I didn’t think I had many illusions left about real estate agents or, for that matter, about the people who use real estate agents or about the people who resolutely refuse to use real estate agents or, for that matter, about the human race.
After ten years of seeing all the above up close and personal, and sometimes before they were ready for their close-up—no, make that nineteen years in the trenches of real estate in various front-line roles—no, make that…well, forget it—I might be excused for thinking I’ve seen it all. Which is a sure sign I ain’t seen nuthin’ yet.
Welcome to the Apocalypse. Please remove your shoes.
These days I find myself looking for a sign that real estate is more than a steaming Darwinian landscape of the naïfs and occasional hacks who report it, the naïfs and occasional opportunists who analyze it, the naïfs and occasional screwballs who rail against it and the anything-but-naïfs and occasional sure-enough-look-like carpetbaggers who’ve descended upon it.
Part 1: Thank you for your trust.
It wasn’t heartening to see agents make the local evening news recently in a big way but not in a good way.
The report concerned alleged insider dealing and, just to make it more poignant, the alleged victim is in her nineties and has Alzheimer’s. Not that ripping off a hale-and-hearty twenty-something is just dandy, but it is less Darwinian. Listing Agent had grossly under-priced Seller’s house, something that in normal circumstances would not have harmed her client: the market—this was a hot property in a high-demand neighborhood—would’ve bid up the sales price to the home’s full market value.
And that’s exactly what happened but, as it turned out, after the fact, or what are alleged to be the facts, which I’ll give you as I know them.
Listing Agent, prior to putting the alleged victim’s home on the market and without the knowledge or consent of the elderly woman’s conservator, purportedly agrees to sell the home to another agent in Listing Agent’s office, whom we’ll call Buying Agent, at a price hundreds of thousands of dollars below market value. To make the scheme look kosher, Listing Agent puts Seller’s house on the market, supposedly exposing to it every buyer interested in the house, but after a day or two gives Buying Agent’s offer to Conservator before other buyers have a chance to even see the house, let alone make offers.
While presenting Buying Agent’s offer to Conservator, Listing Agent fails to pass on two items of information the law thinks Conservator would find useful:
1) Buying Agent is an agent. Agents (or what the law calls “licensees”) are presumed to have an advantage over non-licensees in real estate transactions.
2) Buying Agent works in Listing Agent’s office. Listing Agent’s failure to disclose this leaves herself open to the appearance of collusion.
Buying Agent’s offer is significantly above list price which, however, is even more significantly below market value. Conservator is overwhelmed by the munificence of the offer and asks where she signs. Done deal and big bucks for Buying Agent, who’s snagged the home at a huge discount before other buyers can act. So we know Buying Agent’s upside, but what’s in it for Listing Agent? We can only speculate, but we’re pretty sure that Listing Agent has at the very least made an office buddy for life.
So far, so good, at least for all the licensees involved. Except that, like Poe’s “Tell-Tale Heart”, the Multiple Listing Service won’t shut up and go away. Other agents (including me) and other buyers (including mine) see the listing, then see it almost immediately go pending, and Listing Agent’s phone is ringing off the hook with people who’d like to know why. When I talk to her, Listing Agent sounds rattled. Yes, the home is in contract, she says, but she’s hearing back-up offers that night. Back-up offers, plural? That’s unusual. My clients can’t move that quickly, but others can and do, and their offers come in much higher than Buying Agent’s offer. Hundreds of thousands of dollars higher.
Now, at this point the astute observer might well ask of Listing Agent, “What were you allegedly thinking?” No, not the part about ripping off her client, because Listing Agent had crossed that legal and ethical Rubicon several miles back. No, the part about telling her client that other buyers had offers they wanted to present. Not telling her client would also have been illegal and unethical, but had Listing Agent been serious about saving her bacon, she might have taken to heart Caesar’s comment, “the die is cast”, when crossing his own legal and literal Rubicon on the way to overthrowing the Roman Republic. The answer may lie in the “DO NOT DISTURB OCCUPANTS!!!” Listing Agent inserted in the MLS when the home went pending, which suggests that frantic buyers were pounding on Seller’s door.
Every story should have a compelling moral, and the moral of this story is: If you’re going to be an alleged crook, don’t be a half-way alleged crook.
