legality and morality
Heath, OH · Member since 2016 · 17 posts · 2 votes
I had an idea the other day, and I was just trying to touch base to see how other people feel about it, basically it entails, having a friend or partner low ball a property harshly that way when you give your offer (which is still a bit low) it seems like a diamond in the rough, any thoughts? I know it's legal, but I'm not sure how ethical or even if that really matters long term, more interested in how other people feel about it. Also I haven't done this, it's more of a passing thought
It goes to character and integrity. If I were the seller, I'd use your own questionable intent to get my price. You: I'll offer you $81. Me: I have other offers, submit your highest and best by 5 pm today.
You don't know if that phony offer is the only offer I have. But it is an offer none the less so my words are 100% true. You might submit an offer more than the $81, stick to the original offer or walk away. Doesn't matter to me. I called your bluff, you called mine. An experienced REI would look at the Multiple offer comment and expect that offers in hand were less than list or I would have accepted that other offer. Or the terms may not be to my liking, regardless of price. Yes, its a negotiation game. My personal opinion, No its not authentic to waste anyone's time with BS bids. There's a lot of Karma in this game and its a small world. What comes around go around. Shady tactics will be revealed and you'll cross paths with others at some point. If you want long term success and a reputation that's respected, do things as a professional would and you'll get professional results.
You already know or you wouldn't have asked.
The REI world is full of sketchy people. You have to decide if you want to be one of them or if you prefer a path of integrity and fairness. I have a feeling you are an honest person at heart.
It is always best to pay a fair price based on comps minus rehab costs minus investor risk premium desired.
Wait, since when was it legal to submit fraudulent bids to drive up demand?
I am not sure about Ohio law and I would suggest someone consult an attorney that is associated with the bar in Ohio as opposed to taking my advice on the internet.
However I do not think they are fraudulent bids. I mean if he has a friend offer 52K and then he comes in and offers 81K then sure he would honor the 52K bid. It is not fraud if you are prepared to go through with it.
Not that I would employ that tactic myself (or recommend it) and would think it was shady, I don't know if I would call it illegal. If the owner made a bunch of fake bids in an effort to drive up the price sellers are paying then I would think there was an issue. But low ball bids are what every auction starts with.
Just my thoughts
I am not sure about Ohio law and I would suggest someone consult an attorney that is associated with the bar in Ohio as opposed to taking my advice on the internet.
However I do not think they are fraudulent bids. I mean if he has a friend offer 52K and then he comes in and offers 81K then sure he would honor the 52K bid. It is not fraud if you are prepared to go through with it.
Not that I would employ that tactic myself (or recommend it) and would think it was shady, I don't know if I would call it illegal. If the owner made a bunch of fake bids in an effort to drive up the price sellers are paying then I would think there was an issue. But low ball bids are what every auction starts with.
Just my thoughts
Intent is the big problem here. If they are purposefully submitting these bids with the intent of forcing other buyers to increase their own bids, I could easily see someone getting into trouble, at least in the state of Virginia. It is most assuredly Unfair and Deceptive Trade Practices if the seller is in on it, and I could see a suit being maintained on those grounds in Virginia. But yes, ask an Ohio attorney. If this were in Virginia, I would say don't do it.
DISCLAIMER: Each case is unique. Talk with local counsel before taking such action.
The way I am understanding it the seller is not in on it and they are not trying to "increase bids".
He is trying to show that there are people out there who will pay a whole lot less for it so the actual seller says "Wow his offer is not quite so bad, maybe I will sell it to the best worse offer".
You want to sell your shoes for 100.00
He wants a friend to offer you 52.00 for them and then come in and offer you 81.00 for them so you go "Oh wow, his offer is even better"
Shady? I would think so, not sure about illegal though.
The way I am understanding it the seller is not in on it and they are not trying to "increase bids".
