Buyer beware, listing broker’s duties

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You drive-by sign in front of a house for sale and call the number on the sign – or, you see there is an open house coming up and walk in and speak with the listing broker. You are excited and want to write and offer, and the listing broker says, sure, I’ll write that up for you!

You think you are being represented, but in fact, in this situation, the listing broker’s first duty is to the seller. They may even have an agreement that if they bring in both sides, they will receive a discounted commission. That said, they might want to move the property and convince the seller to take a low offer.

In this last month I have heard or been involved in this scenario three times.

One friend and client told me that he dropped his listing broker because she represented a buyer at such a low price, that he felt she wasn’t actually representing him, as she is supposed to do.

In the second case, I wrote a back-up offer on a property where the listing broker has both sides, and claims the older home should appraise at “offer price”, which to me means a price lower than asking.

The third situation was the hardest. Clients called me and wanted to see a condominium in a somewhat remote vacation area, and we all took a road trip over there. They were so excited that the property had a price drop after a year, and decided to write an offer that was almost full price.

While I was writing the offer, the listing broker (a one man operation) called and said he was showing the property to an investor, but the chances were slim that they would write. We turned our offer in that night to the listing broker using a solid conventional mortgage for second/vacation home. Lo and behold, he turned in an offer on his own listing the next day which was cash. As the cash offer was a quicker close, and had no appraisal, the seller chose that offer.

In my firm we are coached in best practices. When we are operating as the listing broker, we refer a buyer of our own to another broker if they want to write on our own listing. If we don’t refer, our managing broker presents the offer to make sure there is no conflict of interest and that the buyer is fully represented.

I was referred buyers to write on an associate’s listing a few months ago, and it went quite well as we did have the strongest (not highest), offer.

Give a chance, my clients probably could have converted the loan to cash, or taken out cash on their first home as a line of credit. However, as the property needed some work due to winter damage, we wanted a full inspection and an appraisal.

We’ll be watching that property to see what the final price is, and wait for the next, most likely better, property to come on the market.