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A Simple Question: MLS and Responsibility

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Fiduciary Responsibility, Laws and Morals

I’ve been panning this question in both hemispheres of my brain:  “Does MLS actually fulfill the fiduciary or statutory responsibility of the Agent?”  I am not sure it does.  Most buyers hire Selling Agents to help them find their next home, not just those homes in the MLS.  An undisclosed, Unrepresented Seller’s (FSBO) webpage has information stating that only 80 percent of housing inventory is in the MLS.  Considering “Pocket Listings”, Unrepresented Sellers, some REO, poorly maintined listings (Listing Agents not updating expired listings) and other factors; they may have a valid case.

Do You Disclose?

The Realtor Code of Ethics requires Realtors to disclose their company’s policies and many states have the same regulation.  For those agents who have Buyer Agency Agreements (hopefully everyone), do you disclose to the buyers that you only search in MLS for homes for sale?

Better yet, do you rountinly search, Trulia, Zillow, FSBO sites and local resources for homes / properties for sale (like newspaper websites)?

I think it’s a reasonable expectation on behalf of the buyer, to assume that their agent is looking for the right home or property for them, and not just where commission is promised or access is easy.

What say you?

Matthew Rathbun is a Virginia Licensed Broker and Director of Professional Development for Coldwell Banker Elite, in Fredericksburg Virginia. He has opened and managed real estate firms, as well as coached and mentored agents and Brokers. As a Residential REALTOR®, Matthew was a high volume agent and past REALTOR® Rookie of the Year & Virginia Association Instructor of the Year. You can follow him on Twitter as "MattRathbun" and on Facebook. Matthew's blog is TheAgentTrainer.com.

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18 Comments

18 Comments

  1. Gina Kay Landis

    April 19, 2009 at 10:44 am

    Matt, it’s a valid point. As an example, I had a commercial client who couldn’t find anything in his price range. Because I knew there were many commercial properties that likely had expired in the past year, I looked them up, rang the agent, and sold the property to my client. Had I not made that extra effort, he would not have found his choice property.

    Agents who are aware of the varied ways properties become available search out those properties and, frankly, sell more! It takes knowing the market, knowing what has expired, knowing foreclosure potential in the areas you serve to be successful. Thanks for a thought-provoking post!

    Gina Kay
    Follow me on Twitter: @ginakay

  2. Tony Sena

    April 19, 2009 at 12:06 pm

    Great food for thought!

  3. Katie Minkus, R(B)

    April 19, 2009 at 12:35 pm

    Aloha, Matt. Definitely a good point. We routinely send letters to sellers of homes that are not actively on the market but for which my clients are interested in pursuing a possible purchase (howz that alliteration?), and of course, there’s the old “drive through the neighborhood” tactic as well. Additionally, we make certain to network with other agents and Brokers regularly to find out what “pocket” listings they may have that fit our client’s needs.

    Sometimes old school works too. 😉

    And I’m a huge “bleeding edge” techhie!

    Warm aloha and Happy Sunday! Katie Minkus, R(B)

  4. Jim Duncan

    April 19, 2009 at 12:46 pm

    I’ll turn this around from an example from today – listing company has a foreclosure “listed” – but they aren’t in our MLS and their homepage doesn’t list *any* of my market’s counties as areas they serve.

    Is this a breach of their duty to their client – the bank – and thereby unethical?

    Per Article 11 –

    REALTORS shall not undertake to provide specialized professional services concerning a type of property or service that is outside their ?eld of competence unless they engage the assistance of one who is
    competent on such types of property or service, or unless the facts are
    fully disclosed to the client. Any persons engaged to provide such
    assistance shall be so identi?ed to the client and their contribution to
    the assignment should be set forth. (Amended 1/95)

  5. Matthew Rathbun

    April 19, 2009 at 12:53 pm

    Jim,

    I’ve written about this before, as well. There are a large portion of “REO Agents’ who don’t regard the lender giving them foreclosed properties, as worthy a client as a traditional listings.

    Regardless of what the REO agent may say, their “marketing” is usually much less than their other listings. It’s sad that it’s generally very easy to tell a home is REO simply by the marketing.

