Emergency please help - Posted by Adrian

Posted by Ed Copp on July 13, 2003 at 21:05:39:

Yes johnboy does have a point. There could be cases where the agent might be held accountable for directing a seller to an excessively low price. The reason that an agent might do this is obviously for a quick sale, and thus a quick commission. This situation is very rare, but not impossible.

You are correct there are usually at least two prices. A cash price, and a price that takes financing into play. There is also a possibility that the seller may have paid some other expenses in the transaction, such as closing costs.

You mention properties falling out of escrew because the apprasil is short. This is usually written into the contract as a contingency. The offer to purchas is not a contract until the contengency is removed, so if the buyer can not get the financing then there is no contract. This happens a lot more often than the seller listing too low. Often we just can’t get a property sold because it is not worth the asking price.

Emergency please help - Posted by Adrian

Posted by Adrian on July 12, 2003 at 18:05:33:

I anyone can give me advise on this I would greatly appreciate it. My Mom is selling a house that she paid 230,000 for in 97. The market has gone up dramatically and she is about to go to settlement on Tues. The problem is our neighbor just sold his place without an agent for 330,000.
My Mom has the most incompetent real estate agent I have ever seen. Is there anyway she can get out of this deal and get a new agent to resell the house. The contract says if the deal does not go through the buyer will get back all monies put in which is fine. we don’t want to walk away from $40,000. Please let me know what her options might be. Thank you

Re: Emergency please help - Posted by Lee

Posted by Lee on July 17, 2003 at 24:50:39:

Heck, I would sue for malpractice if you can prove that your agent is incompetent, otherwise swallow the pill.

“Education is what you get from reading the small print; experience is what you get from not reading it”

I hate to say it there are a lot of incompetent agents out there who can’t even work the MLS website.


Re: To address your private e-mail - Posted by Ed Copp

Posted by Ed Copp on July 13, 2003 at 11:56:08:

It is never, I repeat never the obligation of the agent to set the price. This is always, I repeat always done by the property owner. Your mom set the price, and the agent did the job as contracted. End of story.

We all make mistakes and sometimes they are costly. Some would call that a seminar. Your mom may have lost some dollars, this happened because she was not properly informed when she decided how much to sell the house for.

You seem to think that your mom is entitled to just back out of this deal. This is not the case, a contract is a contract.

Lets suppose that all the “he said, she said” information that you have is absoultely correct. Lets also suppose that the buyer did his homework and had all the facts. Then at this point he will suffer a loss of $40,000 if your mom backs out. Why should the informed buyer be held liable for your mom’s lack of knowledge on this matter?

I contend that the buyer has a right to close, if the contract is agreed to, even if your mom sold for less than full value.

Re: Emergency please help - Posted by Carmen_FL

Posted by Carmen_FL on July 13, 2003 at 11:22:41:

Not an attorney, but I am a real estate broker in Florida. I don’t know whre your mom’s house is, so I can only be general.

I understand that you are unhappy with the agent; however, we don’t know enough to know who is “wrong” (if anyone) here. What I can say is this: the time for all this hand-wringing would have been 30 days ago or whenever the contract was signed; or even before that at the time the listing was taken. Hiring an agent does not remove responsibility from the seller for having good common sense, and checking out a few things. Did your mom interview several agents, and they all gave her the same price range as comps? If so, they are probably right. Just because someone is “asking” a certain price does not mean they are going to get it. This is especially true of FSBOs. And as was stated before, people have been known to lie.

Let’s assume for the time being that no matter what, your mom wants to cancel the contract and try to get $330K for it. The following can happen:

  1. She would more than likely still owe the brokerage the 6% commission or whatever was agreed, since they brought a party “ready, willing and able” to close the deal, and she accepted the offer. If she does not pay, the broker can sue her. Paying it would cost her $17,400. If she listed with another agent anyway at $330K, she would owe that second agent another $19,800. There’s your $40K right there, huh? Would a broker sue? I don’t know. For a $3,000 commission, maybe not. For $17,400, I know I would.

  2. The fact that you believe the agent is “incompetent” is irrelevant right now. If you or your mother were unhappy, you should have canceled the contract or discussed it with the broker prior to accepting an offer. What if your neighbor had never told you he had sold his house until Wednesday? Would you have been happy to take $60K away? Is it just “Jones envy” speaking now, or do you really think you’ve been purposely flim-flammed by the agent? You realize of course that the more the house sold for, the more the agent would make, so they have an incentive to sell the house for as much as possible.

  3. Read the contract. All my contracts state that the buyer has a right to get their money back if the seller defaults, as well as the right to sue for “specific performance” (that is, force her to sell the house to them). Will they do it? I don’t know. They might, especially since they may know the house is worth more. They could cloud title, and in the end, your mom may be ordered to sell to them. In any case, if the buyers really want the house and are savvy, it could cost a pretty penny, not to mention time.