He is trying to show that there are people out there who will pay a whole lot less for it so the actual seller says "Wow his offer is not quite so bad, maybe I will sell it to the best worse offer".
You want to sell your shoes for 100.00
He wants a friend to offer you 52.00 for them and then come in and offer you 81.00 for them so you go "Oh wow, his offer is even better"
Shady? I would think so, not sure about illegal though.
He is driving up the desirability of his own bid by creating a false sense of urgency knowing that by doing so, the seller will accept their offer. That is a straight up violation of Deceptive Trade Acts in various different states. Many states have passed statutes that make such "unfair", "shady", or "deceptive" practices illegal, and an individual can be sued for each violation of such act, regardless of whether the friend intends to follow through. If the Offeror and the Friend arranged this bid intending to coerce or encourage the seller to accept their bid, yes they are in trouble in states that have adopted such Acts. Whether or not such an Act exists in your state is best discussed with a local attorney, but if you pulled this stunt in Virginia you could be sued, especially if this is a For Sale By Owner situation.
My advice is simple; Don't do this kind of thing without first talking with a local attorney. Unless, of course, you want to be on the hook for a potential lawsuit. Whether this activity is lawful depends on the Statutes that have been passed in whatever state you are operating in.
@Matthew Kreitzer I fail to see where the intent to get another buyer to increase their bid is at.
You want to sell your shoes for 100.00 (Perfectly legal)
My friend offers you $52.00 (perfectly legal)
I offer you $81.00 (perfectly legal)
I hope no one else bids at all (Prefer it because then they might get your shoes instead of me) and you as the seller looks and says "Well his 81.00 low bid is better so I'll take that." My intent is to be the higher of 2 bids.... and hope and pray no one offers you $95 for them because I don;t want to go that high.
@Matthew Kreitzer I fail to see where the intent to get another buyer to increase their bid is at.
You want to sell your shoes for 100.00 (Perfectly legal)
My friend offers you $52.00 (perfectly legal)
I offer you $81.00 (perfectly legal)
I hope no one else bids at all (Prefer it because then they might get your shoes instead of me) and you as the seller looks and says "Well his 81.00 low bid is better so I'll take that." My intent is to be the higher of 2 bids.... and hope and pray no one offers you $95 for them because I don;t want to go that high.
I misspoke; It isn't so much the intent to increase other bids from other buyers, but the intent to deceive the Seller by virtue of creating a false sense of urgency. Bidder 1 offers a bid that is drastically below the fair market value, knowing that Bidder 2 is going to come along and offer a slightly below fair market value offer. Both bidders are aware of this common scheme. This common scheme encourages the original Seller to sell to the second buyer by virtue of creating a false sense of what the current market will bear.
It isn't so much a matter of whether the other potential buyers will be harmed, but the fact that both Bidders have engaged in deceptive practices towards the Seller. This common scheme to create a false sense of urgency is a "deceptive" practice. Why? Because it is deceiving the seller about the current state of the market.
The analysis would be different if we had two entirely unrelated bidders; one who came in trying to undercut the market without ever knowing what the second bidder would offer.
That is not what we have here.
If you want to engage in a common scheme with another person to deceive a seller of a house and undercut the fair market value. On your head be it.
I recommend talking with a local attorney before doing so. In Virginia, that would get you in trouble.
Ah so the deceptive practice toward the seller, not the other buyers. Got it. Yeah I could see that. Eitherway the moral objection would have stopped be before the legal one.
Thanks,
@Jacob Butler assuming you and your partner both make legitimate bids and that either of you would follow through on purchasing, then you are both just trying to low-ball a property. I am not sure I agree when @Matthew Kreitzer says you are deceiving them about fair market value. There is no requirement that you make a fair offer. If that was required, then half the people on BP would be in trouble. When you do this in coordination, I do see the argument that there is a scheme to deceive the selling party into believing the value of the property is lower. However, I would argue that very often in negotiations, the buying party is trying to convince the seller that their product is worth a lower value. Doing it with a partner is just a good cop / bad cop tactic. How many people have bought a car at the dealership and had the salesman and sales manager arguing about price? The sales guy is on your side, right? He has to argue for the lower price with the manager. You know when he goes in the managers office, the discussion is about how to reel you in, not about price. Why, because the salesman has no intent of fighting for you. Is that illegal? Two parties conspire and deceive the buyer. I would argue it is not illegal. It is a negotiating tactic.
