Working With Sellers In A Changing Market
(Christine Toes here)
Many buyers think that when an apartment is not priced correctly, it's always the broker's fault. Check out this example of a situation where the price has nothing to do with the broker:
Apt is on Madison in the 30s - originally priced at $459K on 2/23/09:
On 5/1 - price reduced to $399K, resulting in multiple offers, but after five open houses my buyers "won" at approx $400K. Within about 10 days, the buyer's attorney received the offering plan, financials, read the board minutes & negotiated the contract. The buyers signed the contracts and sent a check to the seller's attorney, who received them on 7/2.
Morning, 7/6/09: seller decided not to sell and to put the apartment back onto the market at $429K. The seller's broker spent an hour trying to talk the seller out of his decision (discussing the market conditions, how qualified the buyers are, that it was already on the market at $459K and if someone was going to pay $420K for it, they would have already gotten those kinds of offers, there's another apartment in the building for $385K that's not selling, sent the seller comps, etc).
Afternoon, 7/6/09: My customers didn't really want to go through the process all over again and hadn't seen anything they really liked for that price. They don't live in NYC so they'd have to fly back here to start their search again. They increased their offer by $10K to approx $410K.
7/7/09: seller decided that he really wants $469K for the apartment and is putting it back onto the market for $469K!
What do you do when you're the broker in this kind of situation? This would be the point where, if it were my listing, I would say "thank you for the opportunity, I'm sorry we don't see eye to eye on this situation, please keep me in mind for the future if you change your mind." And then I would walk away. (By the way, this is an estate sale).
All I can say to the buyers is... "It wasn't meant to be, don't worry, we will find something better." I will also send a letter to everyone in that line or similar lines in the building to see if anyone is thinking of selling their apartment - just in case, you never know!
Moral of the story is - if you see a listing with:
a. Price decreases and increases; or
b. That has been on and off of the market for several months/years; or
c. There have been several brokers
You might want to steer clear because the seller may be flaky or not that serious about selling under a certain price.
The nice thing about sites like Streeteasy is that the price history for every apartment is more transparent. Keep in mind that streeteasy is not always 100% accurate - I have heard several brokers panic because their brand new listing shows up on streeteasy as having been on the market for a few hundred days, so while transparency is improving, perfection is very hard to achieve for this industry with no standardized MLS system.
It never hurts to ask the seller's broker how long the apartment has been on the market when you're in the apartment. Also ask your own broker what the price history of the apartment is. It is always good to compare notes and you can get a sense of how honest brokers are by their responses. In the end, nobody can force a seller to execute a contract and you do what you can with your client's best interests in mind.
Posted by Jose R
Wed Jul 8th, 2009 11:02 AM
"It never hurts to ask the seller's broker how long the apartment has been on the market when you're in the apartment."
I would expect this to be SOP. I would expect that my broker would tell me the whole history of the apartment and the background of the seller prior to my setting foot in the apartment.
In the situation you described, it certainly was the broker's fault for misreading his seller. It seems in RE you can behave like a petulant teenager and get away with it. In an MA deal stern words would be exchanged and lawsuits would be dangled.
Or am I missing something here.
As a broker, it is your responsibility to know your client.
Posted by Sofia Kim
Wed Jul 8th, 2009 12:24 PM
Hi Christine,
This is Sofia Kim, VP of Reseach from StreetEasy. Thanks for mentioning us in your post. You had mentioned that several brokers have panicked because a unit they put on the market is listed as having been on the market for several hundred days.
This happens occasionally for 2 reasons:
1. The broker is re-using an old listing. The is the most common mistake brokers make. And as soon as brokers contact us, we work with the broker in rectifying this.
2. The broker took the listing off the market temporarily. If the unit has been off the market for a substantial amount of time, we consider it a new listing and set the clock back to zero. If it's been off the market for a short period of time, we don't reset the clock but we DON'T count the days it was off market.
Many brokers have tried to reduce time on market by creating new listings for the same unit, but this provides an inaccurate picture to the buyer.
If you have any questions about our data, please feel free to contact me. We do our best here to keep the data as accurate as possible.
Kindest regards,
Sofia Kim
sk@streeteasy.com
Posted by Noah
Wed Jul 8th, 2009 12:34 PM
thanks Sofia for responding here! love it.
