WatchI submitted this complaint to the https://www.ftccomplaintassistant.gov/ today:
It is routine yet fraudulent business practice for realtors in California to "underprice" a house. Meaning that realtors advertise a house for sale at a price which they refuse to accept. This is fraudulent advertising designed only to attract attention and to then get buyers to blindly bid against each other.
An offer to sell published in a newspaper should be a legally binding contract to sell at that price. For example, if a store offers to sell a certain toaster for $40, it is obligated to sell that toaster for $40, and not raise the price to $55 the moment they have your attention.
My complaint is that real estate advertising in California is rife with this particular fraud, and all realtors know it. The buyers are the losers. The FTC exists to correct fraud like this.
I don't really expect the FTC will correct this ongoing blatant fraud, but it's nice have a formal complaint channel I guess.
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San Jose, CA
I totally agree, Patrick. If they do auction, Auction Broker should be involved and advertise property as Auction.
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Hmm...can FTC get NAR? I don't think so.
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It's well past time to disband the NAR, open the MLS and throw all engrossers out of helicopters.
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Patrick says
Sorry patrick.. an ad IS NOT an offer per contract laws.
"Is an advertisement an offer?......No. Courts usually consider advertisements something short of an offer. They are an "expression of intent to sell" or an invitation to bargain."
http://public.findlaw.com/abaflg/flg-9-1a-15.html
Your complaint will be ignored. Next time, do some research, by sharing with knowledgable people who have some experience with such matters.
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46 male
Menlo Park, CA
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Actually, an ad may well be an offer:
From https://litigation-essentials.lexisnexis.com/webcd/app?action=DocumentDisplay&crawlid=1&doctype=cite&docid=58+Hastings+L.J.+61&srctype=smi&srcid=3B15&key=13c3e8ecc1708f7b645e4399b23f3b52
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Any ad in any way sponsored or promising a transaction that could engross a Realtor® should include the warning: "STAY THE FUCK AWAY! PSYCHOPATHICALLY CRIMINAL, COMMISSION-SUCKING UNIDICTED (or INDICTED, IF JUSTICE HAS BEEN VIGILANT) FELON MONITORING TRANSACTION!"
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Half Moon Bay, CA
This happened to me once back in 2005. I offered what the seller was asking on the same day it was put up for sale and my offer was rejected.
Looking back now, I'm glad they rejected my offer. The home is worth half of what it was in 2005.
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Tarzana, CA
Patrick says
Thank you Patrick for taking the time to submit the complaint.
I was just thinking in the apartment laundry room just now what a joke the California Real Estate 'Market' is.
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Oakland, CA
Patrick, amen...
These listiings that are out of the ballpark low just generate a bunch of paperwork and lost time for both sides of the fense.
Going through this hassle right now myself.
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I would agree in principle with a much weaker form of complaint.
If you submit a bid *and nobody else bids higher* then the seller needs to accept your bid. Otherwise, the original price was just misleading. In fact, I think in Sweden they passed some regulation to this effect the other year.
However, one cannot blame the seller for being open to higher bids. There is nothing unethical about selling through an auction-like mechanism. I think complaining that "they are selling thru an auction like mechanism without spelling this out in their advertisement" is a really weak case. I mean is it really true that you tried to bid list and lost because you had no idea that the buyer might accept a higher bid?
In principle though, I like the idea of going after NAR through these types of complaints. They were forced to open up MLS after anti-trust complaints. My pet peeve is that standard *sales* contracts spell out the incentive structure for the *buyer's* agent, this is extremely anti-competitive and seems like a better case to file a complaint against IMO.
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Patrick says
may ? very unlikely... there is too much history over this matter.
but in regard to ... manipulating Market Value.. there are possibilities as pnet has argued. Here is a fast rought draft...
definition per U.S. federally regulated lending institutions
"The most probable price (in terms of money) which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: the buyer and seller are typically motivated; both parties are well informed or well advised, and acting in what they consider their best interests; a reasonable time is allowed for exposure in the open market; payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale."
Key terms...
competitive, open market, knowledgeably, undue stimulus, well informed, best interest, and uneffected by financing.
All these terms and concepts based on regulator definition are NOT present in the market place since many times over RE agents, in order to drive higher commissions 6% off full price, will state without any evidence "other offers exist" putting "undue stimulus" on prices. As such we have seen in the market place 'abusive practice' which has resulting in "inflated prices" and "excessive leverage" taking on by consumers. The ultimate impact of such practices have contributed to nation wide RE bubble, damage to financial markets, and economic recession.
additional stuff .. Blah Blah Blah....
Other offers observed during the bubble are (1) undocumented offers by Realtors "Phantom bids" and/or (2) Actual buyer placing offers on multiple properties without the intent to purchase all said properties. Therefore, actual buyer is counter on their own bids.
