket book.

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Melanie W. January 28, 2010 at 10:30 pm

A good piece of info : Use http://www.zillow.com to get a better idea of what the homes “should” be going for.

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Melissa Tanner January 15, 2011 at 2:35 pm

I am sorry but Zillow is a TERRIBLE place to get housing info, they are not accurate to an appraiser and they have 2 year old listings still actively for sale. Please don’t be fooled or deceived by these outside sources online. Mel

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Grant in Nashville April 26, 2010 at 4:04 pm

I cannot believe that these agents flat out refused to present your offers. You should complete this form assuming you live in CA: http://www.dre.ca.gov/cons_complaint.html

On the flip side of the coin, if you are making offers to the seller’s agent, they don’t have your best interests in mind as they only work on the seller’s behalf and not yours. I very rarely meet an agent who is not willing to work a deal on a property at any reasonable price. Most agents would rather accept some reduced commission than no commission at all, especially now-a-days so I don’t agree with your holding out theory.

Here’s the bottom line, if a seller is not motivated to sell at a lower price, it’s not the Realtors, it’s the seller. Studies have shown that at any given time, more than 50% of the homes on the MLS are “testing the market” and don’t have to sell because a job loss, relocation, etc. The national media makes it seem as though every seller is in desperate straights, but the truth is there are more people like you and me out there than is reported. Sounds like the properties you are interested in fall into the “want to sell” and not “need to sell” category.

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Melissa Tanner January 15, 2011 at 2:34 pm

Hi! I am a Realtor in TN, I got into the business in 2003 after I bought my first home with no one’s help. The Agent in the model home of course only cared about the builder and we did everything they told us. No questions asked. We were young and naive. SO .. I decided afterward .. kinda a calling .. to become a Buyer’s Agent. I was born and raised in the Nashville area so I also am a relocation specialist. I go above and beyond for people and clients, you can ask any of them. :) facebook friends with all of them that are on facebook anyway. I like to stay friends with people after the sale. SO .. not ALL Realtors are shaddy or bad, some DO have your Best Interest at Heart. I never let my clients over pay, I pull comps before making an offer and I also show them every negative aspect about a home. No need to sell someone a house they won’t love in my opinion. Just wanted to let you know there are some good people/Realtors out there before you lump us all together. :) Thanks Mel

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DemInCO November 11, 2011 at 1:00 pm

It is 2011 and all these things are still true- RE Agents are still in denial.

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Tracy February 21, 2012 at 5:58 pm

I feel saddend that you have personally taken a shot at a perfesion. I am a Realtor who began my career to HELP people, so they don’t get taken advantage of. When I represent a buyer, I WILL ALWAYS have there best intrest at heart. Even if that means showing them FSBO’s or FORCLOSED homes that lowers the chance I will get full commision or ANYTHING at all. I and most of my fellow local Realtor’s would never do anything like what you discribe. Part of having a Realtor to represent you is to PROTECT your intrest. If you had a BUYERS AGENT maybe thoes things would not of happened to you. I pray that no one reading your post decides they don’t need a realtor and ends up getting taken advantage of. Yes there are some bad apples but the entire tree is not bad. Realtors provide a service to protect there buyer or seller. Please remember when you speek of a profession you are speaking of someone’s livelihood!

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