What would you do in this situation?Agent really dropped the ball

Question

My brother in law and I have been trying to purchase a rental for a few months now but we have been having trouble getting bids accepted.

A few days ago we put in a bid on a short sale house last Friday. The sellers countered back yesterday at full price. We countered again with our best and final and they accepted. All is great, we're on our way to getting the house. We signed the amended offer and that was it

Today I get an email from my realtor stating that the seller's agent called her yesterday afternoon and said there was another offer coming in and that they were going to wait for that. At this point we're not happy.

1. My realtor got this info yesterday afternoon and she didn't contact us until 1:30 PM today. That's almost 24 hours later. By this point, the sellers have had enough time get the other offer and then counter that and compare

2. This practice seems a bit unethical by the selling agent. We had a verbal acceptance and we signed the contract. I would think that's binding. At the very least it's very unethical to verbally accept and offer while still entertaining others.

What would you do in this situation? I feel that MY realtor really dropped the ball here. I think she should have called us the moment she got the call and told us as well as tried to work this out with the selling agent. Should I be looking for a new agent here?

Chris Mason · Answer

In theory, especially legal theory, bla bla bla verbal this, binding contract verbal that, whatever who cares.

In actual practice:

There Is No Such Thing As A "Verbal Acceptance" or "Verbal Contract" In Real Estate

For that reason, I'm going to have to side with not one, but BOTH agents on this one.

@Robert Fountain,

1. Your agent didn't do anything wrong. Because a verbal acceptance is not actually a thing, there was nothing worth rushing to convey to you and nothing that you could have done differently. Your realtor "calling you the moment she got the call" would have accomplished absolutely nothing. Even if you went from that to talking to the listing agent to "work this out," it would at best have been a "verbal contract," and a "verbal contract" does not exist in real estate (see above), in practice, meaning that literally the most that could possibly have been accomplished was absolutely nothing.

2. You can call it unethical if you wish. The listing agent's job is to get as much possible for the home as they can manage. So it is quite literally their job to go run around telling ten thousand people that their offer is "verbally accepted" while still soliciting higher and better offers, and taking their sweet sweet time on having the seller sign anything that makes it real, until they are certain that it's the best deal they are going to get. Again, you are free to declare this unethical, but it is their job.

I use verbal maneuvering to ensure that no one ever tells me the address of a property that they had a "verbal acceptance" on. If they tell me the address, I have to do paperwork for a non-deal. It's a real deal when there is a FULLY ratified contract. That's it. No fully ratified contract, no deal, period.

As buyers of houses, the REI reading this would be well served by using phrases like

^ That ^ template will obviously not work for all scenarios, but you get the idea. You almost completely disregard the "verbal acceptance," and push for the fully ratified contract, signed and delivered, by creating a sense of urgency that you feel is appropriate for the situation at hand. Obviously this will not be effective if you do it AFTER the seller's side starts bringing up other offers, or when it's a trustee sale and there are eight sellers, etc, but hopefully that helps.

Russell Brazil · Answer

There's is nothing to be upset about here especially since it was a short sale. The price you were going to put the property under contract for doesn't even matter. It could be $1 or $1 million. The real negotiations start afterward with the bank. Even if you were under contract already, which you weren't, if another higher offer came in, the bank would just reject your offer and start negotiating with the higher offer. Being under contract on a short sale means almost nothing.

Joel Owens · Answer

Robert even then the bank and ALL junior lien holders have to approve the purchase price and what amounts they will release a lien for.

Some sellers are dishonest not thinking some liens will be caught and others are so distraught with problems they are dealing with they have no clue what is attached lien wise to the property.

This is why if you write the offer to expire with proper language you CAN but are NOT obligated to accept once the bank approves. You want your price accepted in writing with an approval letter from the bank taking the loss before putting up EM. Otherwise your money can be trapped a long time waiting on the banks answer. I have seen some investors before wait 8 months for an answer.

I have found also you want to know how many short sales the listing broker/agent has completed before. If they have not done many the odds of success are low as they will likely make critical mistakes during the process. You have to get all the docs from the seller upfront because as time goes on they will get frustrated at the banks constant request for documentation and might give up on the whole thing. If they move out somewhere else the problem can become (out of sight,out of mind) for the sellers.

