So two years ago My Mom was in the market for a new house nearer to Me. My best friend's wife is a local realtor whom I thought I could trust, and figured My Buddy could use the money from any commission. I felt She's never really cared for Me, but I thought this might improve Our relationship. Never in a million years did I think She would take advantage of Us. I retained her services as a realtor and My Mom finds a 2 bedroom 2 bath house She likes. It was not a distressed property, the owner did not seem to be in a hurry to sell. She was an older widow who wanted to move closer to her kids. When My Mother and I wished to make a counter-offer, She informs us that the the property is "below market value" and a counter offer probably wouldn't fly. Mom buys the place for list at $186,000. Fast forward a week or two, This same realtor sells a 3 bedroom 2 bath house 2 doors down the street for only $6,000 more. Both houses were in the same condition, apples to apples as far as I am concerned. Some additional info: The home was only on the market 1-2 days,The realtor took every opportunity to inform us that it was "sellers market" and inventory was low (debatable), my mom was a cash buyer with $200k in the bank, found out recently there were multiple offers on the home and when I asked to see comps, She read some "comps" on her computer screen. I didn't actually see the comps. Internet based sites such as Zillow show the property as worth +/- 175,000. I have a 3/2 rental in another, more expensive community 50 miles from here with RV parking, city lights view etc. etc. and it was worth only $175k . we did not seek an appraisal since I thought She was honest and it was cash deal. the 3/2 down the street was most likely financed and appraised, so $192,000 should be dead-on price wise, right ? If it was truly a seller's market, Why would the property be below market value ? If the property was receiving multiple offers, why would it be below market value ? Why would My Mom, with $200K in checking, pay list ? Why the disparity between my rental/ Zillow / and her place ? I realize I was an idiot for not doing My due diligence and relying on "trust". Caveat emptor, I get it. What I'm asking is, does Anybody see any holes in My logic. Have I overlooked anything in this deal, as You guys can tell I'm certainly no expert in real-estate transactions. Thanks for Your time
[Disclaimer: I'm not a real estate expert at all.] Yeah, you should have had an appraisal but other than that you didn't do anything really wrong and the agent was just doing her job. She legally represents the seller. You are assuming she was misleading you but you don't really know for sure. No 2 houses are identical. Zillow just guesses at values, they haven't really done appraisals on every house in the country. It sounds like the worst case is that you might have paid a little more than you should have. Everyone who buys a house feels the same way. Your mom got a new house. That's awesome. Enjoy it.
It is very rare to have a buyer's agent paid by the buyer. Unless you had a very unusual arrangement both agents were actually representing the seller and your agent was legally obligated to try to get as much money for the seller as possible.
I didn't see if you got an appraisal down the road. That is the only way to see an approximation of current value. Floor area, lot area, structural condition, curb appeal, a lot of factors play into value. Don't feel that you got ripped just yet. Btw, where are these 150k houses?
It's always easy to second guess big purchases and even if you get an appraisal, many times they'll conveniently come back around the amount you're trying to finance as long as it's within the normal expected range for the area and comps. As a cash buyer it might have helped but then again a really good realtor could find and compare comps and come up with similar results and save you the $500-600. In the end it's still up to the buyer to do their homework, look at the research the realtor or appraisal provides, then determine how much to offer. A good realtor should answer questions and help you come to a decision but never tell you what to offer. The last house I bought was through redfin.com and working with a great local realtor. You get a discount on their commission but some of the work falls back in your court. Using tools on their site as well as others I figured out my own comps and what I was comfortable offering and paying. I also used Zillow and other sites to verify my numbers and find info on property sales but Zillow's "estimates" are usually pretty suspect being that they primarily look at price per square footage in the area and don't take other factors into play. It's an okay rough estimate but you need to do research and adjusting the $/sq-ft for a particular property. While a bad realtor could always be looking to push the sale price up to make more on their part of the commission, many are very good and if they're representing you will help get you the best price. I probably haven't worked with the one you went through so I can't make any judgments. I will say that word of mouth can be important when there's tons of choices for realtors and having a buyer come back feeling like they got screwed probably won't help future business if they do seem to care about and like their job.