Confronted with evidence that she’s left hundreds of thousands of dollars on the table, Conservator’s initial joy turns to doubt. Seller isn’t exactly in her prime earning years and could use the extra money. Heck, most of us could use an extra $400,000. Conservator contacts local consumer reporter Michael Finney, who does a restrained but damning report for the 6:00 News. His camera catches Listing Agent skeedadling from her office in her Jaguar. I don’t know how many viewers see this, but the number is probably in the hundreds of thousands. Then it’s posted online, where more hundreds of thousands can see it.
Most of them say or think, “I knew they were all crooks”.
But wait, there’s more! It turns out that the managing broker who supervises Listing Agent and Buying Agent not only knew about this alleged insider deal but was right in the middle of it. Managing Broker represented Buying Agent as her agent in the transaction, standard practice in some brokerages whenever one of their licensees makes an offer for herself. “So what?”, you ask. Well, the managing broker—the person most people outside real estate would call the “office manager”—is there to be a beacon of professionalism for his agents. That’s the big reason he’s there. Other people run the office on a daily basis. But have a tricky question? Ask your manager. Need guidance on an ethical issue? Ask your manager. He’ll keep you on the straight and narrow.
Maybe it’s just me, but if I was Listing Agent and I’d just been steamrollered with publicity like this, my inclination would be to lay low. I’d be worried that maybe my fellow agents would be looking at me funny. I’d even worry that they’d actively resent me for making the entire profession look like elderly-abusing scumbags, even if all my actions had been strictly on the up and up. So I’m more than a little surprised to see Listing Agent’s card, shortly after this report airs, at a home I end up selling. In fact, I start seeing her cards all over the place. I’ve probably always seen them and haven’t noticed them. I do now.
I pick up one and on the back it says, “The highest compliment I can ever receive is the referral of friends, family, and business associates. Thank you for your trust.”
Part 2: Have gun, will travel. Even when it’s loaded with blanks.
A month or so later buyers call me about a home they’ve found for sale on Craigslist. I look it up and note that the house is professionally presented and that it’s “for sale by agent/broker”. I email agent/broker with a few questions, including the biggie: is he cooperating with brokers? In other words, will I get paid?
This isn’t as mercenary as it sounds. If agent/broker won’t give me part of his commission, Coldwell Banker won’t let me represent my clients in the purchase of the home. This also isn’t as mercenary as it sounds: why should Coldwell Banker and I assume all kinds of liability representing buyers in a transaction when we know we won’t get paid? And we don’t have to get paid to assume all kinds of liability. Our liability exposure starts the moment I advise my clients on the house. Unlimited liability, zero compensation: a lose-lose situation.
So I need to know, and quickly. Agent/broker doesn’t respond. This suggests that either 1) he isn’t cooperating, or 2) he’d rather not cooperate. By putting his listing on Craigslist rather than on the MLS, he seems to be trying to shut out other agents and find his own buyer. I note that agent/broker has an out-of-area telephone number and grumble about out-of-area cowboys.
I also do something I almost always do, and always should do: look agent/broker up on the Department of Real Estate’s Web site. Now that’s interesting: it says “no current employing broker”. In other words, agent/broker isn’t affiliated with any real estate office. And since agent/broker has only a salesperson’s license, not a broker’s license, he can’t call himself “agent/broker”. And since agent/broker has only a salesperson’s license, not a broker’s license, the law says he has to “hang” his license with a broker before he can sell other people’s homes.
Maybe he’s selling his own home. I check county records. Nope. Not only is agent/broker violating the law, he’s incurring huge liability if the deal goes bad, because he has no Errors & Omissions insurance to defend him. Not only that, he may have misrepresented himself to the seller as a legitimate real estate agent, leaving himself open to a civil suit.
It also explains why he’s got his listing on Craigslist and not the MLS. He doesn’t have access to the MLS except through one of the limited-service brokers, and an MLS listing would raise his profile considerably.
Intrigued by his bold desperation, I Google agent/broker to find out where he used to hang his license. The only trace of him is a sketchy bio at a social networking site. It tells me who his broker was, a franchise, but not the office he worked at. I search county records again and find the address of the house he owns—for now. The entry has a “foreclosure alert” red flag. Stuff happens, even to real estate agents. Agent/broker has owned his house since the late 1980s, but there’s an interspousal deed transfer a few years ago that suggests he’s coming off a divorce. Agent/broker could really use a commission check.
