2009 Aug 28th

What Do You Think? Is This Seller Being Served?

Hoboken Condo Sale Hypothetical

An owner wants to sell a Hoboken condo property.  Owner lists the condo for sale with a listing agent.  Although this agent is commonly called the “listing agent”, he or she is an agent of the seller and owes the seller a fidiciary duty. Let’s call this agent Mr. List. The property in question is listed on the MLS by Mr. List on Monday. On Tuesday, an agent from another company, let’s call her Ms. Look, brings a buyer to see the condo.  Mr. List knows of the showing as it is made through Mr. List’s office on a system that tracks showings and automatically emails a notice of the showing to Mr. List. The same system solicits feedback on the showing from Ms. Look and emails that to Mr. List.

On Wednesday, Mr. List enters the property as “under contract” or “Dabo’d” on the MLS. Mr. List never called or contacted Ms. Look to see if her buyer was interested in the property, to inform her that he was expecting or had received an offer, or to see if Ms. Look’s buyer might want to make an offer. Mr. List sold the property to his own buyer and will receive both sides of the commission.

Did Mr. List do the seller a disservice? Might Mr. List have gotten a higher price for the seller had there been another buyer making an offer? Did the fact that Mr. List will sell the unit to his own buyer possibly influence his failure to notify Ms. Look of the offer or to inquire as to Ms. Look’s buyers interest?  I know what I think but I’d be interested to know – what do you think?

  1. wally

    unfortunately, the answer is very obvious. clearly, this seller is a POS and is only interested in his financial windfall. truth is, some people just cant be counted on to do the right thing.

  2. Ari

    Lori – I think the hypo needs some editing for clarification. I assume what you’re suggesting is that after the showing, Mr. List received an offer from one of his own clients and rather than check with Ms. Look to see if her client was interested, he simply pulled the listing off the market.

    If this is the case, I don’t see how any reasonable person could think that Mr List was acting in the best interests of his seller. Is it unethical? I would say so, though I’m not familiar with the requirements of your profession. I would imagine the duty of a realtor is not to simply the home, but to get his or client the best $$$ possible. This situation strikes me as being no more ethical than your doctor sending you to get an MRI at an imaging center he owns, even though he’s already done an X-Ray and it’s clear you’re fine.

  3. lori

    Wally – the seller? I don’t understand.

    Ari – yes – Mr. List received the offer from his own buyer, changed the property to “under contract” instead of “active” and did not contact Ms. Look. You are correct on all counts. Sorry if I wasn’t clear.

    So does the time horizon matter? What if it was a month instead of a day?

  4. Ari

    Time certainly matters, though how long is certainly up for fair debate. If a month has passed, my question is, what is Mr. List doing sitting on his hands? Mr List should be taking the affirmative step of calling up Ms. Look and letting her know their is a bid on the place and that if her client is interested in the property, her client must make an offer quickly. After that, I’d say the seller should have the final say in deciding if he/she wants to wait for an offer that may never come (and lose a potential buyer) or take the offer already made.

  5. Mark

    Ms. Look’s client was interested enough to go see it, so to me it is safe so assume that there is some (small or not) chance the client would be interested in purchasing the property. Without knowing anything else, we can only speculate whether there was no interest or it was a client who likes to take a few days to think. In addition, Mr. List personally benefited financially from selling to his own client. I would certainly say that Mr. List failed in his fiduciary duty to his client.

  6. David

    Mr. List breached (in the sense that he probably would lose in court if it could be proved) his fiduciary duty. It’s a no brainer. I’m not even sure ethics has anything to do with it, unless you are talking about the rules that govern agents in general. Morally, Mr. List cheated his seller, and is no better than a common theif.

    But there is a solution: Mr. List should be paid 3% no matter what. Then he has no incentive to pull this type of stunt. Of course, Mr. List would say he has no incentive to work harder. However, if the seller asks Mr. List present a list (pun unavoidable) of things that he would do differently if he was able to get both ends, I’m sure the seller would see that Mr. List will do nothing more for that extra commission.

  7. lori

    I guess you wouldn’t be surprised to learn that this exact situation occurs very frequently in Hoboken. What I find even more surprising is that most of the time when I see on the MLS that an agent has sold his or her own listing, the number of days on the market is minimal – often less than a week. Makes me think that they had a seller in mind when they got the listing and may never have even really marketed the property to the general public. Seller beware – this is totally legal according to the NJ Real Estate Commission. Might it be a basis for a common law cause of action by the seller for breach of ficudiary duty? I wonder. But then, how motivated would a seller be to bring suit when he or she sold the property that quickly in today’s market? I like David’s suggestion that the selling agency receive only half the total commission in these cases. Bet that would change things a bit.

  8. Kathy Zucker

    I think the real problem is proving the listing agent’s actions. The way our real estate transactions are structured through the MLS, there are so many intermediaries that the seller and buyers have no direct contact and there is no transparency. Proving cases like this one would require buyer & seller communication and collaboration -likelihood of that happening very low under the current structure.

  9. Lori Turoff

    Actually when this occurs it is quite apparent as it show up right on the MLS.

  10. Kathy Zucker

    But the seller doesn’t have access to the MLS, so how are they going to know about it or prove it? The listing agent certainly isn’t going to tell them about it, and unless the buyer’s agent and buyer go directly to the seller, it’s unlikely to go further. Even then the seller may not want to deal with the hassle of filing charges against his/her agent.

  11. Lori Turoff

    The seller certainly knows who found the buyer and how long the property was marketed before an offer was presented! The buyer is working with the seller’s agent – the seller knows that as well. I don’t see any of that as problematic. As a practical matter, the seller doesn’t complain because he or she doesn’t know any better. Any disgruntled consumer can report his agent’s actions to the NJ real estate commission. Most sellers, if they sell that quickly, think it’s a good thing and simply don’t realize there may be an issue. Sometimes I think their judgement is clouded by their relief at getting a fast sale and they’re not focusing on the price as much as they should.

  12. JustBrought

    I think the simple solution is like what David mentioned earlier, the dual agent should be paid a reduced commission or one commission (I support the reduced). A seller agent get pay for selling the house, whether he found the buyer or not still point to him doing his job. New Jersey should seriously consider follow some of the other states in allowing for agent to compete on commission.

    I just went in contract (not with Lori due to us not being able to find what we want in Hoboken on our budget, sorry Lori), the agent that we decided to put down on the contract because she was close to the listing address (poor choice, I bet Lori would be a much better choice even though she was far away) was not there when we found the listing, not there when we put in the offer, and not there when we went in attorney review. With the service she provided so far, I wish I could retract her commission, but of course that is not possible. The system is definitely flawed with the way it is.

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