Posted by Eduardo (OR) on February 15, 2000 at 22:06:55:
Glenn–
Up until about 10 or 15 years ago it was the case in most States that the listing broker worked for the seller. The laws have been changed since then and in many States, perhaps most, real estate agents are now considered “facilitators” instead of agents of the seller. This change came about as a result of lobbying by Realtors who didn’t want to be held accountable under agency law. In these States primary fiduciary responsibility is no longer owed the seller alone. So here the listing broker is NOT violating r.e. laws or Realtor ethics in negotiating on behalf of both parties. He is trying to put a deal together without owing allegiance to either party OR the one who pays him. (In my opinion, the old way was better.)
Contacting the owner directly on listed property without the listing agent’s knowledge is risky because of the following possibilities: Seller is related to agent; seller hires agent because he/she does NOT want to be dealt with directly, seller and agent have an ongoing relationship (such as friends or agent has sold other properties for seller over the years;–for whatever reason, seller knows and trusts agent). For a beginner (who asked for advice here) to attempt to insinuate himself between seller and agent during the listing period is indeed very risky if the goal is to buy the property at the best price. Much better to either work with the agent or wait until the listing expires to contact the seller.
I would agree that I would want to be present when my offers are presented, but I am an experienced investor with an extensive knowledge of negotiation techniques. If the object of the beginner in this case is to acquire this property as opposed to learning how the “mating-dance” works in general, he should stay out of the process and let the agent handle it. Nothing scares sellers more than detecting inexperience in would-be buyers. Good agents can soothe these fears. There is more in “how you say it” than in “what you say.” --Eduardo
Posted by scottny on February 15, 2000 at 09:31:12:
Hi all,
I’m a newbie, and still haven’t culminated my first deal yet. However, I recently placed a bid on raw land in PA for personal use(we plan on building our permanent home on it). The broker told me he would draw up the paperwork and send it to me. When it arrived, it was a completed sale agreement. I assumed(stupidly) that the offer had been accepted because a sale agreement was sent to me so I contacted and retained an attorney. When I asked the broker if the offer was accepted, and he said he hasnt presented it to the sellers yet because he needed the signed contract. I informed him that my attorney advised me not to sign anything until a price had been agreed upon. The broker absolutely refuses to tender my offer to the sellers verbally, stating that he will only do business if its in writing. I’ve already spent money for an attorney, not to mention several hours with the paperwork, and I feel the broker should at least have the courtesy to verbally forward my offer to see if it will be accepted. Can a broker refuse to forward my offer like this? I can get the sellers direct phone #, so should I contact them directly if the broker continues his shenanigans? Thanks for your help…
Posted by Eduardo (OR) on February 15, 2000 at 18:06:47:
Hi Scottny–
In all 50 states (somebody want to prove me wrong?) an offer to purchase real estate is REQUIRED by state law to be in writing to be legal. As the man said below, verbal offers aren’t worth the paper they’re written on–anywhere! In your case, you must have confused your attorney because I don’t believe he could have misunderstood this legal requirement–unless, of course, he is not a real estate attorney, but does wills or divorces or something. But then you wouldn’t hire an attorney to assist you with a real estate transaction if he was not proficient in this area would you? Everybody (except the man from Florida below) knows that in real estate, where licensed agents are involved, all selling prices are arrived at by means of written offers and written counter-offers. Offers themselves do not commit you to anything unless they are accepted (in writing) in which case they turn into binding legal contracts. So to summarize, the broker is right in this case.
Point 2: If you are going to work with agents (as opposed to working directly with sellers), you should not do things to irritate them. Many would be investors don’t seem to get this important point. You are trying to get the best price possible and the broker is submitting your offer to the seller often without you being present. The psychology of the situation is that he is not going to go out of his way to negotiate a better price for you if you are causing him trouble. Contacting the owner directly on a listed property is very risky in this regard. You may find that you end up paying for it. At least this has been my experience in having seen hundreds of transactions over the years. There are ways, but they require some sophistication. good luck! --Eduardo
Posted by Jim IL on February 15, 2000 at 16:42:14:
Scott,
To me, an offer that is only verbal is not even worth the paper it is written on.
Write up an offer and send it to the RE agent.
Why on earth your attorney told you to not sign an offer is beyond me?