The following is NOT legal advice and I am NOT your lawyer: A realtor you engage to help you find and buy a house owes you a fiduciary duty. That includes using best effort and judgment on your behalf even if that means a lower commission due to a lower selling price. Your realtor is obligated to be truthful to you and to disclose all material facts, even if you don't specifically ask. I share your concerns. However, it may well be that your realtor legitimately and reasonably believed the price was below market and that a counter offer probably wouldn't fly. It would then be up to you to decide whether to tell the realtor to make a counter offer. Of course, whether your seller would have taken less is a critical factor. So too is whether you and your mom would have been willing to pass on the particular house had the seller refused a lower price. The general rule is that if a breach of duty doesn't cause actual, measurable harm, there is no liability. (No harm, no foul.) The fact the realtor sold a 3/2 for only $6k more, while suggesting you overpaid, is not controlling. Perhaps the realtor breached a duty to the seller by undervaluing the second house. Perhaps the seller was desperate. And, why has it taken 2 years to address this? (There may be issues with the statute of limitations as far as any lawsuit is concerned' so if you want to sue, you had better move quickly.) Just my. 2 cents.
I haven't bought a house in 20 years. Maybe things have changed so I'm sorry if I said something that is no longer correct.
Both selling realtor and buyers realtor have a financial incentive to get the highest price possible for a home. Anyone buying a home that thinks their realtor wants to get the lowest price for them is delusional. It's a commission based business, go figure. Higher selling price, bigger payday for both realtors. Best to find a fee based realtor, if they even exist.
I have an RE license so can offer some inside knowledge here. It is true that it is a sellers market right now and offering below list is not likely to be accepted unless it was grossly overvalued and even then the seller is not going to be convinced they priced too high until the house has been sitting on the market for a long time. While it might seem the realtor is pushing to get the most commission, remember that their share is generally just a couple of points on the deal: e.g. pushing a deal to increase by 10K will only net the agent an additional $150-200. That said, not showing you comps and a written market analysis is not good practice. A good agent should show you this in writing. A buyer's agent should be acting in the buyer's best interests and can be sued and/or disciplined by the state when they fail to do this.
Price is based on neighborhood price per square foot. Take the square footage of other near by houses for sale. Divide the price per the area. Take the area of the house moms new house, multiply by the price per square foot. viola. After that the price will change very little, ie: busy street, school, view, pool etc. These do not increase or decrease the price only the abilty to sell.
That also is ridiculous. The buyers agents duty is to their client, not the seller. As posted by Bruce the laws are pretty specific on agents responsibilities and duties. Getting the highest commission is definitely not on the list.
This is where it gets tricky. For most business transactions, the client is the one paying the workers. The seller pays both agents. The bottom line is a buyer can't assume either agent is working for them.
Your best weapon is knowledge. No one should buy a house without understanding the basic market information (about how many houses are for sale that meet your specs in your area, and whether you are competing on any house.) reviewing the appraisal (if there is any question) reviewing the comparables and having them explained, and get detailed property inspection before signing. Also just ask lots of question, when you do more will be explained and the likelihood that you will be taken advantage of decreases. After that the price will change very little, ie: busy street, school, view, pool etc. These do not increase or decrease the price only the ability to sell. That makes no sense.... these absolutely affect the prices and / or the ability to sell which are directly related. As do upgrades in the house that are often not visible from the outside, or poor / old interiors that can decrease the value. Also please people don't take Zillow as gospel, its an Automated Valuation Model (AVM : a computer estimate that knows very little about the actual house. ) an no lender *ever* basis the appraised amount on Zillow (or anyone else cash etc should either.) At best it gives you a general idea and trend. Yes Appraisals often come in to meet the loan, but the Appraisal laws have changed and now the need to go through and intermediary and thus are now more "Arms Length and thus should be more independent. To the OP sorry for your stress....but you definitely didn't help your self, There are a lot of other factors especially if houses were selling quickly, emotions are involved, some sellers are more "motivated" than others, all folks feel like there house is worth more than it is when they own it... and buyers think is less than it is when they want to buy it....Almost ever seller will say its below market value.. as I try to decipher you OP it seems you are stress over "what mom paid" vs the other house 3/2 sold, You said there were multiple offers... you tend to pay more when competing, did you actually go in the other to see it was apples to apples. Also trying to compare to some place 50 miles doesn't make sense either (Real Estate is very locally driven). The bottom line is that you did not have an independent appraisal... that would have been your best best. Anyways what is done is done, maybe you paid 10K to much (5%) maybe you didn't the fact is you don't know and you probably never will. So you learned your lesson, and you are going to be very diligent moving forward, demand to see the paper work, ask probing questions, make sure you get an appraisal, inspections, see the comps ... be prepared to walk away... and make an informed decision. That's the best way to sleep good at night. Good luck, hope you get past this.