TOES - sounds like seller was big time flaky and perhaps not a real seller. I assume its still active now. Perhaps this seller got a sense of what the market deemed the place is worth, and decided he was not interested in selling at that level. Why he would agree to a price reduction to below a bid that he negged on, is suprising to me and telling of the sellers character.
I have worked with my share of nutty sellers over the days, and in fact one in which I got 200K over ask for them, and they said no. That sale was given to a different broker who ultimately sold it for 300K lower than what I procured. Unreal. Seller remorse - it happens when sellers think they are bigger than the market. But in the end, its their call to sell their property or not, not ours. We just deal with it.
Posted by Christine Toes
Wed Jul 8th, 2009 12:35 PM
Clearly, this seller has issues. He accepted the offer, allowed his attorney to draw up contracts and had his broker send out an offering plan & financials. We even negotiated including the furniture in the apartment for an additional cost. 10 days later, check and contract in hand, the seller decided not to sell to my VERY qualified buyers and to *raise* the price. There's not much a broker can do in that situation besides try to talk some sense into the seller.
The buyers and sellers have invested money on their attorneys, the brokers have invested their time. There is no legal recourse to my knowledge. In New York City, until the contracts are signed on BOTH sides and returned to the buyer's attorney, the buyer can back out, the seller can back out, a higher offer can come in. Occasionally, a seller will accept more than one offer, send out more than one contract and see which comes back first - without disclosing that to the buyers or buyer's broker.
Its SO important to have a great NYC real estate attorney and to sign contracts quickly. Even when you do both of those things (as in this situation), there are no guarantees that a seller wont do something like this.
People change their minds, and there is nothing the broker can do short of sending comps and giving all of the reasons the seller should move forward with the deal as planned/agreed upon. We don't own the apartment.
Posted by Christine Toes
Wed Jul 8th, 2009 12:38 PM
Hi Sofia! Thanks for posting! Yes, I should have mentioned that both brokers who had this issue contacted Street Easy and were able to quickly get the issue resolved.
Keep up the great work:)
Posted by Former Seller
Wed Jul 8th, 2009 02:04 PM
Christine,
Perhaps there's no legal recourse for you, the buyer and selling broker for time invested and work done.
I was on the other side of that fence when an all cash buyer made me an offer in Jan. but re-negged a month later just before going to contract after a lot of ground work had been done. Fortunately it worked in my favor that the deal didn't go through because the market was at its worst then.
As you pointed out, the most one can do is to make a verbal contingency to go to contract within a certain number of days or no deal. I realize that in some cases that's not possible.
Since we're well into the information age, I wonder if one day there will be a way to record factual information about offers/deals on a property to an archive that can be checked, similar to a Carfax. Perahps that would make flaky owners, brokers and buyers think twice about re-negging late in the game.
Posted by jeff
Wed Jul 8th, 2009 03:32 PM
Sorry for the typos above...let's try again
Just wanted to chime in on the "brokers responsibility" issue. I can't speak for Christine or her brokerage relationship with her buyer in this case. I would point out however, that in New York City, in addition to having no MLS system and listing agreements that may be viewed as favoring the listing brokerage firm's buyers over other buyers, there is very little use of buyers' brokers. That is, a broker who is hired by the buyer to represent their interest, as opposed to a broker who has accepted a co-brokerage agreement from the listing brokerage and is therefore in every way a representative of the seller (but able to share in the commission). A buyers' broker is responsible for finding out every and any detail regarding the seller, the property, the Co-Op etc, that could potentially impact the client's decision to buy or not buy, what price to pay etc. When I work with commercial real estate investors in NYC I do so under this type of arrangement and as is the ethical requirement I treat their potenial transaction as if my own money was going to be at risk. A seller's broker owes their entire responsibility to the seller....even a co-broker and they are in fact expressely forbidden from saying something like, "This is a really flakey seller" or giving out any information that might prejudice the seller's negotiating position - "These guys have to sell because......" So please people understand whether you have a buyers' broker working with you or a sellers' broker and don't demand something from them that they cannot provide under the arrangement you have chosen to enter with them.