  4. If you did cancel the sale, relisted, and tried to sell it again, let’s say you got an offer of $320K. It could take 2-6 months to re-sell the property. If your mom is paying $2,300 a month, that’s another potential $4,600 to $13,800 she’d be paying (mostly towards interest), not to mention the proration of the taxes, etc.

Taking emotions aside, adding up all the potential costs, it sounds like she’d be making about the same selling for $290K now, rather than holding out who knows how long, possibly paying 2 commissions, facing possible suits from both the brokers and the buyers, and paying the mortgage interest, taxes and insurance for another few months.

She should also take into account the moral and ethical implications - she is playing with other people’s lives and money. The buyers have spent a bit of money getting the mortgage, appraisals, inspections, surveys, and other necessary paperwork; they’ve probably given notice at their rental or sold their own house, have hired movers, etc. They have probably switched their phones, utilities, etc. If they have children, they’ve probably planned the move so the kids can get settled and into the right schools on time. So if she does decide to go the route of canceling, at the very least I would offer to reimburse the buyers for all their costs and inconvenience. This could stave off a suit.

If the risks are worth it, then if she refuses to sign, then there can be no sale (obviously). So although she is obligated, she could walk away. The risks are financial, and there is no “defaulted seller’s jail”.

Re: Emergency please help - Posted by Ed Copp (OH)

Posted by Ed Copp (OH) on July 12, 2003 at 20:06:23:

If the settlement is tuesday, let me suggest that somebody did do something.

It looks like an agent got a listing. Then it looks like someone was shown the property and made an offer. Now it looks like your mom accepted that offer.

The time to cry foul was before she agreed to take the $290K, and no it is not the agents fault. If she was unsure she should have asked for comparables before she agreed to accept the offer. Your postings really do not say much. They do a lot of finger pointing, however. We do not have much to go on here as far as detail. That is good, because we are not lawyers.

There is an important lesson to be learned here and that is that if you need a lawyer, you should hire one. It would have cost very little for your mom to have a lawyer look over the offer before she signed it, a lot less than $40K I would think.

Now contrary to popular opinion, no two houses are alike, as no two transactions are alike. You are offering hearsay information here. There is no way for us to know if your information is correct. Somebody paid $330K for something, is this true? Who knows for sure? The appraiser said to someone that the house was worth more, so was an apprasil done? Who knows?

If there is a settlement date and time, it looks like the transaction is what we call a “done deal”. This means that if your mom refuses to close the commission will be owed to the brokerage that the agent is associated with. So that is the option she can pay the commission which it appears has been earned, refuse to close, and then sell the house for $330K (maybe).

Good luck.

Re: Emergency please help - Posted by Arthur

Posted by Arthur on July 12, 2003 at 18:49:50:

So, i assume your Mom sold her house for $290k?

Well don’t forget to take these points into account:

  1. Are the 2 houses the same? Perhaps they have an extra room, highly decorated, etc.
  2. How do you know the person paying $330k is not overpaying?
  3. Is your mom part of a chain? I.e. is she selling to buy something else.
  4. Have you spoke to other agents? Call some up and ask for a valuation.

As for getting out of the deal, i guess you would have to check any documents you have signed to date to see what clauses there are.

Re: To address your private e-mail - Posted by JohnBoy

Posted by JohnBoy on July 13, 2003 at 13:07:57:

While it may never be the obligation of the agent to set the price, there are sellers that have no clue as to what their property may truly be worth. Many sellers put trust in the agent to advise them as to how much their property is worth.

So lets assume a seller calls on an agent to list their property. The seller has no idea what the true value of their home is really worth. The agent informs the seller that their property is worth x amount. The seller accepts the agent’s professional opinion that the property is worth x amount. The agent is suppose to be a licensed professional and know the fair market values of property in their area. Even if the agent is unsure, they do have access to pull up information to verify the market value.

So the seller agrees to list with the agent at the price the agent suggests the property would sell for, stating x amount is what the fair market value is. Then a buyer comes along and enters into a contract to buy at that price. Now the seller discovers their property is really worth a lot more than what the licensed professional agent has told them.

I agree the buyer should not be held accountable and their contract would be enforceable. However, it would seem to me that the agent was negligent and wreckless in telling the seller their property is worth x amount when it is really worth a lot more. If we’re talking about a property being worth $40k more than what the agent told the seller, where the seller has relied upon the agent they hired, that is gross negligence and wreckless on the agents part. This is one of the reasons an uninformed seller contracts with a professional to sell their property. They depend on the agent to provide them with factual information pertaining to the fair market value of their home.

So if the agent tells the seller their house is only worth x, and that is the price they suggest the seller list the property for, and the seller has relied on the agent’s professional opinion, being in the business of selling real estate, then it would seem to me the agent could be liable for negligence by grossly underestimating the property’s fair market value. The agent should have verified the value with comparable comps, which is readily available to agents. Failure to do so is gross negligence on the agent’s part in my opinion.