In all cases, actual bona fide buyers are pressured to overbid, overpay, over leverage without the relevent facts given the market is absent of open markets, knowledgable buyes, pressure to overbid, divulge method of financing.
Solutions ... Blah Blah Blah...
Clean it up and you will have something....
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drtor says
Let the seller prove its bona fide buyer...otherwise it just a fake offer. Since all these comments are verbal, they arent allowed in court when your dealing with RE and Contract Laws. The realtors do understand "statute of frauds" and there are holes in it ..to abuse it.
http://www.west.net/~smith/frauds.htm
At best if someone states.. i have "another offer"... clearly its ALREADY written and should be available for inspection by other buyer. Else its undue stimulus with the actual and only bona fid buyer not well informed, with agents not acting in best interest of their client.
Like I said.. if its another offer.. get a copy! OFFER = Written!
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thomas.wong1986 says
Yes! I would absolutely love it if that were possible. But you know what the answer would be: "Oh, I can't show you the other offers, because that would violate the privacy of the bidders."
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Patrick says
Ah! thats the rub.. but there is NO Attorney–client privilege for Realtors. Fact is no even CPAs have client privilege regarding tax work. As to confidentiality, yes it only exists between clients (seller) and Realtor as it relates to agency contract as a representive, agreement between the two parties. We certainly dont see this in terms for appraisal or other inspections which are disclosed. Besides if they already said there are other offers, then if such confidentiality existed, it certainly was broken by such disclosure. You see... there is none.
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robertoaribas's website
thomas.wong1986 says
yeah... I'm sure your law degree is hanging right there above your computer! As if existence of an offer = all details of pricing, financing et that are material to an offer... yeah sure!
Patrick.net was worth something at one time, but it has gone to shizzle now.
the fact that Patrick wrote this thread shows the problem: Look up the legal definition of fraud, and you will see clearly that this practice by no means meets any part of the definition, but the bitter on here will grasp at all straws to blame for the market not being "fair" to them today.
However, if it was your offer that was disclosed to someone else, so they could offer $1 more or a quicker close to kick you out... Oh if that was the way it worked how this site would be full of whining how that was so unfair too...
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robertoaribas says
I think the point is that it shouldn't require a law degree to fully understand something as basic as the rules governing a simple purchase of residential property.
@Patrick, I fully agree with your complaint. I don't blame sellers for being open to higher offers, but the list price has to mean something. When you list something on an auction site like eBay with a starting price of X dollars, you have to sell it at that price if no other bidders come along. It looks like home sellers are getting the best of all worlds -- the attractiveness of a list price with a dollar figure attached, the freedom to take higher prices if such offers come along, but then also the freedom to disregard offers at the very price the seller claims to want to receive. Why not just list all houses starting at 99¢, eBay style, and then turn down all those dozens of bidders if the price doesn't go as high as you like? Even eBay sellers can't get away with that.
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Patrick,
Thank you so much for expressing a frustration I've had myself.
My view is that it takes too long for the government to get around to plugging up these sorts of problems. When they do finally do it, they make laws that just cause all the good ethical agents (or whomever is in the industry targeted) extra paperwork and hassle. But the unscrupulous ones just keep on doing it and getting away with it because they are good at avoiding enforcement. Or they move on to another business, because that's the kind of life they live: fly-by-night with zero responsibility.
Additional government intervention, new laws, and new regulations tend to cause more problems than they solve. There are too many people in government who just don't understand business or simple economics. Wasn't it government intervention in the housing market to get more people (even those with poor credit) into the housing market a main driver in the housing boom and collapse?
If there weren't such market manipulation by the banks and their friends in government, a lot more homes would ACTUALLY be selling for those prices that seem ridiculously low now--because that's what they should be worth in a real market!
I believe in market-based solutions. Sites like Zillow and comment-oriented sites like yours are examples of the free market at work.
Perhaps Zillow and similar sites will offer a way to identify "outliers" in the listings. In fact, I've noticed they do make note of it in the detailed listing. I just haven't noticed a way to figure it out from the map listing.
Maybe there's a way to keep track of agents who use this tactic. Perhaps Angie's List, Yelp, or another ratings site?
I, too, would love to see the practice of deceptive pricing eliminated, but I believe the market will take care of it.
The whole real estate bubble shows how a bit of legislation with apparent good intentions (and a BIG benefit to a certain industry) that interferes with a functioning market, can cause HUGE negative repercussions.
...and yes, I am a fan of Ron Paul for President 2012!!! I registered Republican so I can vote for him in the California primary and send a message that we need to end this type of mentality that "the government will save us."
