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Totally FREE but not actually FREE!

I got another story for you today!

I love the open market and what it allows individuals, professionals and businesses to do!  The open market offers freedom and allows individuals to compete among other professionals and businesses and offer innovation in products and services.  This also drives the price lower for the consumer as more entities are competing for the same business.  A mind set is also at play here where some think from a mindset of scarcity and others from abundance.  I won’t go into too much detail about the mindset but will touch a bit about it.

I’m dealing with another offer crisis and some of you might think that I’m crying wolf but hear me out!  I had told you in an earlier post about a listing that I was having difficulty purchasing for my client.  I also told you that I will be contacting them again to see if they would be inclined to make a “deal” with my clients.

I followed up with the agent and sent them another offer at full-asking and offered an explanation about how my clients are fit to make the purchase and will require a condition to have their due diligence completed including an inspection, financing and lease agreement review.  The listing agent took the offer and got back to me that the seller isn’t interested in the list price. ” They are expecting more than the list price,” I was told.  In fact, the offer has to be $50,000 over the asking price for the seller to consider.  The price range in which this property is listed, $50,000 is a couple of percentage points so I went back to the drawing board with my clients and we reviewed our numbers again in further details.  My clients came back with a number of $30,000 more that the list price or else they will walk.  They still need the condition of due diligence to cover for inspections, financing etc to be included.

I drafted the offer and sent it in and got another rejection.  This really got to me as to why an agent won’t be inclined to help their seller move a property that I have qualified buyers for.  I spoke with the agent again trying to massage the situation and to see if we can somehow get this property under contract.  This is when I found out that the listing agent ISN’T CHARGING ANYTHING FOR THE LISTING!  I scratched my head and offered her some commission out of what I’m making to make this go through.  It’s still not happening!

I’m baffled!

I’m all for the open market but to list a property for free would make me, as a consumer, wonder about how the agent is making their money.  The listing agent had helped the sellers purchase the properties and as part of their consideration to use them as buying agents, the agency promised that when they are ready to sell the place, they would list with them and pay nothing for the sale!  WHAT?!?!?!

First of all, where is the competition Bureau that claims that the real estate industry is gouging on the consumers and not offering enough options.  This is a prime example of what the REALTOR community was talking about that we do have intense competition between each other.  How else would this be happening?

Secondly, from a business stand point, this is ridiculousness!  I’ll give you two reasons for it too

Consumer 

Who is the agent working for if the property is listed for free?  I can see now why the agent was in no hurry to get the property under contract.  The agent wants to use the property to get more business.   I specialize in income properties and had two properties listed in the area that this agent came and saw.  I have an idea now about how the agent is getting those clients.  The agency is leveraging the listing to get clients and showing them other properties.

Here’s how it would work:

  • A property is listed at a very good price
  • A prospective buyer would call about the property showing interest.
  • The prospective buyer is told that the property is either sold or is under contract or no longer available but they have other properties that he/she should look at
  • The buyer is taken out and shown other properties and one of them is sold to them
  • Rinse and repeat

The listing agent has NO motivation in selling the listed property as they stand to loose money.  It is in their best interest to keep the property listed at a very attractive price for as long as they can.  They have to keep the seller at bay, all the agents that are interested in the property at arm’s length and keep selling properties in the area.  I did some research in the area and found two other contracts by the same sales representative.  I don’t know if they are new contacts or older ones but this beg the question.  Who is the agent really working for?

Business Viability

As a business man, I see this option as a shortcoming for the real estate agent that did the deal.  Why would I, as a business man, make a deal with a customer to sell a property that they are enjoying for the next three to five years for free?  Following are couple of reasons that I would do something like this

  • I am so desperate for any business that I will do or promise anything it takes to get the business
  • I don’t have a long term goal for my business
  • I don’t think I will be in the business for a long time
  • I hope the client will forget about the deal and I could still get some money from it
  • I will be making money by leveraging the listing
  • I’m making sure I guarantee a listing in a hot area

Some might consider this very smart on part of the real estate agent but I think it’s very narrow sighted because it’s creating couple of issues:

  1. Real Estate Sales is a very cooperative business hence the buying agents are called cooperating agents.  If the buying agent doesn’t cooperate, you don’t have a sale.  I have to keep good with everyone in the business because I don’t know when I will have to deal with him while selling or buying real estate for a client.  I’ve had the opportunity to be on both sides with couple of agents already and it goes a long way to help another real estate agent out than to burn them.
  2. It’s hard to say whose benefit the agent is working for!  From what I can see, it would be advantageous to the seller to sell their property now, for good money, and move on.  It could also be that the seller is being stubborn in which case we should see a sign back at least but here, there’s nothing.
  3. There is something questionable happening here and I would think that it won’t go on for very long.  You will have clients that will start turning off from your services.  There are three items that today’s seller is looking for; Price, Timing and convenience.  This tactic removes all three and might even leave the seller with the property still not sold.

I would never make such a promise or condone such a tactic.  I’m hired by my clients to represent their best interests and if I’m representing the sellers, their needs should take priority.  I’ve listed some very hot properties in my career where our office gets so many calls from prospective buyers and my job is to interview as many of them as possible and to find the one that’s right for the property and sell it.  We are working for our sellers and buyers to help them make decisions and not to look for our own benefit through the process.

I would also add that as a consumer, please make sure you know who is working for you!  Anytime you have a free service being offered to you, ask them what’s their in!  How are they making money through the process to survive.  You will be surprised by some answers and some might make you mad but it’s a conversation that you need to have with your service provider be it real estate or any other!

In conclusion, I’m still not able to help my client with their purchase and it’s not for a lack of trying.  We are going to start looking for the perfect property again soon and if you come across one that you think would be a good fit, do drop me a line.

What do you think about this situation?  How would you go about dealing with an agent or a seller that is not willing to cooperate?   Please leave your responses in the comment section below.

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2 comments

  1. Great post Addy. I can see where this is going. This property won’t sell with this agent because there is no motivation to help in the least. It will eventually expire and the sellers will either go it alone or find some other sucker to list it for free. Well you get what you pay for.

  2. Funny enough, the property listing just got terminated after I wrote this blog… I wonder if the seller have read this… If you have, contact me and I have buyers for your property 🙂

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