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Real Estate Dual Agency and Fraud

By BayArea   Mar 27, 10:07am   2 links   950 views   11 comments   watch (1)   quote      

Hi Patrick,

There seems to be certain people on this site (myself included) that are particularly passionate about the dual agency topic and see a dire need for real estate transaction transparency.

First, I want to make one distinction. I'm not taking issue with dual agency itself necessarily. If the seller's agent and the buyer's agent are representing the same company, as long as the numbers are transparent, then I'm mostly ok with it. I still think it leads to unfair advantages, but there's a bigger problem:

The issue I have is that during dual agency, there is incentive to keep the whole commission "in-house" by not fairly presenting all offers to the seller and letting them decide. That's the root of the problem and it's amplified during times of low inventory and high demand. I don't know how rampant this practice is, but it seems that no small handful of people suspect that they've been the victim. When you make an offer that gets rejected for a property you really wanted, and 3-4wks later you see that the property sold for less than your offer and you find that both agents work for the same company, what are you supposed to think?

One reason that it's hard to trace is that decisions can be buried under excuses like, "they had more cash" or "they told the seller that they are moving their family in for a long time" or "during inspection they found termites and the seller dropped the price to keep that buyer" or a host of other reasons that somehow explain why a seller was swayed to go with one buyer over another, even though the rejected party had a higher offer.

You'd think that the NAR and the agents out there would be in favor of transparency because they are getting burned too.

Patrick, I wonder if you have suspected that this sort of thing affected you personally in the past? I have to think that for someone to write a book and talk about this issue, you may have been affected personally. When I was looking for property back in 2010-2012, I was nearly certain I was affected, but I couldn't prove anything and once the transaction passed me, it seemed like there were no ears to listen or care.

I like the recent posts on this topic and what better place than patnet.com to brainstorm what can be done about it?

Raising awareness is a good start. I am certain most of the home-buying population never dives deep enough to consider that this type of thing can and does happen. Most of my home-ower friends are hearing it for the first time when I discuss this over beer.

So here is a challenge to patnet (myself included): What can we do to raise awareness, expose the cases where this has happened, and do something about it?

The good news is that to expose the problem, you don't need the real estate company. You just need the county sales record, the buyer that got burned to confirm the offer, and the seller who was either presented with the offer or wasn't.

Comments 1-11 of 11     Last »

1   Patrick   Mar 27, 10:22am     ↑ like (1)   ↓ dislike   quote    

BayArea says

Patrick, I wonder if you personally have suspected that this sort of thing affected you personally in the past? I have to think that for someone to write a book and talk about this issue, you may have been affected personally.

Many sleazy things happened to us when we tried to buy a house years ago: underpricing, strange phone conversations which we were deliberately supposed to accidentally "overhear", attempts to manipulate my wife and to make me feel bad about not bidding more, and a realtor who found us a temporary rental raised the price on it after we had signed the lease by pointing out that the landlord had not signed the lease yet. We rejected that rental and the agent after that of course, but jeezus. The last straw was when we bid $600K on a house listed at $500K and lost. I don't actually know what it sold for because I was so disgusted with realtors that I gave up and have pretty happily rented and invested since then.

Not sure if the dual-agency offer suppression thing happened to us, but it became really clear that realtors are willing and able to fuck both sides to maximize their commission because there is zero transparency and the NAR is paying off Congress to keep it that way.

So how can we get people to list their bids on patrick.net?

If I could get even one clear case, then maybe it would be easy to go to the press and get a story written, and more people would list their bids, but how to get that first case?

2   APOCALYPSEFUCK_is_ADORABLE   Mar 27, 10:26am     ↑ like (2)   ↓ dislike   quote    

Time for an MLS busting RE Bid BlockChain!

3   Patrick   Mar 27, 10:33am     ↑ like (1)   ↓ dislike   quote    

Who else might have a financial interest in ending this continuous fraud? Lawyers, I suppose. They have their uses.