Posted by Thisson
Wed Jul 8th, 2009 04:53 PM
Maybe I'm missing something here, but my understanding is that a (properly licensed) broker has earned their fee when they have procured a buyer who is willing and able to pay. I understand that the broker is entitled to that fee even if the seller backs out of the deal.
Feel free to correct me if I'm mistaken.
Posted by Donald
Wed Jul 8th, 2009 05:12 PM
"I would expect this to be SOP. I would expect that my broker would tell me the whole history of the apartment and the background of the seller prior to my setting foot in the apartment."
You obvivously have not been in the market that long because that almost never happens. Pus, it is rather easy to distort the number of days a unit has been on the market. All you have to do is temporarily withdraw it and then re-list it. And like magic, the DOM gets re-set to ZERO.
Posted by MeekSheep
Wed Jul 8th, 2009 07:14 PM
They should really let them show historically when the property has been listed. I watched a house that was on the market since 2006. It appeared no later than 60 days on market when I was tracking it. Price dropped every time too. Wash, rinse, repeat...
Posted by Solid Article about NYC
Wed Jul 8th, 2009 08:26 PM
Intelligent piece with an emphasis on NYC -- with a brief reference to Urban Digs.
http://seekingalpha.com/article/147560-dont-expect-a-v-shaped-recovery-in-real-estate-prices
Posted by bje
Wed Jul 8th, 2009 09:23 PM
Thisson, you are correct. The broker did her job and has earned her commission. Statute of frauds is one thing and protects buyers and sellers by requiring an exchange of signed docs. The obligation to compensate the broker is an entirely different matter and the fee is earned upon the accepted offer assuming all the contract points were agreed to. As a practical matter, good luck collecting.
Posted by batraa
Thu Jul 9th, 2009 07:57 PM
do people use buyers brokers in NY?
i asked this of a real estate agent who is an acquantance and she said that all brokers are essentially sellers agents.
not sure if there is a difference in nyc and rest of ny on this topic.
does a buyer pay the broker out of their own pocket?
i bought a house in LI where i did not feel my broker was 100% in my court - i.e. - i think she could have helped me get a lower price (it was an open listing so she made a ton of money)
Posted by jeff
Sun Jul 12th, 2009 08:02 PM
Your friend is correct that in NYC buyers' brokers are rarely used.
Posted by Christine Toes
Thu Jul 16th, 2009 12:02 PM
In NYC, the seller pays both the seller's and buyer's brokers. So there are no official "buyers" brokers, but it is good to have your own broker to point out things you may have missed, ask questions you may not know to ask, negotiate the deal (the seller's broker will tell another broker things that they will not tell the buyers directly), put the offer forward in the best light with all pertinent documents needed (so the other broker knows the buyer is qualified, especially in a co-op transaction), and to prepare the co-op or condo package (which includes a lot of paperwork, typing, copying, etc, and there is a very specific way that they need to be done). Additionally I have found that in a direct deal, the buyer never trusts the seller's broker. So even though the seller is technically paying both brokers, your buyer's broker is really trying (or should be) trying to act in the buyer's best interests.
Posted by Reverse Mortgage Information
Fri Jul 24th, 2009 03:20 AM
Hi,
I would agree with "Many buyers think that when an apartment is not priced correctly, it's always the broker's fault. " and for this concern I also think that if the brokers who had this issue should have made contact with Street Easy and both were able to quickly get the issue resolved sooner.
- J
Posted by Mexico Condos For Sale
Mon Jul 27th, 2009 05:58 AM
I agree with your advice It’s a tough market for sellers. There are many homes in competition throughout all cities of Northeast Ohio. Here’s a quick way to get your home ready to make its best impression.
Posted by Gavin King
Tue Jul 28th, 2009 11:29 PM
The Boise real estate market is suffering from the same afflictions as many others and it is tough to get property priced in the right price range. I can't really blame home owners for wanting as much money as they can get out of their homes, but the broker does know best!
Thanks,
GK
Posted by Mortgage Advisor
Mon Aug 24th, 2009 06:58 AM
As a mortgage broker Ive seen it a lot. The buyer always thinks the broker is trying to make a quick buck off his back. Problem is that there are a number of other variables that the buyer might not even be aware that they exist.