I call the office of his former brokerage that’s closest to his home and get a booming “It’s a greeeeeeeaaaaaaaat day for real estate at Bushleague Realty”. I pick myself off the floor and ask for agent/broker. Boomer ratchets down his enthusiasm a few notches and tells me agent/broker don’t work there no more. Boomer thinks maybe agent/broker works at another Bushleague office and gives me its phone number.
I know he won’t be there either, but call that office and again enquire after the elusive agent/broker. “He’s not here anymore”, says the floor agent. I sound disappointed. “Can I help you?” No, only agent/broker can help me. “He’s a great guy”, agrees floor agent. Yes, a real prince. Where’d old agent/broker head off to? “He said he had to sell his house. Once he does that, he thinks he’ll get back into real estate.” She gives me his cell number off an old roster, I thank her humbly and hang up.
My next step is to contact my managing broker and tell her I know everything about this guy except his shirt size. She tells me to steer clear. In the meantime my clients have gone through the open house and decided the home isn’t for them.
I don’t turn agent/broker in to the DRE. Why not? My wife always asks me this whenever I grumble about shady ethics. I have an expedient and serviceable but not particularly noble answer, based on Cain’s famous wrong answer, “Am I my brother’s keeper?”, but updated to meet the needs of the 21st century: no good deed goes unpunished.
The agent I file a complaint against today may have a listing my buyer likes tomorrow. That’s not likely in this case, but once I file a complaint I’m sucked into a lengthy administrative law process based in Sacramento, a long way away, that’ll put a big dent in my business and my ability to pay bills. And suspending his license for six months won’t change agent/broker’s business model, because his license is useless anyway, so maybe this is something for the District Attorney’s office instead. Except that I’m not the victim. And the victim, the seller, may know all about agent/broker’s situation and be getting his services at a reduced commission and be as happy as a clam with the arrangement. Finally, it’s just barely possible that agent/broker has hung his license with another broker and that the DRE’s Web site hasn’t caught up to him.
But I think the real reason I didn’t report agent/broker is that, somewhere, I began to feel sorry for the poor sod. No, it’s worse than that: I began to identify with the poor sod, or at least his less venal aspects. Maybe that’s a funky reason, but these are funky times. In any case, no apparent harm, no apparent foul: his listing was overpriced and never sold, and maybe he’ll run out of business cards.
Moral: If you’re going to be a crook, be a pathetic crook.
And the last time I checked, agent/broker was still hanging onto his house, red flag and all. How, I don’t know. Maybe I don’t want to.
Part 3: Trouble is my business.
For the past few months I’ve had the pleasure of working with first-time buyers in a price range that didn’t exist six months ago, single-family homes priced at $450,000 or less. At one point we were even looking at $225,000 condos, while other clients of mine were making an offer on a home listed at $2,175,000. I cover a lot of territory these days.
And one thing that getting around gets me is the knowledge that if you’re looking for bank-owned homes over $2,000,000 you’re looking for something that doesn’t exist. But if you’re looking at $225,000 condos or $450,000 single-family homes, you’re looking at bank-owned homes.
The upside of looking at bank-owned homes, or REOs (Real Estate Owned, a bank term) as they’re often called, is that they’re easy to show because they’re always vacant. This might seem obvious—no bank would let a delinquent homeowner stay in the home after it foreclosed—but a significant number of these homes were rentals. So it might be tenants, not homeowners, that the bank just booted. And be assured that a bank can boot any tenant, even one supposedly protected by a lease. Even a tenant supposedly protected by local rent control, according to the California Association of Realtors® legal counsel I spoke to. Only banks get to do this.
Didn’t know that, did you?
The downside of looking at bank-owned homes is that they’re always pathetic, often hammered and sometimes downright scary.
Call me a sensitive so-and-so but I can’t walk into a bank-owned home without feeling the pathos. Sure, foreclosed homeowners had it coming, so the moralists say, but I’m not convinced. And sure, many will recover; after all, most had little to lose, at least financially, and that was the problem. Still, I know that most busted homeowners were motivated by more than dollar signs because, unlike the moralists, I know that buying your own home usually isn’t about grabbing the brass ring. Lots of people, virtually all of them at the low end of the socioeconomic ladder, were sold a dream that for long had seemed like an impossible dream, then had the rug pulled out from under them.
