Dear GHREB
I recently received this message, and wanted to share it in hopes of preventing similar situations in the future.
Dear GHREB,
Like you, I am a real estate agent working in the communities of Greater Hartford. I recently had an experience that has left me sad and upset, and wanted to get your take on the situation.
Over the summer I sold the home of someone that I have known for many years in a variety of capacities, reducing my commission on the sale because they were a friend. They were planning to buy their next place privately, so as a favor I also worked with them to value the property and suggest next steps that would protect their interests throughout the process.
At some point they visited an open house, and that’s where the trouble began. I don’t know exactly what happened at the open house, but a short time later they called to find out where their sell-side deal stood to determine if they could make an offer on the open house property.
It was a difficult conversation.
The potential buyers were told that the listing agent could negotiate a lower price for them than any other agent. We talked about how a listing agent’s job was to get the highest possible price for the seller. And we talked about how the seller is the one who accepts or rejects a price, not the agent. They believed that the listing agent knew the sellers would accept much less than the asking price, and that the only way to get the sellers to accept that price was to submit the offer through their listing agent.
During the course of the conversation I used their sale, in which I was the listing agent, as an example. I asked them, “Suppose I told a buyer interested in your place that they should work with me because I know how low a price the sellers will accept?” They said that they would be very upset because they told me that information in confidence. Yet, since they believed they were benefiting from “inside information” on the other deal, they were willing to work with the agent with questionable ethics.
I also asked them, “If you agree that the agent is acting in an ethically questionable manner on this point, how can you trust them to protect your interests in other aspects of the deal?” They responded that the price was so good that they were willing to take that risk.
At this point they had still not signed the listing agent up as their Buyer’s Agent. I proposed that I take them to see the house so that they would have independent representation. Since they were already talking numbers that they thought the seller would accept, they could make the exact same offer through me. Once again they said that in order to get the “best price” on this house they had to work with the listing agent. But that if this house didn’t work out they would definitely use me for the rest of their search.
With that I wished them good luck; there was nothing more to say.
The house went under contract, and I dreaded seeing the final closing price come through the system. As I feared, they did not come anywhere near the final price that they had been initially discussing. Once the closing credit was included in the calculation, the purchase price was equal to the average discount to asking price for homes in that price range, in that town. The listing agent did not help them get a price anywhere near what they had been talking about on the phone, delivering a completely average performance on price. Who knows whether or not the listing agent protected their interests in the other areas of the deal.
I later ran into my friends at a social event. They brought up the purchase again and apologized for not being able to work with me on the deal. I told them that I was glad that they got the home they wanted, and that they felt good about the price. I tried my best to be positive about the situation, but then they started talking about how the previous owner had made improvements at great expense and how the purchase price was at a huge discount to the cost. I felt compelled to point out that value is very different from cost, and that they knew better than to compare the two.
Thinking about the whole situation makes me feel sad for my friends. They’re in a position in which they may need to sell the home again in short order and they didn’t get the wonderful bargain that they imagine. A big part of the problem is that, like most people, they don’t understand how the real estate industry works. They were manipulated into doing something that was not in their best interest (skipping independent representation), and clearly did not have a logical conversation about how much the home was worth (offer price measured as a discount to cost).
I try to act in an ethical and responsible manner, and actions like this make me feel like a sucker. I went out of my way to help them with their sale and a potential private purchase and this is how I’m repaid? They believe someone they’ve met once more than they believe me? How can I keep this from happening again while still taking the high road? I would love to hear your take on this whole drama.
Thanks so much,
Disappointed in Greater Hartford
Dear Disappointed,
I’m sorry you had to go through that experience – it sounds absolutely horrible. If you believe the listing agent committed an ethics violation, then you should contact the Greater Hartford Association of REALTORs to see if there is any recourse. There is a grievance committee that deals with complaints made by both other agents and the public. Unfortunately, ethics violations are very difficult to prove.
I think you hit the on the main problem at the end of your note – it’s a matter of educating your clients and the public about how the real estate industry works. In this case, that listing agents cannot break their fiduciary duty to their sellers by disclosing private information, even if they are helping a buyer write an offer on the property. We’ve expressed our concerns about dual agency in the past and this seems like a good opportunity to link back to the post again.
Thank you for sharing your story so that we can use it as a springboard to discuss three additional topics.
1. Choosing Your Real Estate Agent: There are lots of real estate agents in Greater Hartford. Choosing one can be a challenge, but here are some tips and why it’s important to have an agent that you know and trust.
2. Cost vs Value in Real Estate: Houses should be valued based on comparable sales, not how much money has been spent to build or improve them. In fact, most major home improvements have relatively poor payback ratios – you don’t get out what you put in.
3. Real Estate Karma: We truly believe that over time people get what they deserve.
In the meantime, keep your head up. Your hard work will pay off, and at some point you will hopefully benefit from your good real estate karma.
Best regards,
GHREB
Dear disappointed in Greater Hartford,
My name is Susy Hurlbert and work for the Greater Hartford Association of REALTORS as the administrator of NAR’s Code of Ethics & Professional Standards program. I am pleased to see the topic of ethics discussed in a great forum like this blog.
A warm thank you to Amy and Kyle for recommending GHAR as a resource to report unethical activity within the REALTOR community. We are committed to strengthening our industry and our professionals. One of the benefits of belonging to GHAR is to ensure the ethical behavior of our members. Should this be a GHAR member in question, we are here to help. Please feel free to contact me with any questions at 860.561.1800 ex 226. Also, the forms can be found on our website: http://www.gharonline.com/downloads/Ethics_Complaint_Form.pdf
Here is some background. Your concern is valid and speakes to Article 1, Standard of Practice 9, which states that “The obligation of REALTORS® to preserve confidential information (as defined by state law) provided by their clients in the course of any agency relationship or non-agency relationship recognized by law continues after termination of agency relationships or any non-agency relationships recognized by law. REALTORS® shall not knowingly, during or following the termination of professional relationships with their clients: 1) reveal confidential information of clients; or 2) use confidential information of clients for the REALTORS® advantage or the advantage of third parties unless a) clients consent after full disclosure or b) REALTORS® are required by court order; or c) it is the intention of a client to commit a crime and the information is necessary to prevent the crime; or d) it is necessary to defent a REALTOR® or the REALTOR®’s employees or associates against an accusation of wrongul conduct. Information concerning latent material defects is not considered confidential information under this Cod of Ethics.
Please feel free to contact me at 860-561-1800, ext 226 with any questions regarding the Code of Ethics.
Susy- Thanks for your comments and for reading our blog. Hopefully this agent will reach out to you and share their story to see if anything can be done.
They’ll get theirs…