By Thomas A. Early, MCEBA
I appreciate the opportunity to submit this article in follow up to the article that appeared in the March issue of our magazine, Short Sale? Buyer, Seller and REALTORS® Beware!, written by Donna Grove.
Disclose! Disclose! Disclose!
The single most important word in Donna Grove's article is the word "DISCLOSE". I would really like to reinforce Donna Groves point about advance disclosure by adding that if a listing broker fails to disclose to the agent of the buyer that an offer on the property will require approval of any third party (and not just a lender) he is, in effect, creating the equivalent to a head on collision just looking for participants. One of the first questions the buyer who suddenly finds himself in this position will ask me is "how can the listing agent get away with something like this?" Spending millions a year on a campaign (NAR) to improve the image of REALTORS® will, in my opinion, be a total waste of money when this consumer - for the next 5 years - shares his experience with everyone with whom he has the opportunity.
My question is, should not the short sale listing be handled the same way that we handle the 3rd party relocation? In a RELO, the listing broker always discloses the transaction will require approval of a third party-- and that disclosure should happen no later than first contact with the agent of the buyer. When that third party is going to be involved in the decision-making process - it is a pertinent fact - known by both the listing broker and his seller -- and such a pertinent fact MUST BE DISCLOSED.
The Truth Will Out
These are the words of William Shakespeare in The Merchant of Venice, and they apply just as much today. When the disclosure of the short sale is not made in advance of the contract, ramifications to the buyer will need to be explained to the buyer "after the fact." In other words, you can't keep the secret forever, so why would you not disclose it up front? If the listing broker has disclosed in advance the fact that a third party will be involved in the decision making process, I will have had advance opportunity to sit down with my buyer and explain all the possible ramifications.
The other truth that will out - is the offer of compensation in the MLS. If the listing broker has offered X% in the MLS, and later comes to me with a sad story about this being a short sale and that the bank is cutting commissions, I will say to the listing agent "it sounds like YOU have a problem." I will also say "your offer of compensation in our MLS is X%, and I have no reason to accept less". If YOUR client is not going to pay the commission you expected, you have a problem with your client - I would suggest you solve your own problems without involving me - or my client."
Short Sale or Not - How I Get Paid
With every client, I use an exclusive buyer agency agreement that obligates my CLIENT to see to it that I am paid. Yes, generally I get paid through the offer of compensation in the MLS. However, if the co-op compensation the listing broker has offered gets reduced below my agreement with my client, for whatever reason, it means my client must either: (1) find a way to pay me the compensation agreed to in our contract, or (2) move on from the transaction and let me find them a different property to buy.
It is both my fiduciary and agency obligation to give my client all information that comes into my possession, whether I see it as pertinent or not. If I had received, in advance, the disclosures that the MLS Committee recommends be made - that the property may be subject to short sale, and even further that there may be a reduction in the commissions to be paid, my buyer and I will have had the opportunity to resolve the compensation issues in advance.
Short Sale or Not - My Job as the Agent of the Buyer
When I have done my job as the exclusive agent of the buyer, I will have identified target properties from the entire real estate market (MLS, FSBO, short sales and foreclosures, etc.) that might meet the buyer's requirements. I will have helped identify good conditions as well as the defects in those properties. After preparing comparative market analysis, I will have helped the buyer negotiate the best price. And with an eye on the time constraints in the contract, I will have assisted the buyer through every step of the transaction. If the buyer is one that can plan for, and wait, the additional time the short sale is likely to require for approvals and closing and if we have negotiated the best price on the right property, the buyer will be happy with the purchase. Frankly, if the potential for reduced commissions is known before we have negotiated, and the buyer can plan for those costs at closing, the buyer will not be unhappy about those costs.
It is my job, as the agent of the buyer, to make sure that the buyer is a happy fully educated and informed consumer. And that will happen, as long as the pertinent facts were disclosed in advance.
About the Author
Thomas A. Early, MCEBA is the REALTOR®-Broker of The Buyers Real Estate Brokerage in Westerville, Ohio. Tom is also a two time Past President of the National Association of Exclusive Buyer's Agents (NAEBA.) Master Certified Exclusive Buyer Agent (MCEBA) is a certification earned from the NAEBA.
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