Ultimately what you suggest here is a moral grey area, but probably very unlikely you are going to find yourself in legal trouble for doing it - provided both offers are legitimate.
Landlords walk the grey line all the time. I hear landlords talking about posting fake Craigslist advertisements to test the market prices. This is false advertising and violates Craigslist terms of service. Could someone be held legally accountable, theoretically. Is it likely, no.
How many wholesalers are buying properties off grieving families or old people for well under half their value? They are buying lists specifically to target vulnerable people. That seems morally worse to me. At least when the listing is on the MLS, there is a real estate agent to help the seller make an informed decision.
My point is the buyer and seller need to beware. I would hardly call what the OP suggested a scam to defraud sellers. You are just giving them two crappy offers instead of one crappy offer. Their likelihood of taking the offer has more to do with motivation than the offers themselves.
I would not personally do what the OP suggested. I would just submit my low offer and see what happens. If they reject the offer and the property sits, just offer the same price again at a later time.
Thanks as I said, it's a passing thought I'm pretty sure I wouldn't do it, just touching base to see how people felt about it. Ive heard of it being done using llcs but that's more commercial scale, Its a lot of work for as stated probably wouldnt do much help. Thanks for the input!
I'm jumping on the 'it doesn't seem illegal but highly immoral' bandwagon. I don't like car salesmen tactics either.
Doing it with a partner is just a good cop / bad cop tactic.
And while that may seem fine to the normal Joe Buyer, there have been complex layers of both state and Federal Law which have defined when, or if, playing "good cop/bad cop" is legal. This is one of the lesser known areas of law that the average sales person or vendor isn't entirely aware of. Some "normal course of dealing" activities that the average person engages in, under either Federal or State Law, could get you in trouble.
Whether it will get you in trouble depends on the local treatment of some of the elements of common Unfair or Deceptive Trade Practice Laws.
Ohio's Deceptive or Unfair law is codified in 4165.02. There are at least two portions of that law that this activity could potentially run afoul of. That is why I implore you to *speak with an attorney prior to engaging in potentially harmful activities*. I'm not saying you can't do it, but you should probably get a professional opinion from a local expert prior to engaging in potentially illegal activities. I'm promoting caution. Don't do things that can get you in thousands of dollars worth of trouble without a free consultation.
You could even be on the hook for the difference in the offer you may have otherwise received from a qualified buyer, or the difference between the starting bid and the final bid.
Disclaimer: Not your attorney. The above is basic legal educational information. if you have a legal question, consult local counsel.
@Matthew Kreitzer thanks for providing the applicable law. Ohio has it available online for viewing. After reading though, it appears to cover sellers. What two sections do you think apply to buyers example from OP in this situation?
http://codes.ohio.gov/orc/4165.02
@Matthew Kreitzer thanks for providing the applicable law. Ohio has it available online for viewing. After reading though, it appears to cover sellers. What two sections do you think apply to buyers example from OP in this situation?
That is a misreading:
(A) A person engages in a deceptive trade practice when, in the course of the person's business, vocation, or occupation, the person does any of the following:
..............
(D) "Person" means an individual, corporation, government, governmental subdivision or agency, business trust, estate, trust, partnership, unincorporated association, limited liability company, two or more of any of the foregoing having a joint or common interest, or any other legal or commercial entity.
Doesn't say only sellers. It seems to apply to *any person, corporation, government, agency, trust, estate, partnership, LLC, etc* who *engages in deceptive trade practice* according to...the following enumerated situations.
