Protecting Your Interests When Selling a Home
I want to share a story about a home I recently sold in Mississauga, and how it gives a good example of the ethical dilemma’s faced by real estate professionals every day.
Just recently I listed and sold a 3 bedroom, detached house located in Central Mississauga. The home showed pride of ownership, but aside from that it was a typical house for the area. It wasn’t the largest, and it wasn’t the most upgraded.
Our first step was to research the property and comparable sales.
What we discovered was that on average, similar homes were being listed just under $700,000 and selling for $720,000-$740,000.
Whenever I list a home, the first step is to determine market value of the home ‘as is’ meaning what it will sell for today without doing anything. Once the baseline value is established, an important part of our documented approach is to identify areas where we can raise the perceived value of the home and help our sellers make more money on the sale.
Over the years, we’ve developed a proven system that when implemented, allows for our sellers to easily make an extra $30,000+ on the sale that they otherwise wouldn’t have. In this case, I was confident that if our seller followed the plan, we would get her a top dollar sale, with my goal being closer to $770,000.
Our seller was all-in; she agreed to take care of all minor repairs we identified in the initial assessment, do some paint touch ups, have the kitchen cabinets updated, change light fixtures and do a massive declutter. Once that was complete Stephanie came in and staged the home with furniture and props in order to prepare it for sale.
When it came to a pricing strategy, we decided to list the home at $699,000 with the goal of maximizing the exposure that a competitively priced home would get.
The Unrepresented Buyer
Within an hour of the home being listed for sale on the MLS, I received a call from a prospective buyer named ‘Bob’ (name changed for privacy reasons) who wanted to see the property. Since I was going to be stopping by the home later in the day to drop off feature sheets, I agreed to meet ‘Bob’ and his wife at the home.
Bob and his wife were a nice couple in their mid 30’s, educated and currently owned a freehold townhouse. We chatted for a bit, and then proceeded to tour the home. They were financially qualified, and both had good jobs. They loved the home, and wanted to put in an offer immediately.
“Jeff, let’s go back to your office a write up an offer for $735,000, no conditions”
Bob didn’t have a real estate agent, and wanted to use this to his advantage in negotiations. The only reason he contacted me directly was the hope that I would work harder for him, to ‘double end’ the sale and earn an extra commission.
It’s important to note that ‘double ending’ is how many real estate agents make a living. They use their client’s listings to barter more business for themselves. This is a common practice taught by many trainers and coaches in the industry, however it can easily lead to misrepresentation on the part of the real estate agent.
Aside from the verbal offer Bob made, within 2 hours of listing the home on MLS, we already had 15 home showings booked by other real estate agents. To be fair and transparent, I explained to Bob that the home had very high amount interest but that I would talk to my seller and call him later that afternoon with an answer.
I called my client and told her exactly what Bob discussed with me what he was offering. Not only is keeping our client informed the right thing to do, but as a Realtor we are obligated to do so. One of the fundamental duties in a client relationship is full disclosure, while at the same time protecting our client’s personal information and motivation from others.
Taking into account the high level of interest on the home, my client instructed me to continue with the showings and that she would not look at offers until the offer presentation date as originally planned. I also explained the potential conflict of me representing both the buyer and the seller in the same transaction, and my client indicated she did not feel comfortable with me representing both her and the buyer.
I then called Bob and let him know my client’s wishes. I encouraged him to bring his offer on offer day and referred him to a very good realtor that would be more than happy to assist him in submitting an offer on the house.
2 Days Later
The showings were going extremely well, our advertisements were bringing in buyers and agents from all over the GTA. That evening I received another call from ‘Bob’. He wanted to level with me; he didn’t need the agent I referred him to speak on his behalf.
“Jeff, we are prepared to offer $745k right now, so your client gets 45k over asking price, and you get the double commission. Also, we have a house to sell and if we get this home we will use you to list our house for sale…”
Bob knew what he was doing, he was now dangling the possibility of 3 commissions, hoping my desire for more money would get me to ignore my duty to protect the best interests of my client.
Now before I continue with the story, I receive ‘offers’ like this almost every time I list a home for sale, which tells me that this strategy works well on most listing agents. It’s sad that this is a strategy being employed by many realtors but the fact is that the average real estate agent only sells a handful of houses a year, so the temptation of 3 deals would be too much to resist.
For me, I would sooner quit the business and do something else over selling out my integrity. I was raised to be ethical and I just couldn’t live with myself knowing that I’m short-changing my clients.
I thanked Bob for his continued interest, but reiterated from our previous conversation that my client would not entertain a verbal bully offer and that she was not comfortable with me representing both parties.
On offer day, my client was rewarded for her patience, and we ended up selling the house for $835,000. That’s $90,000 more than if she took the bully offer being proposed by Bob.
Bob did bring in an offer with a completely different agent, one who is known in the area for bait and switch tactics and unethical business practices, however it fell well short at $745,000.
On a daily basis, real estate agents are confronted with situations where they have the choice to act ethical, or to act in their self-interest. My job was to get my client the most money possible on the sale of her home and that’s exactly what I did, and what I do with every one of my clients.