Amazing that the law does not require sellers to sign rejections of offers. That would do tons to help fix this problem. I guess it's not amazing given the money that the NAR throws at public officials.

4   BayArea   Mar 27, 10:34am     ↑ like (1)   ↓ dislike   quote    

I would think a show like 60 minutes would salivate over something like this if we could get 1 clear example where this unquestionably happened.

Public awareness would force the NAR's hand. But I wonder, why wouldn't it be in the NAR's best interest to fight this too? Afterall, when the fraud we are describing occurs, at least one other real estate agency loses (usually several real estate agencies lose in multiple offer regions of the country like were we live here on the Peninsula).

The things you described above, man, I've had similar experiences. I saw these things first hand during that 2010-2012 time period. You start to really see these patterns when you are in the game for an extended period of time.

Lots of games and dishonesty that is difficult to 100% prove due to that lack of transparency.

5   APOCALYPSEFUCK_is_ADORABLE   Mar 27, 10:39am     ↑ like (3)   ↓ dislike   quote    

What we need is 20 guys to become Realtors and work for a year, watching and recording the scams and archiving any related documentation and work with lawyers to redact any personal information they could be sued for revealing and hand it all over to the 50 state AG's and US Justice with a recommendation that commission selling of RE be banned in the US.

6   jvolstad   Mar 27, 10:47am     ↑ like   ↓ dislike   quote    

I don't have to worry about dual agency. I would never use a so called Buyer Agent if I was buying a house. What a scam!

7   Patrick   Mar 27, 10:48am     ↑ like   ↓ dislike   quote    

Even though agents screw each other with these games, keeping the bidding secret keeps commissions as high as possible overall, and that is the sole reason for the existence of the NAR.

APOCALYPSEFUCK_is_ADORABLE says

What we need is 20 guys to become Realtors and work for a year, watching and recording the scams and archiving any related documentation and work with lawyers to redact any personal information they could be sued for revealing and hand it all over to the 50 state AG's and US Justice with a recommendation that commission selling of RE be banned in the US.

Lol, that would be excellent, though I'm skeptical that anything would change because the NAR is the 2nd largest lobbying group in DC. Maybe the solution should be more practical than legal -- continuous exposure of all bids. If we could just get people to do that.

8   BayArea   Mar 27, 10:49am     ↑ like (1)   ↓ dislike   quote    

Patrick says

So how can we get people to list their bids on patrick.net?

Good question, your talking finances which people are typically reluctant to share. But since the selling price will be public info anyway, that reluctance is misplaced.

Apocalypse, I like the idea lol, infiltration would work, but that's some serious dedication.

Patrick, one thing we have going for us is that we live in a place where inventories are low and demand is high. So there's no shortage of multiple offer test subjects here. I need to think about this some more but hoping the creative minds on patnet can come up with a way to get that in for one solid example where we can get a losing buyer and successful seller to eagerly cooperate after the fact... not easy.

9   BayArea   Mar 27, 11:43am     ↑ like (1)   ↓ dislike   quote    

Ironman says

If a buyer is going to go the Dual Agent route, they better be extremely knowledgeable about the entire process and be able to recognize the different alliances in different segments of the deal.

Spot on. In any transaction in life, you should ask yourself "what are the other party's incentives/motivations and why?"

10   Patrick   Mar 27, 11:55am     ↑ like   ↓ dislike   quote    

Yes, and we have to understand these things well to get people to go public with their bids.

People are shy in public about their finances. Are they going to post on a public web site a claim that they bid a large sum of money? That gives away to the world knowledge of how much money they could bid.

But yes, I think the motive of revenge for being burned by a sleazy realtor might override that shyness.

For the seller, similarly, if they realize they have not actually been presented with all the bids, that might also encourage them to speak up and say so.

11   HEY YOU   Mar 27, 12:54pm     ↑ like   ↓ dislike   quote    

New price for any real estate transaction.
Seller signs over title,receives nothing & pays buyer 10% of listing price.

Continue to overpay SUCKERS.

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