June 1st, 2012 at 7:01 pm
As we all know, one of the signs that our markets are turning around is the return of multiple offers. No matter where I go, I hear the same thing: Because inventory is so low, if a property is priced correctly, it will go in multiples. While we are glad to see this activity, multiple offers do raise certain issues that we haven’t seen in a while. With that in mind, I thought it a good idea to remind you about these problems and, most importantly, what you should do to handle them correctly.
The issues we most often see in multiple offers arise from the appearance of two potential conflicts of interest, both resulting from the listing agent representing one prospective buyer. In that case, two things almost always happen: the other offerors think you are favoring your buyer with the seller, and the seller thinks that you are acting in your buyer’s interest rather than theirs. The reason for this suspicion is obvious: You will earn both sides of the commission if your buyer gets the property. As a result, if your client does end up as the ultimate buyer, no one will believe it was for legitimate reasons. So, while avoiding this situation and not representing both sides in a multiple is the easiest solution, there are other things you can do to properly represent your clients without violating your obligations to anyone else.
First, always get your manager involved in multiple offers. Their involvement acts as a buffer to your potential conflict of interest and oftentimes makes the other parties feel like they are getting a fair chance. More importantly, however, is to have your manager represent the seller in the offer process when you also have a buyer. That way, no one can claim that you improperly steered the seller to your buyer. After all, when following that process, you will not even be in the room when decisions about counters or which offer to accept are made. Rather, at that point in time, your manager protects the seller’s interests and you protect your buyer’s. As a result, everyone feels like the process was fair to their client. Of course, after an offer is accepted, regardless of which buyer is chosen, you can then step back in and represent the seller. By that point, the potential conflict has gone away and you can perform your duties as listing agent and represent your client.
Please understand that this policy came into being after a lot of experience. Without following it, you are very likely to get a complaint. If you do follow the process outlined above, however, our experience is that your deal goes much more smoothly and you can avoid these problems.
As always, contact us with any questions you may have.
May 25th, 2012 at 7:00 pm
I went to a Seminar this week put on by Inman, and the first presentation given was entitled “The Way The World Communicates Just Changed – Have You?” That title is true in many ways, but none moreso than with regard to e-mail. Where we used to meet a client in person to deliver or discuss a document, today, we send it by e-mail. Where we used to call the client to schedule an appointment or showing, today we do it by e-mail. While we can have a long debate about the benefits of this technology, and the corresponding loss of personal contact, the truth is that because e-mail is now such a central part of our world and business, we need to make sure that we use it appropriately and with the proper amount of care.
For example, we have had a number of complaints from clients who received an e-mail with the wrong document attached or whose personal information or document was sent to an unrelated party. In each of these instances, the agent’s explanation was invariably that they were out when the e-mail came, either could not or did not have time to open the attachment, and wanted to get it out quickly. So the e-mail is forwarded on faith, and the attachment is sent out blindly and without being checked. I think this is done in part because we use also e-mail in our personal life and that use is invariably very casual. While I have no problems with that use, e-mail for business is very different. It is the same as sending a letter, on your letterhead, by registered mail. It never goes away, and you need to treat it that way. Just like you need to proofread a letter, and make sure that the enclosures are correct, you need to proof an e-mail and review the attachments. In other words, you need to slow down and take the proper care before sending any e-mail.
Similarly, because e-mail can be informal and sent from our phone, we tend to send it quickly. That, of course, can result in a number of problems. First, we can hit the wrong button (reply instead of forward) and send our message to the wrong person. For example, in one transaction an asset manager sent an e-mail, meant for our listing agent, to the selling agent. Unfortunately, the e-mail said many derogatory things about the selling agent and obviously made the deal more difficult to close. Also, you can respond to an e-mail quickly and emotionally, and send an e-mail which, upon later review, does not say what you want to say or how you want to say it. There are many examples where a quick e-mail comes across as very angry. When sent to a client, it can often result in the cancellation of a deal or the loss of a relationship. As a result, don’t hit reply in the heat of anger or emotion. Walk away from the e-mail, think about your response, and come back to write it letter. Those are things you always did with letters and will improve your communication by e-mail.
In short, while e-mail is a great, easy way to communicate and run our business, it is really no different than any other written communication. As a result, we need to treat it with the same care. Slow down and think about what you are doing before hitting the “send” button. By doing so, you will avoid the e-mail problems we all have heard about and will avoid having your e-mail as Exhibit A to some lawyers lawsuit. And, of course, that is one thing we all want to avoid.
