Bad Realtor
I recently received a message from a friend asking for some
insight. His friend had a condo on the market and was having trouble selling
it. Often when I get these calls
they are quite unremarkable; with some research I can clearly see that that the
property is over priced, or there is a glut in the market, or sometimes it has
only been listed only a short time and falls within the normal timeline for the
market in that particular area. Sometimes a listing is a very difficult ‘one
off’ type of property that is difficult to sell; a true ‘need the right buyer’
type of deal.
When I began my investigation however, I quickly realized
that in this case, none of the above held true. The condo was dramatically over
priced. The Realtor had access to several recent sales of similar size,
view/exposure, and upgrades none of which would have supported an asking price
nearly 25% higher than the previous highest sale only 4 months earlier.
My first question was ‘who and how was this price decided on
’? When the story began to unfold
it was a little shocking, however not something unheard of.
Simple scenario. A buyer is looking to upgrade but does not
have a Realtor. They meet a Realtor who seems very personable and
professional. They check him out
on the Internet. The Realtor has a
website and some web presence (later to find out it is the company issue
website and a basic social media profile set up by the office). There are
listings and buyer sales on the website, so it looks like he is and active and
busy agent. (Later to find out the listings are office listings and sales not
the individual agent.)
Note: I do not want to suggest that without a genuine web
presence that agents are unqualified, only that buyers and sellers should look
beyond the web before making a final decision. In fact I am certain there are
agents with phenomenal social media savvy who really are just that – a great
social media presence. I know
several nearly new agents who have amassed huge followings on Facebook, and
Twitter – it makes them great self-promoters – not great Realtors.
They decide to work with the agent and off they go looking
for a new property. Before long a
suitable property is found. The client asks the Realtor,
Q. “Before I
sign off on this, what is my place worth and can I afford this?”
A. (25% more than reality so yes)
Q “They want a
quick closing so how quickly can my place be sold?”
A
(Quickly! The market is great)
Q. Should I maybe sell my place first then buy this place,
or make it conditional on my place selling?
(No the seller
wont accept this - plus you don’t need to it’s a hot market) “
The answers received are based on lies, or incredible
ineptitude.
1. The
client’s property is overvalued dramatically
2. It
cannot be sold quickly because it is overvalued
3. If
you need to sell higher in order to qualify to buy a place – you definitely
should sell first! Or make it conditional on the sale of your place.
A few months later reality hits home. They now own a new
property that is outside of their affordability range. They are carrying two
properties and bridge financing is over and they cannot afford to carry both.
They need to sell at or below market value ASAP and their property is
stigmatized.
To top it off they did not qualify for the new purchase any
longer because the bank pre-approved them based on their current property
selling nearly 25% higher. They
had to take a new short-term mortgage at rates considerably higher than the going
5 year rate!
The ramifications of their agent’s actions have been costly
and stressful.
Moreover the agent locked them into a 1-year listing
contract! That alone should have been a reflag considering they were told it
would sell quickly. Technically he does not have to release them.
Protecting clients is about of managing risk. Uncovering potential pitfalls is
essential. There are no guarantees. The market environment is never static.
Prices, time to sell, as well as mortgage lenders requirements are just a few
factors that impact sales price and time on the market.
There is no magic set of indicators for determining who
possesses all the great qualities that are needed to be a successful and honest
agent, hence a solid plan of action which explains risk and backs up claims
with solid facts and figures is just as important as popularity.
Agents that I respect in the industry always prioritize
their client’s financial considerations. Miscalculations of affordability are
common. An Agents due diligence to
ensure their client is buying/selling within their means is an often overlooked
value; the excitement of viewing gorgeous new property and preparing an awesome
listing usually overshadows these mundane tasks.
From my perspective, however inglorious the financial aspect
seems, it is of the utmost importance because it not only protects the buyer
and seller but also protects the integrity and transparency of organized Real
Estate.
Bad Realtors hurt not only buyers and sellers but the
industry also.
D
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