Just make sure that you have some clauses in your offer that allow you to control it.
Perhaps a time limit on how long the offer is good and a clause that says when the earnest money will be paid. (I usually put in that earnest money is paid within 3 days of offer acceptance.)
And, include some clauses that allow you to walk with only the earnest money being lost. That is called a “liquidated damages” clause.
And since it is land, not a home, an inspection clause may not work.
Perhaps a clause stating that you have some many days to get your “partner” to approve the deal, or a financing clause.
Whatever you do, if it is a good deal, and you want the land, get it in writing.
nothing to stop a buyer from contacting the seller directly, but if exclusively listed then the seller is bound by law to pay the commissiion even if the buyer and seller deal directly.
hth
David
Posted by Bill K. - FL on February 15, 2000 at 11:07:28:
Scott,
You fail to mention if the broker is the listing broker of the property or a cooperating broker. Who is the broker representing? If the broker is the listing broker (has an agreement with the seller to sell and be paid a commission) unless there is a clause in the listing agreement between seller and broker stating that verbal offers need not be presented then the broker must present yours. Most likely,there is no clause. A favorite realtor ploy is to get your deposit, put it in escrow, and then try to sell you something else. They figure once they have your $ you will be more likely to stick with them. Maybe this is why your atty advised you not to sign anything. (first time I have heard of this). What I would do in this situation is write up an offer with a short acceptance time (24hrs) give a small deposit (no more than $500 which shows good faith with more upon acceptance if your original offer is accepted by the seller and you planned to put more down anyway). Most brokers are given a time limit of several days before they have to put deposits into their escrow accounts. Instruct your broker to wait 24hrs for the acceptance before depositing your check. Now I’m not from PA and will be the first to admit I’m not an expert in that state but you might find reading the laws that unless it is written in the listing agreement to the contrary, a broker must present all offers (when they are the listing broker).
If your broker is the cooperating broker (does not have the listing) then no such obligation exists. Just find another broker that will work with you. Also,to make sure your offer was even presented have the seller put in writing that your offer was presented and refused if you are told there is no counter-offer. Maybe someone from PA could clarify the rules existing in that state.
Ever heard of an oral contracts? - Posted by Bill K. - FL
Posted by Bill K. - FL on February 15, 2000 at 22:09:50:
Verbal offers and some oral contracts are perfectly legal here. I can prove you wrong in FL where I have my brokers license and know all the techniques of RE salesmanship. I was just trying to give an honest (not RE salesperson BS) opinion of the situation.
Posted by Glenn OH on February 15, 2000 at 20:23:09:
You sound like a real estate agent. What kind of BS is it that you would represent that “the psychology of the situation is that he is not going to go out of his way to negotiate a better price…”? By law, the listing broker works for the seller. If he tries to negotiate a “better price” for you, he is violating his real estate laws and realtor canon of ethics. How is contacting the owner directly “very risky”? What are you going to end up paying for? You have no contract with the listing agent, the buyers does, so if anyone pays, it will be the seller, just like he always does. If you want to get around the possibility of your offer being presented in a poor light, require in the offer that you be present when it is presented to the buyer. Since by law, the agent must present all WRITTEN offers, you can report him to the state if he refuses.
As far as the original question - get yourself a real estate attorney, because every attorney should know that RE offers must be written to be valid. Thus, the contract the realtor wants you to sign - I assume - is not signed by the seller, therefore it is just an offer form that will become a contract when both parties sign it. Go ahead an make your offer, with a small ($100) earnest money check, to be deposited only after the contract becomes valid. Make sure the contract has a few reasonable weasel clauses in it (I’m sure it doesn’t now), then send it on to the realtor to present.
I am not an attorney but I don?t think that you were exactly accurate when you wrote ?In all 50 states ? an offer to purchase real estate is REQUIRED by state law to be in writing to be legal.? I don?t think that an offer to purchase real estate must be in writing in order to be legal. As far as I know, there is nothing illegal about verbal offers. I do, however, believe that in order to be ?ENFORCEABLE?, offers must be in writing.
Perhaps Bronchick or one of the other lawyers who frequent this site can clarify this for us.
Other than that one minor point, I agree with everything else that you wrote in your post. Very good advice about working with agents.