ARE YOU ADVOCATING OR DOING WHAT COMES EASY?

When it comes to being truly different in the world of real estate, being an educator first, then an advocate, then a real estate agent is the order we here at SREI ascribe to be most fitting. 

In recent years it seems to have become fashionable for brokerages and agents to try and squeeze every last dollar out of a transaction at all costs, whether it’s actually in the clients best interests or not. You may be saying to yourself, “that’s not me.” If so, please take a true and deliberate inventory of your actions and their consequences. 

Here is an example. Mrs. Brown has lived in the same home for 50 years. She was recently widowed after caring for her ailing husband for the last 10 years. As such, the home has not been as lovingly cared for as it once was. It’s cosmetically dated, there are a few dripping faucets, and the shrubbery has taken over the yard. The roof isn’t leaking, but likely isn’t going to pass muster with the inspectors and there is some peeling paint under the eaves. Otherwise, this home has “great bones” and is in a wonderful up-and-coming neighborhood with great schools.

As an agent, you walk in and immediately realize that this home is going to be a tough sell for any first time homebuyer or even move up buyer with a busy life. They simply won’t want to put the time, money, or elbow grease (is that even still a thing?) necessary to make it the home of their dreams. So, you begin to discuss the options with Mrs. Brown. 

You explain that she can sell the home as-is, or she could make a few repairs and cosmetic changes (i.e. fix faucets, paint, take down some wallpaper, and replace carpeting) to make the home more appealing. You also mention that homes in the area that have been renovated are selling for crazy-high prices because purchasers who want their kids in that school district are willing to pay for homes that are HGTV worthy. 

Mrs. Brown, while seeing the merit and wisdom in making some long-overdue updates, explains she is exhausted and would rather walk away from this house and begin her new life at a retirement community near her daughter in another state. She doesn’t really care how much she gets for the house. 

As her agent, you are now faced with a variety of tasks and decisions. One would think this to be fairly easy – we know our role, right? We understand the Code of Ethics of NAR and we have even been tested on it. We also know that as moral human beings, we must care for those who may otherwise be vulnerable and protect them from forces that may try to take advantage.  

So, why all the mental chatter? Let’s listen to the conversation and what’s happening inside the heads of agents, brokers, and investors. 

Agent Alice: Mrs. Brown is my client and I know my job is to serve her interests. She says she just wants to walk away, but my job as her agent is to also make sure she gets fair market value for her home. I need to determine a price for this home that will attract buyers and maximize Mrs. Brown’s equity. 

Broker Dave’s email: Hello lovely agents! Don’t forget that we have a wonderful new program that will match your sellers with eager and capable investors who are ready, willing, and able to offer them fair market value for their homes, ensuring you get an easy sale and earn your full commission! 

Agent Alice: Wow, it sure would be easier to simply put Mrs. Brown’s listing in front of all these investors and get an offer. I know she would be thrilled because it would be fast and easy. I can charge her 4% instead of 6% which is what I would normally do if I put it in the MLS. I make more, she pays a little less, and everyone wins. 

Agent Brock: Hi Agent Alice. Let me tell you about a listing I just sold. It was a pretty outdated home but I put it in the MLS and we had 7 offers. Most of the offers were investors, but a couple were from neighbors in the area who have family members they want to have nearby. I don’t like my family that much! But, anyway, the house contracted for a lot more than I would have ever expected and we close on it in 30 days. It’s a great week! 

Agent Alice: Interesting. I wonder if Mrs. Brown’s house would have similar results in the MLS. The downside is that I have to get photos taken, enter all that data in MLS, deal with all those showing requests and inquiries, and there is no guarantee that she will get more. I will probably only get 3% if I put it in MLS and if I use that new program our broker is pushing, I may make 4%. I’m so conflicted. 

Broker Dave: I’m glad you came in to talk with me about your dilemma, Agent Alice. I guess if I were going to advise you, I would say that you should charge the owner the full commission and call all these investors in town who keep emailing and calling looking for good deals. Think about it, you can make a few phone calls and get both sides of the sale. Just tell them to make their highest and best offer and based on what you said your client wants, she should be thrilled. It’s the best option for our office too! 