It’s hard to argue with the charge that foreclosed homeowners lived beyond their means but, folks, look at the neighborhoods they lived in and the homes they bought before you call them uppity. I’ve seen plenty of both and doubt that they’d appeal to the average moralist. Lately most of my REO time has been spent in a place I’ll call Old Town. Old Town is a rarity for the Bay Area, not a sprawling tract neighborhood slapped together post haste post-World War II but an old-fashioned scene right out of Norman Rockwell (albeit a seedy Norman Rockwell) and built mostly from 1900 to 1930. Many of these homes were cheap and charmless even when new, and years of neglect and ham-fisted low-budget “upgrades” haven’t helped. But once in a great while you can find something with architecture and a few period up-market features, something a little worn around the edges but showing a little love.
“Seedy charm”, in other words, but as you head east out of Old Town into Sprawlsville, charm leaves and seedy stays. I don’t know if the rundown tract neighborhoods of Sprawlsville are worse than the rundown built-one-at-a-time neighborhoods of Old Town, but as I drive through Sprawlsville today scouting bank-owned homes for my clients, an inner voice keeps telling me to leave. A remarkably strong, insistent inner voice. Call it instinct honed by managing rentals in all kinds of neighborhoods, or call it the perfect end to a perfect day, but whatever it is, the voice keeps urging, “Go home. It’s late afternoon. It’s been a long day. You’re wasting your time. There’s no way your clients will like these crummy nondescript homes. There’s no way your clients will like this crummy blighted neighborhood. Go home. Go home.”
That’s one half of the internal debate. The other half goes like this: “Keep on. You’ve driven this far. You’ve burned this much gas. The next neighborhood might be better. The next house might be the one. Keep on.”
The next neighborhood isn’t, and the next house never is, but “keep on” keeps out-talking “go home” until I stumble across something so astoundingly normal that it stands out like an ancient temple in this unreal patch of real estate jungle: an open house A-frame. Then another. And another. And another.
It’s Wednesday. Nobody holds REOs open. Even on Sundays, let alone Wednesdays. Because REOs are always vacant and easy to get into. Besides, there’s way too many of them in neighborhoods like this for one agent or even a team of agents to handle. Besides, the agents who list REOs aren’t known for their full-service attitude, and a Wednesday open is full-service plus.
It’s a house I want to see anyway, so I follow the signs and pull up to the house. Plenty of cars are parked on the street, but none are obvious “realtor cars”. I park my obvious realtor car in the driveway and pause a moment to wipe the “why am I here and what is the meaning of life?” look off my face.
I’m well inside the house before the agent steps out from nowhere to greet me. I wonder if she was hiding or if this is just part of her open house technique. She tells me it’s a bank-owned house. I say, “Yes, there’s quite a few in this neighborhood”. She looks startled. We trade cards and I see she’s not from the area. I excuse myself to look through the house. I notice it has two full baths, not the full and half-bath the listing claims. I mention this. She says, “I noticed that too, but I’m not the listing agent.” Remembering the times I did week-day afternoon open houses for a hard-to-sell listing in a scruffy neighborhood—and remembering how flat they fell—I ask her, “How many people showed up today?” “Including you, three”, she says, smiling.
Maybe holding open this house isn’t the best idea she’s ever had, and maybe she hasn’t done her homework on the neighborhood, but there’s something uncomplaining and quietly friendly about her response, about her attitude over the past few minutes—no whining, no cynicism—that heartens me. I decide to look at another house. It’s the worst I’ve seen all day. I decide not to spoil the moment any further, and wheel my obvious realtor car toward home.
On the way back I see the agent collecting her signs, a small vulnerable figure against a hardscrabble landscape. I see why I couldn’t spot her car. It’s a small faded-red Honda, clean but older, the kind of no-frills two-steps-up-from-taking-the-bus set of wheels that fades into the background in this kind of neighborhood. Ain’t no one making big bucks. Just an ordinary agent, taking an open house no one else would take, trying to make something happen in a tough neighborhood in a tough market. More guts than glory.
And the moral of this story is this question: how many naïfs, hacks, critics and opportunists would leave their cubicles, spare bedrooms and ivory towers to do the same?
copyright © John Fyten 2008