Occasionally when I'm pinching a loaf and get frustrated at not getting passed 24 pipes on Flappy Bird, I start browsing the internet and find myself back on STR. I try not to get too involved in debates because it's not very conducive and takes time away from more important things like spending time with my family or out riding with friends. First off, DON'T GO ON A MOUNTAIN BIKING FORUM TO GET ADVICE ON ANYTHING NON-MOUNTAIN BIKING RELATED. As you can see, you have been misinformed by various members due to lack of knowledge about the industry. Although you requested advice from RE Experts, you're going to get advice from everyone....that's just the way forums work. With that being said, here's the low down. Take it for what it's worth. I'm not here to debate, just don't like people being misinformed. 1. No High School diploma is required to become a successful Real Estate Agent or Broker. What does that mean? There are a lot of idiots in the industry, so pick your agents wisely - someone with years of experience and are highly referred by someone you trust. 2. Realtor is TWO syllables NOT three. It is pronounced Real-tor, NOT Real-a-tor. There is no 'a', so don't be adding it for no reason. A Realtor is an agent who is pay additional fees to the Realtor franchise to get the designation Realtor. Not all agents/brokers are Realtors, but all Realtors are either agents or brokers. 3. Listing agent - represents the sellers by listing their property. 4. Selling agent - represents the buyers and "sells" the property. 5. Fiduciary Duty - as Runs with Scissors stated, each agent as a fiduciary duty to their client, which is upheld by the court of law and the Department of Real Estate. The selling agent as a fiduciary duty to the buyers to act on their best interest. Amount of commission cannot be a motivator to "increase" the offer price to make more money. 6. Dual agent - represents both buyers and sellers. This is a gray area and lawsuits against dual agents are increasing. How can an agent act in the best interest of both buyers and sellers? 7. Sellers and buyers market - depends on the area at this time. 8. Economic principle of supply and demand. Price the property below market value and you will get a ton of offers. Price it above market value and you will get none. 9. Factors that influence value - physical, external and economic. Physical - size, amenities, age, upgrades, pool, etc. External - neighborhood, noise, views, etc. Economic- self explanatory. Value is based on contribution and not actual cost. A property is not based on price per square foot. This is a common mistake with most unexperienced real estate agents. I can go on and on, but I have to go get my drink on. As for your original question on the 2nd property that sold for only a few thousands more, it all depends many things. The seller might wanted a quick sell, there could have been unknown damages/repairs needed, buyer could be related or friend, etc, etc. ALWAYS get an appraisal to protect your investment. Banks do, so why wouldn't you? Hope that helps.
"That makes no sense.... These absolutely affect the prices and / or the ability to sell which are directly related. As do upgrades in the house that are often not visible from the outside, or poor / old interiors that decrease the value" Actually they hardly make any difference in price at all. The negatives will decrease the price per square foot slightly. Last weekend it was +/-$25/sq ft. or about +/-7% for any home in my area. There were about 35 homes for sale in this range.
Yikes ... this could get into a long math discussion.... Not sure where you are getting your numbers, but OK.... is that the average over the 35 houses "for sale" or is that "recent sales" ... listed price vs sale price 2 different things.... ...OK ... so say that +/-7% on a 500K house... is +/-$35K ... that's could be a significant difference to a buyer / seller ... and to go a step further..., the range is 14% which is a range of 70K would say that a pretty big number .... on a 200K house that is +/- 14K or range on 28K... so a for someone looking at a 200K house that's a big number/difference from 186K-214K..... To put in perspective my ~500K house at the end of the culdesac with some upgrades vs the one backed up to the noisy main thoroughfare kinda run down... could be a 35K - 50K+ difference... easily within your numbers ... averages are great but you have to look at each house. Averages are good to do sanity check ans maybe fraud detection but no way would I blindly use that for an absolute check. Sounds like your into real estate cool... I work for a real estate analytics firm. And that without getting into the difference between mean, average and std dev etc... All in all I like to use the phrase that I think we are in violent agreement