To Chris mason's point about in writing it's also that way from a lender's standpoint on a loan. I see guys quote for loans sometimes in the mortgage space 4% but it is NOT a locked rate. If the rate isn't locked for a specific time you also have nothing so I do not know why lenders even quote rates on stuff. You could quote 2% on a loan to buy a property and it means nothing without a lock in writing. Just remember talk is cheap and get everything in writing by the correct person who has the power and authority to enter into a contract.

Brent Coombs · Answer

@Robert Fountain, once you countered with your "best and final" offer, your Realtor was ONLY a messenger from then on. From their perspective, what would have updating you on a minute-to-minute basis have accomplished? Sure, they could/should have explained to you all the points that Chris raised above from the get go, so that your happiness barometer would not have gone up or down until CLOSING, but - now you know!

But your post reads like: if they had told me straight away, we would have offered even more! Really? What does "best and final" REALLY mean to you? It's not that I object to you withholding the truth from your Realtor as part of your game - but, don't expect them to like it!

Trusting your happiness meter has now been adjusted to reality. Cheers...

Joel Owens · Answer

The reality is even if the seller was obligated to sell to you good luck enforcing it. If the seller is doing a short sale as a homeowner they have no money to speak of. If they did the bank would not accept a big loss on the note but would want the owners to make them whole instead.

So doing specific performance etc. can be a waste of time with a short seller. As mentioned you have nothing on price. The lender taking the loss will get a BPO performed. Generally a lender might take 90% of the BPO value that comes in and write down the rest.

Verbal versus written contracts vary state to state. In some states a verbal contract is legal but not enforceable in a court of law.

One thing if you are pursuing a short sale is to not tie up a bunch of earnest money with a short seller and have a short time in the contract. This way you put EM in ONCE the bank accepts the price in writing and sends conformation back. Otherwise you could have EM tied up into a contract for a long time. In addition the bank could take forever to get an acceptance and the interest rates might have changed by then affecting the price you can pay etc.

It helps waiting sometimes if market value is rising and you have a set price but if the market is going flat and interest rates rise or market prices go down it can be a negative.

No legal advice.

Patrice Boenzi · Answer

I can speak from Illinois! Contract is not bidding until both parties sign AND IT IS DELIVERED! We have timeframes we need to meet here. You can call the agent's managing broker and discuss the situation; however, it may be too late for that property

Robert Fountain · Answer

Patrice Boenzi yes you are correct the bank would have to approve the offer on the S.S. which we are aware of but what really bothers me is that my realtor waited almost 24 hours to tell us that our offer, which we thought was accepted, was not.

I'm more looking for some advice on how to handle the situation with my realtor.

Robert Fountain · Answer

A lot of really great comments. Thanks everyone. I'm going to use this as a big learning point for me.

@Brent Coombs. Thank for your input. To answer your question, no we would not have offered more. What we would have done if we knew as soon as this happened would have been to stipulate that our offer expired at midnight. Our thoughts would be that it would put some pressure on the seller and agent so they couldn't just sit around and wait for better offers. Would it have been the right decision? I have no idea. But since we didn't even know what was going on we had no chance to react.

Kate J. · Answer

OK, I did not read the comments, but let me drop my cents right away. First of all try to make it as a habit "no happy feelings before the contract got signed by both parties". Even the executed contract should not guarantee your happiness, because the seller CAN exit the contract during the attorney period. The seller's agent, if a good one, must entertain offers during whole time until the closing. What happened to you is unethical, and does not feel right, but it is legal. You can not do anything to punish this behavior. In it's turn, your agent's priority is to make the deal to go through. The fact that the agent delayed does not mean anything, once again even if the seller would have singed the contract they still can get out of it with a better offer. To give you an example, a seller received an offer next day the house was listed, and accepted it, in 3 days after the seller received a better offer, his attorney gives undoable conditions to the already signed contract, like bringing a closing day earlier. Yes, it is not legal to cancel the contract based on the new offer, but nothing stops the seller to change the closing date or whatever is in the contract (except the purchase price, of course, this attorney can not change). Having said that, you should relax and search for more investment opportunities, and keep an eye on the one you tried to buy.

What would you do in this situation?Agent really dropped the ball

What would you do in this situation?Agent really dropped the ball

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