    I agree that it is a potential violation.

  6. Sarah Cooper

    April 20, 2009 at 2:54 am

    Excellent question. A savvy buyer is going to be looking at many different sources. What a letdown it would be for a buyer to realize they “have access” to more homes than their agent because the agent gets all information from one website.

  7. Joe Loomer

    April 20, 2009 at 5:37 am

    Matt,

    You seem to be very adept at raising the thorny issues that sometimes get ignored in the course of day-to-day business.

    Katie & Gina are on the ball – I’ve also sold properties that are either expired or FSBO. Other than commenting on blogs, I often spend part of my coffee routine searching for other listings online.

  8. Melina Tomson

    April 20, 2009 at 12:04 pm

    I have a check box/section on my buyer agency agreement that addresses non-MLS homes. If they check, yes, they want me to look for them, then they know they might have to pay me directly. If they check no, then they know that the search is limited to the MLS.

    Most buyers choose to have me look for non-MLS listings, even knowing that they might have to pay for my services themselves.

  9. Fred Romano

    April 20, 2009 at 2:31 pm

    @Melina – That’s a great idea! I might try that out.

  10. Ken Montville - The MD Suburbs of DC

    April 21, 2009 at 6:29 am

    It’s interesting that you frame this question as a possible shortcoming for the agent (“…not just where commission is promised or access is easy.”)

    As we know, 80%+ of the consumers out there use the Internet in their search and then call a Realtor for help. FSBO sites, newspaper sites, etc. are all easy access for the consumer. How much responsibility do we take on for the consumer? All of it? Doesn’t the consumer have some responsibility for searching for the house they are planning to live in (assuming a primary residence search).

    I can’t count how many times a consumer has asked me about House A or House B only to research it to find that it has SOLD or is UNDER CONTRACT.

    I’ll raise my hand and say, “Yes. I only use the MLS to search for homes.” (Should I call a lawyer?). There are tons of choices in the MLS in a large spectrum of architectural styles, price ranges, geographic location, and physical condition. There are also plenty of deep discount brokers that provide home sellers with MLS access so their homes can be exposed to a wider range of potential buyers. Inventory is not a problem at the moment.

    If a consumer asks to see a house that he/she sees on the Internet or hears about from a friend, co-worker or family member (or even from eavesdropping in the grocery line), I’ll do what I can to show that house.

    I’m sorry, Matt. I belong to the school where you find out what your buyer client’s preferences are and what their motivation is and then help them find their home of choice sometime before I’m eligible to receive Social Security.

    Yes. There is such a thing as too much information (i.e., homes on the market).

    My $.02

  11. Matthew Rathbun

    April 21, 2009 at 2:51 pm

    Ken,

    I understand your point of personal responsibility of the consumer, but if I follow your logic, then we weaken the argument of why a consumer would need to hire an agent at all. If we just say that our fiduciary responsibility is limited by the consumers acclamation to Google; than it’s a sad state of affairs.

    Just because (according to NAR) 83% of consumers use the internet in the course of a real estate transaction, does not translate that they know what they are looking at. Enter: the agent. The agents role should be to help the consumer navigate the vast information.

    Just because the consumer got their information from Wikipedia, doesn’t mean I don’t have to go and let them know that it isn’t a reliable source and that our state or my practices maybe different.

    If you’re a Realtor the Code of Ethics (and my local state’s law) compel me to disclose my company policy or my practice to my client. Agents should disclose that the listings that show the client would only be those listed in MLS.

    I’m not saying you are unethical if you only use that tool, but shouldn’t the buyer know the limits of your services?

    Does your buyer agency agreement stipulate that you get paid, in exclusive agency, for only those homes the buyer buys inside of MLS?

    My question is not necessarily if an agent should search outside of MLS (although I always have) but more so, should a quick disclosure or consumer education take place to let the buyer know what the limit or scope of your service might be.

    I also understand that you are of the school “…where you find out what your buyer client’s preferences are and what their motivation is and then help them find their home of choice sometime before I’m eligible to receive Social Security.”

    I’m of the school that my length of service is a non-issue. Meeting the goals of the buyer, who hired me, is far more important than doing it in my timeframe. Having said that, I also am very careful to choose who I work with and to establish reasonable expectations in the forefront.