If this is the case, then it would seem to me the seller could have a valid claim against the agent for being negligent.

Are agents allowed to tell sellers their property is only worth $40k less than what it really is? Are they allowed to knowingly let a seller depend on their professional opinions as to what their property is worth when it is really worth $40k more? While it may be the seller that sets the listing price, in many cases that price is set on the recommendation of the licenced agent’s professional opinion, which in my opinion, the agent should be held accountable if their professional opinion is grossly underestimated. Especially if comparable comps that were available to the agent proves the property was listed $40k under market value.

I would find it hard to believe and agent could just tell sellers their property is worth $40k less than what it really is, when comps show otherwise, and then just say, oh well, you should have done your homework Mr. Seller. You were stupid to rely on my professional opinion. I just list the property. I’m not responsible for giving you false information, even if I knew it was false when giving it to you. I just wanted to get a fast sale. Next time, don’t be such a sucker!

My view - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on July 13, 2003 at 18:04:47:


I think you make a lot of sense. However, I think your math is wrong. If the owner sells through a broker she will always have to pay one commission. If she withdraws and sells at a $40K higher price she may only pay one commission if the first agent does not sue. So that would be almost $40K more for the seller. If the first agent does sue and wins, the seller still would be about $20K ahead. Also, a compromise with the agent might make the number be between $30K and $40K more for the seller. All this assuming that the market value really is $330K. That is certainly not a given, it seems to me.

In general, I’d think she would be well advised to complete the deal as agreed.

Good InvestingRon Starr****

Re: Emergency please help - Posted by Sharif

Posted by Sharif on July 14, 2003 at 09:53:45:

Leave it up to good ol Ed to speak up for an incompetent realtor.

Chances are, a lawyer would not have been able to advise the buyer as to the true matket value of the house. That was the job of the incompetent realtor you feel obligated to defend.

Bottom line: A seller trusted the realtor and got screwed out of some big bucks as a result. No suprise here…

Re: Emergency please help - Posted by Adrian

Posted by Adrian on July 12, 2003 at 19:26:48:

  1. Yes the houses are all the same in this community
    2)No they are not overpaying we are now finding out that all off the houses up for sale are going for around that price. plus the fha appraiser came out and told the agent she could get a lot more but he would not give the appraised value. She had an incompetent agent who gave her nothing and did nothing. she should have checked comps but she did nothing.

  2. No she is not selling to buy anything else (right now)

4)she is now calling other agents to see what here options are.

thanks for response

Re: Incomplete picture - Posted by Ed Copp

Posted by Ed Copp on July 13, 2003 at 14:13:46:

It is real difficult to post properly when I keep getting private e-mails from her.

She seems to think that we should get behind her because as investors “we all specialize in backing out of deals when money is involved”. She must have me mixed up with Tony Suprano. I don’t know about the rest of you but I just want a nice quiet business. If someone is ignorant of the facts, it is not my fault and I really don’t want to pick up the tab for thier ignorance. This is especially true when greed seems to be thier only motive. Ignorance and greed are a terrible combination in the business world, unless you are a lawyer and they are your client.

Re: I see - Posted by Ed Copp (OH)

Posted by Ed Copp (OH) on July 14, 2003 at 18:50:15:

your mind is already made up.

No sense confusing you further with facts.

Re: Emergency please help - Posted by Kristine-CA

Posted by Kristine-CA on July 12, 2003 at 22:42:10:

Adrian: please take this in the helpful spirit intended. Your mother should not be consulting other agents to see what her other options are. Agents cannot give her the legal advice and counsel she needs if she is intending to break a contract. Depending on the contract, it is very likely that the buyers have a right to buy and that your mother is in no position to just cancel the contract because she feels like it. At the very least, the contract probably contains a mediation agreement if the parties involved have a dispute–for example, if the buyers want to buy at that price and your mother changes her mind.

Your mother needs a lawyer, pure and simple.

Out of curiousity, what was the FHA appraiser doing at the house? Does FHA go as high as $290K?

Sincerely, Kristine

Re: Incomplete picture - Posted by Kristine-CA

Posted by Kristine-CA on July 13, 2003 at 16:19:28:

Ed: I received several private emails regarding the original post as well. The issue does bring up a question for me.

Properties often fall out of escrow because the the lender’s appraisal is lower than the purchase price. Or the seller changes the price to accomodate the loan. Now, a seller can’t hold the agent responsible for that either, could they?

This is tricky, this heresay information about what other properties sold for. Where I am there are two sets of prices: the conventional loan price and the seller carry back paper price. And the difference is often more than 10 or 20%.

Does the seller in this case really know the sales prices (and terms) of comparable properties? Or is it that one property that sold for 40K more that is getting to them.

I am glad I am not an agent. I don’t understand how an agent could always get the comps right–there are so many variables. Does JohnBoy have a point? Is helping the seller set the price too low someting that the agent can be held accountable for?

Sincerely, Kristine