Agent Alice: But what about representing Mrs. Brown? Shouldn’t I tell her that if we put it in the MLS that we could possibly get more money for the house? 

Broker Dave: Remember, based on our office policy, you don’t “represent” Mrs. Brown. You have to stay neutral. It’s her decision to decide what to ask for her house and whether or not she wants it in the MLS or not. You can’t give her advice under our brokerage agreement. It’s your job to give her her options and then let her choose what is best for her. 

Agent Alice: I guess Broker Dave is right. I can’t really give Mrs. Brown advice. She is a smart woman and her daughter can advise her about these things. I provided her with all the reports. She has all the numbers and her options in her folder. Besides, Mrs. Brown doesn’t seem too concerned about the price anyway. They have plenty of money. When I told her what I thought the as-is price would be, it was actually higher than she expected and she seemed pleased. I can make 6%, she can get a fast sale, and these investors will really appreciate getting first crack at the property. Maybe the investor who buys it will list it with me after they fix it up and I can sell it again for him at the higher price point.

Agent Alice’s conscience: I’m pretty sure your job is to make sure Mrs. Brown gets the best price you can get her for an as-is house. She may not really know the market and that’s why she hired you to begin with. She trusts you. Her friend told her you were honest and would do the right thing. Are you doing the right thing? Is selling to an investor because it’s easy and you make more money the right thing to do? Shouldn’t you put it in the MLS and see what the market will do? Isn’t’ that how values are determined…in an open market where everyone has a chance to make an offer? Did you even know that your brokerage doesn’t allow you to represent the seller in their sale as a fiduciary? I thought that is what agents did…looked out for their clients, especially the inexperienced ones or those who didn’t really understand the way real estate works. Who are you ultimately looking out for here?

Broker Dave: Hey, Agent Alice, I was talking to my friend yesterday after work and he is looking for a flip in that neighborhood you said you had a house coming up. He is a really great guy and does nice work. You should call him and give him first dibs. He would pay cash and close quick. He may even be willing to pay you a finders fee on the buy side so you still get 4%. I would ask him. Here’s his number. 

Agent Alice: I am so confused. Ugh. Selling real estate isn’t what I thought it would be. 

___________

Why is Agent Alice so confused?

Agent Alice is confused because she lacks clarity about her role and job description. She hasn’t evaluated her brokerage arrangement and whether it is a fit with her own values. She hasn’t fully studied the REALTOR code of ethics, and she isn’t sure if she fully believes in karma. 

The fact is, Agent Alice should really have no confusion whatsoever. Here is how Agent Alice’s mental dialog, if she were clear, might sound: 

Agent Alice: I’m going to price Mrs. Brown’s home to the best of my ability based on the statistics of recent sales in the area. I am going to have professional photos taken, put the details in the MLS, and organize any and all offers in a way that I can help Mrs. Brown evaluate the best option based on her goals and expectations. 

Hopefully, if I get it right, there will be several offers and that will help both Mrs. Brown and I both better evaluate what true market value in today’s market looks like. Yes, I know it will be extra work, but it’s the right thing to do. 

Once I have the offers compiled, I’ll sit down with Mrs. Brown (and her daughter if Mrs. Brown would like) and provide guidance about which offers appear to be the most solid, would bring her the highest price, and that would help her achieve her goals. 

After the house is sold and closed, I’m going to change brokerages. My broker clearly doesn’t have the best interests of my clients in mind. If all he cares about is how much commission we make as an office and ensuring we get deals done quickly and efficiently, this may be the wrong place for me to operate. Ultimately, I want to do the right thing for my clients. I want to make sure they get the equity they deserve from their homes. It doesn’t feel right that I should leave it up to a homeowner who is a recent widow without experience or understanding of selling a home in today’s market to make these decisions without some guidance from someone who knows and understands the best way to maximize her equity. 

She deserves better. All clients deserve better. I deserve better.