As always, let us know if you have any questions
May 11th, 2012 at 6:59 pm
As you all know, one thing you often need to do in your job is help your clients deal with and get around conflict. It is very common for some dispute to arise between the buyer and seller, or a client and agent, and keeping the deal together becomes dependant on whether that conflict can be resolved. With that in mind, I wanted to share an experience I had twice this week where solving a problem revolved around a very interesting “issue.” Specifically, we have a listing where the seller claims some personal property was stolen during an open house. Now, as you know, we don’t believe that we are responsible to safeguard a seller’s personal property. The Listing Agreement specifically provides that we are not responsible for any such loss and states that that seller will take reasonable precautions to safeguard her valuables. That being said, when property is stolen, the seller is upset. So, yesterday I received a call from the seller’s lawyer demanding that we somehow compensate them for their loss. In the course of that conversation, the attorney said to me that there was one specific thing that we could do that would help in making the problem go away. When I asked what that was he said that we “could tell the seller that we were sorry that she lost this property and was going through this issue.” He wasn’t asking me to acknowledge that we had done anything wrong or had breached a duty. Rather, he wanted us to tell the seller that we understood why she was upset and felt bad that her things were taken. He said that in two weeks of discussing this issue with our agents, no one had expressed these feelings to the seller and that bothered her. So I, of course, told him how we sympathized with her and felt bad that she had lost some property she felt strongly about. I didn’t say it was our fault. I only said that regardless of how or why it happened, we felt bad that it did and wished she wasn’t having to go through this problem. With that, the dispute easily settled. That was the second time this week that this exact issue resulted in resolution of a dispute. Earlier we settled a major lawsuit after telling the plaintiff that we were sorry she had problems after moving in to her new home, even though we never said it was our fault.
I share this story because I think it can be helpful to you as you negotiate your deals and try to resolve disputes. Please understand I am not telling you to admit fault. In fact, you should NOT do that. But you can express sympathy and understanding. Sometimes that is all the client wants to hear. With that understanding they are often willing to move on and close your deal. So don’t ignore your client’s emotions. While this is business to you, it is “home” to them. So by understanding and acknowledging their feelings, you are more likely to solve a problem, close a deal and have a happy client. And that, of course, is good for all of us.
As always, please contact us with any questions
May 4th, 2012 at 6:58 pm
As you know, we are doing a lot of lease business in this market. In that context, we often find ourselves being asked by a prospective tenant why their lease application was denied. Please understand that this can be a very problematic conversation and you have to be very careful how you respond. After all, the Fair Housing Laws apply to rental properties and, as a result, the landlord cannot discriminate against a potential tenant based on their membership in a protected class. As a result, discrimination in a leasing decision based on gender, religion, age, familial status, race, sexual preference or national origin is illegal. These problems can come up in obvious and not so obvious ways. For example, not wanting to rent to a family with small children could be seen as familial status discrimination. Similarly, we recently had a lease listing near a university, but the landlord did not want to rent to students. While I don’t think that is familial status discrimination, the contrary argument could be made. Also, even if not a factor in your landlord’s decision, the prospective tenant’s membership in a protected class could cause sensitivity. So, even if a denial has nothing to do with my religion or sexual preference, if I have been subject to discrimination before, I might not believe your explanation.
As a result, if you are the listing agent, and a lease application is denied, please be very careful when you talk to the prospective tenant. When asked for an explanation as to why the application was denied, you should answer in one of two ways. First, and preferably, tell the tenant that you don’t know. Try to avoid getting an explanation from your landlord thereby allowing that answer. You are not obligated to ask the landlord for her rationale and, in that case, saying “I don’t know” is a truthful response and cannot be misconstrued. Next, if you have been told why the application was denied , and even if it was for purely financial reasons and was not discriminatory (which it should always be), still try not to give a reason. That is where problems come from. Instead, tell the tenant that the decision was made by the landlord and not you. Try to leave it at that. If pushed, just say you can’t talk about it. But stay away from explanations. They are the only way to get you, or your client, in trouble.
As always, please let us know if you have any questions
April 21st, 2012 at 6:56 pm
As you know, it is common in our market for the buyer to make a deposit equal to 3% of the property’s purchase price. This practice is, at least in part, related to the fact that by law, liquidated damages can be no more than that amount. As a result, especially when the parties make liquidated damages part of the purchase agreement, the seller wants a 3% deposit so they can have the maximum protection should the buyer breach the contract.
Of course, the issue we see in this regard arises in the context of the negotiations that almost always occurs between buyer and seller. As you know, in the normal course, the buyer’s original offer will include the 3% deposit. However, it is also true that most times the seller will issue a counter offer, increasing the purchase price of the home. The question is whether the seller also increases the deposit at the same time to keep it at 3% of the newly offered price. As you know, the boilerplate language of the counter offer form does not address the deposit, saying only that the “down payment and loan amount(s) will be adjusted in the same proportion as in the original Offer.” As a result, if the deposit is going to be increased by a counter offer, it needs be explicitly done. The counter offer needs to say, “Purchase price to be x and deposit to be y,” with y equaling 3% of x.
What does all this mean for us? Well, as a listing agent, I believe it is your responsibility to discuss with the seller at the time of counter offer. Make sure to include an increased deposit amount in every counter, so that the seller has a 3% deposit in escrow. You could also include language as follows in the counter: “Deposit to equal 3% of the final purchase price.” Either way, should the buyer breach, your seller will be fully protected and, more importantly, will not be angry with you.
As always, please contact us with any questions you may have.