  12. Matthew Rathbun

    April 21, 2009 at 2:53 pm

    By the way… Let me point out that the true power of AgentGenius is when you get comments like Katie and Melina. Those are great ideas and really what I was looking to find out, when I wrote this post.

    Thanks for sharing!

  13. Jonathan Dalton

    April 21, 2009 at 3:21 pm

    > then we weaken the argument of why a consumer would need to hire an agent at all.

    Only if you’re making the assumption that the sole purpose of hiring a real estate agent is to locate a particular home and that’s the end, thanksbyebyenow. To me, there’s more work to be done than just that.

    Zillow and Trulia are routinely incorrect. There was a recent example of (shudder) an agent asking if a home was on lockbox inside Trulia Voices. The home hadn’t been active for more than a month, at least not according to the MLS, but was on Trulia.

    If I go to my doctor for an ailment, I would expect him to treat me using the treatments that are recommended wherever such things are recommended. I wouldn’t expect him to advise me of a poultice from a tribe living isolated at the top of the Andes, just to make sure I knew what all of my possible options might be.

    Similarly, if someone asks me to help them find a home, I’m going to go to what tends to be the most reliable source – the MLS (even if our own local MLS is less reliable these days thanks to agents who don’t understand the meaning of active.)

    There may be a FSBO of which I’m unaware but the reason I’m unaware is the seller has done a poor job of marketing the property in any reasonably accessible fashion. Knowing the failings of the listings on the aggregation sites, those aren’t even worth the look 99 times out of 100.

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Coaching

Disputing a property’s value in a short sale: turn a no into a go

During a short sale, there may be various obstacles, with misaligned property values ranking near the top, but it doesn’t have to be a dealbreaker!

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magic eight ball

magic eight ball

It’s about getting your way

Were you on the debate team in high school? Were you really effective at convincing your parent or guardian to let you do things that you shouldn’t have been doing? How are your objection-handling skills? Can you flip a no into a go?

When working on short sales, there is one aspect of the process that may require those excellent negotiation or debate skills: disputing the property value. In a short sale, the short sale lender sends an appraiser or broker to the property and this individual conducts a Broker Price Opinion or an appraisal, using special forms provided by the short sale lender.

After this individual completes the Broker Price Opinion or the appraisal, he or she will return it to the short sale lender. Shortly thereafter, the short sale lender will be ready to talk about the purchase price. Will the lender accept the offer on the table or is the lender looking for more? If the lender is seeking an offer for a lot more than the one on the table, mentally prepare for the fact that you will need to conduct a value dispute.

Value Dispute Process

While each of the different short sale lenders (including Fannie Mae) has their own policies and procedures for value dispute, all these procedures have some things in common. Follow the steps below in order to conduct an effective value dispute.

  1. Inquire about forms. Ask your short sale lender if there are specific forms that you need to complete in order to conduct a value dispute. Obtain those forms if necessary.
  2. Gather information. Your goal is to convince the lender to accept the buyer’s offer, so you need to demonstrate that your offer is in line with the value of the property. Collect data that proves this point, such as reports from the MLS, Trulia, Zillow, or your local title company.
  3. Take photos. If there are parts of the property that are substandard and possibly were not revealed to the lender by the individual conducting the BPO, take photos of those items. Perhaps the kitchen has no flooring, or there is a 40-year old roof. Take photos to demonstrate these defects.
  4. Obtain bids. For any defects on the property, obtain a minimum of two bids from licensed contractors. For example, obtain two bids from roofers or structural engineers if necessary
  5. Write a report. Think back to high school English class if necessary. Write a short essay that references your information, photos, and bids, and explains how these items support your buyer’s value. This is not something that you whip up in five minutes. Spend time preparing a compelling appeal.

It is entirely possible that some lenders will not be particularly open-minded when it comes to valuation dispute. However, more times than not, an effective value dispute leads to short sale approval.

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Coaching

Short sale standoffs: how to avoid getting hit

The short sale process can feel a lot like a wild west standoff, but there are ways to come out victorious, so let’s talk about those methods:

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short sales standoff

What is a short sale standoff?

