Real Estate Agent Pain

For all of those real estate haters out there who think that I and my colleagues are effortlessly collecting fees for selling property, here are a couple of anecdotes that you’re sure to enjoy.  After all, readers of blogs like Patrick.net seem to "get off" on anything related to real estate agent angst.  Well here goes because I’m deep in it right now. 

Twice in the past 4 months, I have represented buyers of very large residential purchases who had the transaction implode in the eleventh hour.  The buyers 4 months ago had signed the contract and provided the 10% deposit check only to call their attorney on the day the contracts were to be delivered and "kill the deal."  It took a while but I got over that one…it happens.  When people are spending in excess of $10,000,000 on a home, you have to appreciate "cold feet."  They ultimately decided that such a purchasing in this particular project just "didn’t feel right."  Just can’t argue with that.  If your spending that kind of money it better darn sure "feel right."

The second incident happened today to clients I have worked on and off with since 1997 also in the $10M+ price range.  Today, they were the very unfortunate receivers of a good, solid gazumping.  After a 10 day negotiation, a contract was drafted on Tuesday and sent to my client’s attorney.  Yesterday, I was consumed with this transaction as the seller’s agent insisted that a contract needed to be signed by the end of the business day Wednesday.  After multiple phone calls and conference calls, more than 100 emails to various parties, and my office hand delivering original contracts for buyer signature and back to buyer’s attorney, I still couldn’t rest.   Then I received confirmation that the contracts had been hand delivered to the seller’s attorney.  I later received email confirmation from both the seller’s attorney (via the buyer’s attorney) and the sales agent that the seller was "committed" to signing the contracts at 10AM today.  At 9:30AM I received a call from the seller’s agent that they received an offer this morning that was $1,300,000 over my client’s negotiated contract that they "committed" to sign.  OUCH!!!  The seller had refused offers as much as $1,000,000 more over the past week because she was "committed" to my clients.  But that extra $300,000 was the straw that broke the "committed" camel’s back.  My clients have since rescinded their offer, requested the contract and deposit be returned and the seller is proceeding with a new buyer.

Now I would be lying if I said this doesn’t sting…heck it aches.  After all, we’re talking big numbers here.  Having said that, what is bothering me more as the day passes is that even this moral and ethical seller had her "price" supporting the old adage that "everyone has their price."  I’m sure many out there are going to say, stop with the self-righteous BS, but isn’t that part of the problem with our society.  A person’s word is only worth what the next person is willing to pay for it.  And to prove that I walk the talk, my wife and I accepted 5% less than a higher bidder on our last sale because we had "committed" to the original buyer.  And I have many clients who have done the same but all too often money does indeed talk.

Of course I wish both of my clients had proceeded with their respective purchases but it just wasn’t "right" in both instances.  I will likely sell both of them something else so it’s not about me losing a deal as much as it is about how people do business.  In Manhattan, we have no binders.  A deal is not a deal until the seller counter-signs the contract and deposits the 10% contract deposit.  The time that lapses before that actually happens creates the "perfect storm" for gazumping. 

What has happened to a person’s word or a hand shake?  Sadly, it all too often doesn’t mean anything in today’s society.  It’s all about "show me the money" and that is unfortunate.

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7 Responses to Real Estate Agent Pain

  1. avatar Norm Fisher says:

    Awe man! That’s gotta hurt. Sorry to hear of these misfortunes. I’m curious about process in your area. Where I work we use a written “offer” which basically includes all details of the purchase. Once accepted, it forms a binding agreement and the seller and the buyer are actually “committed.” Lawyers only look after transferring the title to the buyer.

  2. avatar peter says:

    Doug,
    Tough luck. You win some you lose some.
    I think next time you lament how only money talks in real esate and business, you should look at how you conduct business.
    I’ve noticed whenever you have an exclusive listing you price it below comps, to draw alot of interest and create a best and final price auction.
    How is this any different than what just transpired with your buyer client.
    Someone offered more money end of story.

  3. Thanks Norm.
    Not looking for sympathy but appreciate it. Nothing binding at all hear in Manhattan until seller executes contract and deposits 10% in escrow.
    Peter,
    My practice of pricing property is indeed quite different than what happened in this instance. Firstly, to address your silly accusation that I underprice everything, I price in line with comps that are sold and closed and have signed contracts, not those that are currently on the market and priced by my colleagues (many of whom are over pricing because they fear their sellers and aren’t confident enough in themselves to trust their professional opinions) and my track record speaks for itself. Enough said on that subject.
    The difference between what happened here (the gazump) and my “best and final” scenarios (that work brilliantly for my sellers and frustrate people like yourself) is that once I and my seller accept an offer, it’s done! No “bidding wars.” In my best and final scenarios, bidders have one shot to put there best foot (bid) forward and that includes not just highest price but best terms such as contingencies, closing date, and the like. This is the ONLY way to truly let the market dictate the selling price of an apartment.
    And I wish you were correct but contrary to what you state, I and my sellers are not so fortunate to have all of my properties reach a best and final scenario. I also should add that I price both inline with market comps and in more traditional ways (with room for negotiation) depending on what my seller wants.
    Thanks for the opportunity to eleucidate my business practices. Greatly appreciated. I still maintain that a person’s word should mean something.

  4. avatar "Almost" the Buyer says:

    I just read your blog post about the apartment, and thought you might want to add my perspective as the gazumped bidder.
    As a general rule, people tend to cheat on ethics when they believe the violation has 1) become socially acceptable they wouldn’t be embarrassed to tell it to a friend or family member 2) can be kept secret, and there are no risks of disclosure; or 3) there is no multiple transaction requirement the violator doesn’t have to operate daily based on trust.
    The problem with residential real estate sales as a rule is that, essentially, each condition which encourages moral violations exists, most particularly the last one. The violator has no practical requirement which encourages moral behavior. One only has to behave in a fashion consistent with the law. Basically, if you are not a person of great personal integrity or great personal faith (presumably both), the temptation to cheat is simply too great. The only discipline against that is if the 2 principals know one another and have a meaningful relationship (personal or commercial) that encourages moral decisionmaking.
    Even when violators acknowledge violating, they will seek to provide a rationale even though we all know it’s just for the money. In this case, recall the hilarious email from the other agent referring to parental responsibilities justifying breaking a commitment, a handshake deal. Please.
    The bottom line is, nothing can be done. That’s simply the way the real estate market works. You gave the right advice, which was to hurry. We did. Then the only choice was to match or withdraw, and we withdrew. The only additional thing we could have done was to demand a signature that evening. In hindsight, that would have been wise. But if they chose not to sign that night, it would not have made a difference really.

  5. avatar Mark (Augusta GA agent) says:

    Dear “Almost” the buyer:
    Your view is the cold hard truth. I am curious as to your background (moral, ethical, career, etc.) Care to elaborate?

  6. Mark,
    I will obviously let the buyer answer your question but happen to know that he and his family are currently traveling abroad so it may be some time before he responds.

  7. avatar almost the buyer says:

    I am in the investment business. Not especially religious, though Jewish. Together with a partner, we manage our own company, with 50 people supporting us. It used to be called the LBO business, now everybody calls it private equity. I serve on several boards — some public companies and a couple of non profits, including a school and a foundation.
    In almost all of those settings, we wrestle with ethical and moral questions every day. We have 2 children, and we try to infuse them with values and morality. We want them to understand that ultimately one of their few real gifts is the value of their name, their reputation for integrity — and that it’s hard to secure, but easy to lose.

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