I am unable to analyze which of the provisions it would fall under, as that would be the provision of legal services, and I am not licensed in the state of Ohio. If you or anyone has a question about the particular facts of this case, they must consult a local attorney.
@Matthew Kreitzer I am not talking about the defition of person, I am talking about the specific items the person does. They are numbered 1-13 and it is the specific acts that come after "the person does any of the following:" All the items relate to misrepresenting a business or the goods or services. Which two of those numbered items would the "dual offer" situation from the OP fall under? They are offering legitimate offers under legitimate business names, nothing in this law seems to relate to buyers coordinating their offers.
@Matthew Kreitzer I am not talking about the defition of person, I am talking about the specific items the person does. They are numbered 1-13 and it is the specific acts that come after "the person does any of the following:" All the items relate to misrepresenting a business or the goods or services. Which two of those numbered items would the "dual offer" situation from the OP fall under? They are offering legitimate offers under legitimate business names, nothing in this law seems to relate to buyers coordinating their offers.
If an individual routinely engages in the practice of buying properties as part of their business, there are indeed a few of those provisions that would apply. Buying can be just as much a commercial transaction and service as selling can. Whenever a person engages in economic commerce as a buyer, they make certain assurances and communications as part of that economic activity. If they lie, deceive, or engage in fraudulent practices, they aren't protected by simple virtue of their designation as a buyer. There are actually three of those items which, in my professional, trained, and experienced opinion, could apply to this particular case. But again, I am not licensed in Ohio, so I cannot tell you which ones. Moral of the story; don't do things that could get you in trouble without seeking a consultation with a local attorney.
It goes to character and integrity. If I were the seller, I'd use your own questionable intent to get my price. You: I'll offer you $81. Me: I have other offers, submit your highest and best by 5 pm today.
You don't know if that phony offer is the only offer I have. But it is an offer none the less so my words are 100% true. You might submit an offer more than the $81, stick to the original offer or walk away. Doesn't matter to me. I called your bluff, you called mine. An experienced REI would look at the Multiple offer comment and expect that offers in hand were less than list or I would have accepted that other offer. Or the terms may not be to my liking, regardless of price. Yes, its a negotiation game. My personal opinion, No its not authentic to waste anyone's time with BS bids. There's a lot of Karma in this game and its a small world. What comes around go around. Shady tactics will be revealed and you'll cross paths with others at some point. If you want long term success and a reputation that's respected, do things as a professional would and you'll get professional results.
Setting aside the question of legality or ethics, I think this strategy just plain wouldn't work. Who's going to fall for that trick? If the property is on the open market, and they've only received two offers (one in actuality) maybe it's not the deal you think it is.
this all originated because my real estate agent sent the wrong bid and by the time we redacted they didn't want to go for my offer, so now I'm having my wife make an offer through another agent, she has a different last name so that's where the thought came in, I wouldn't do it simply because there's not much gain to have in my eyes. But I enjoy talking about potential tactics and the such, thanks to everyone for there input.
It may work for you one or two times. But in the long run, if the agent involved is the same or if some one reviews these bids for the same seller, you are opening yourself up to unnecessary headaches. In fact if your friends bids are too low, the agents will start ignoring those bids altogether or may be that just draws more attention to those deals/bids.
In today's market, surely you and your friend are not the only offers out there for the seller :-) ... you will be competing with far more people. And like some one already said if there are only two offers out there, then may be this isn't a deal like you thought.
@Jacob Butler it is a horrible idea. If you need to try and deceive the seller as to the value of their home then you are basing your business and profits on deceit. I wish very bad things to anyone who implements those types of tactics and hope you steer clear of using them. If a person cannot be good enough to succeed with integrity, then they need to improve themselves, not lower others.
How would you feel if someone did this to you? What would you say about this person if they pulled it off and you found out afterward?