If you are a short sale listing agent, a short sale processor, or a short sale negotiator then you probably already know about the short sale standoff. That’s when you are processing a short sale with more than one lien holder and neither will agree to the terms offered by the other. Or… better yet, each one will not move any further in the short sale process until they see the short sale approval letter from the other lien holder.

Scenario #1 – You are processing a short sale with two different mortgage-servicing companies. Bank 1 employees tell you that they will proceed with the short sale, and they will offer Bank 2 a certain amount to release their lien. You call Bank 2 and tell them the good news. Unfortunately, the folks at Bank 2 want more money. If Bank 1 and Bank 2 do not agree, then you are in a standoff.

Scenario #2 – You are processing a short sale with two different mortgage-servicing companies. Bank 1 employees tell you that they cannot generate your approval letter until you present them with the approval letter from Bank 2. Bank 2 employees tell you the exact same thing. Clearly, in this situation, you are in a standoff.

How to Avoid the Standoff

If you are in the middle of a standoff, then you are likely very frustrated. You’ve gotten pretty far in the short sale process and you are likely receiving lots of pressure from all of the parties to the transaction. And, the lenders are not helping much by creating the standoff.

Here are some ideas for how to get out of the situation:

  • Go back to the first lien holder and ask them if they are willing to give the second lien holder more money.
  • Go to the second lien holder and tell them that the first lien holder has insisted on a maximum amount and see if they will budge.
  • If no one will budge, find out why. Is this a Fannie Mae or Freddie Mac loan? If so, they have a maximum that they allow the second. And, if you alert the second of that information, they may become more compliant.
  • Worst case: someone will have to pay the difference. Depending on the laws in your state, it could be the buyer, the seller, or the agents (yuck). No matter what, make sure that this contribution is disclosed to all parties and appears on the short sale settlement statement at closing.
  • In Scenario #2, someone’s got to give in. Try explaining to both sides where you are and see if one will agree to generate their approval letter. If not, follow the tips provided in this Agent Genius article and take your complaint to the streets.

One thing about short sales is that the problems that arise can be difficult to resolve merely because of the number of parties involved—and all from remote locations. Imagine how much easier this would be if all parties sat at the same table and broke bread? If we all sat at the same table, then we wouldn’t need armor in order to avoid the flying bullets from the short sale standoff.

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Coaching

Short sale approval letters don’t arrive in the blink of an eye

Short sale approval letters may look like they’ve been obtained simply by experts, but it takes time and doesn’t just happen with luck.

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short sale approval

Short sale approval: getting prepared, making it happen

People always ask me how it is that I obtain short sale approval letters with such ease. The truth is, that while I have more short sale processing and negotiating experience than most agents and brokers, I don’t just blink my eyes like Jeannie and make those short sale approval letters appear. I often sweat it, just like everyone else.

Despite the fact that I do not have magical powers, I do have something else on my side—education. One of the most important things than can lead to short sale success for any and all agents is education.

Experience dictates that agents that learn about the short sale process
have increased short sale closings.

Short sale education opportunities abound

There are many ways to become educated about the short sale process and make getting short sale approval letters look easy to obtain. These include:

  • Classes at your local board of Realtors®
  • Free short sale webinars and workshops
  • The short sale or foreclosure specialist designations

As the distressed property arena grows and changes, it is important to always stay abreast of policy changes that may impact how you do your job and how you process any short sale that lands on your plate.

The most important thing to do is to read, read, read. Follow short sale specialists and those who blog about short sales on AGBeat, Google+, facebook, and twitter. Set up a Google Alert for the term ‘short sale’ and you will receive Google’s top short sale picks daily in your email inbox. Visit mortgagor websites to read up on their specific policies and procedures.

Don’t take on too much

And, when you get a call from a prospective short sale seller, make sure that you don’t bit off more than you can chew. Agents in most of America right now are clamoring for listings since we are in the midst of a listing shortage. But, if you are going to take on a short sale, be sure that it is a deal that you can close. And, if you have your doubts, why not partner up with a local agent that can mentor your and assist you in getting the job done? After all, half a commission check is better than none!

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