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robertoaribas says
I must agree with you Robert. For the past few years there has been more and more misinformation passed along as fact on these threads. There are so many arm chair home buyers giving bad advice it's hard to set the record straight at times. Posters that have never purchased and/or sold property, or been landlords, and have no real life experience in these matters are constantly giving bad advice. Some of it is so far off base that one can only laugh.
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lurking says
Noooooooo. You can't be serious. Misinformation? Bad advice? No real life experience? Off base on Patnet?
You're just jealous because they know more than you do. ;) wink wink.
You and Roberto summed it up pretty well though. Short and precise. How would they like others to see their offer so others can offer $1 more with better terms than their offers?
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Tarzana, CA
lurking says
I took offense to this post also. I have purchased 2 condos in my life, sold one in 2005 and the other is rented. Both more of a success with the information from this blog.
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Patrick,
Regardless that your site has some out of touch people, I'm glad I'm part of it. I've made friends with some very intelligent people on here. There are several others that I'd to be friend with, but their out of state & too far away. One of the guys that you and I went out to lunch with a couple of times; he is so good with running a business that he adds about $30k-$35k value to each of our joint-venture real estate transaction. That's huge on an average $150k transaction. we're getting in contract for another property this week. The deal is already locked in, and it is currently off market.
Although you are rigid with some of your thinking time to time, I still appreciate you for creating this website, which allowed me to meet some fantastic individuals.
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Trabuco Canyon, CA
California Equity & Loan's website
Bait and switch. Pure and simple. Wrong and punishable. Sue and win.
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46 male
Menlo Park, CA
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E-man says
Thanks! Glad you still like the site. Happy to have lunch again sometime.
I wasn't sure that you and the other guy were going to make money on that property, but it sure looks like it's working out well for you two.
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David9 says
Let me echo this sentiment. This blog and its forums are a great resource for staying in touch with the US housing market, particularly for someone outside the country who will probably be moving back (and buying RE) in a few years.
My only criticism is of some of the Californians who presuppose familiarity with their state a bit too much.
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Palo Alto, CA
It wasn't always like this. 35 years of democratic party monopoly in the state legislature created this kind of environment in California. If you want change, I suggest looking at your local elected officials.
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Emeryville, CA
anon12366 says
We punish the Dems. We vote Green in the Bay sometimes.
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Tarzana, CA
Michinaga says
Yes, in 2005 or so, same as now only reverse, some people were blogging PRICES WILL NEVER GO DOWN.
The data and expert opinion articles said otherwise.
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46 male
Menlo Park, CA
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Michinaga says
I wish I could do more for you, something worth paying a little for.
If I got a mere 274 subscriptions to Patrick.net Premium then I'd be making $100K per year (well, $93K after Paypal commissions).
Currently I have 23 subscribers. So I keep thinking I should just give up on all this and go back to the real world before I eat all my savings or my wife kills me, or both.
Then I get pulled back by some new hare-brained idea or other, like the Open House Reviews. All I need is to find something that is worth $1/day to 274 people.
Ah, one last and probably impossible condition: I want to remain the side of the buyers, and not try to cheat them with realtor games like I just reported to the FTC.
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Patrick
This is great work
You need to submit this complaint on an hourly basis for a year
Call regular press conferences on your lawn and ask why no one has been indicted for these crimes
Get apostate Realtor®s to confess at those press conference that it is a felonious Realtor® SOP and break down and cry beg forgiveness
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Oakland, CA
Patrick, I will submit the identical complaint.
Maybe if they hear it enough, we'll see some movement.
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Los Angeles, CA
Patrick the realtors are not breaking the law on this one as the law exists now. What you are really asking for is for new laws. Good luck with your career in politics - get elected and you can get paid to do this full time.
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robertoaribas says
Well Rob, lets do some looking up...
http://en.wikipedia.org/wiki/Fraud#United_States
Common law fraud has nine elements:
1.a representation of an existing fact;
2.its materiality;
3.its falsity;
4.the speaker's knowledge of its falsity;
5.the speaker's intent that it shall be acted upon by the plaintiff;
6.plaintiff's ignorance of its falsity;
7.plaintiff's reliance on the truth of the representation;
8.plaintiff's right to rely upon it; and
9.consequent damages suffered by plaintiff.
Most jurisdictions in the United States require that each element be pled with particularity and be proved with clear, cogent, and convincing evidence (very probable evidence) to establish a claim of fraud. The measure of damages in fraud cases is to be computed by the "benefit of bargain" rule, which is the difference between the value of the property had it been as represented, and its actual value. Special damages may be allowed if shown proximately caused by defendant's fraud and the damage amounts are proved with specificity.
---------------------------------------
The Supreme Court of Michigan strongly affirmed the trial court’s ruling in favor of the auctioneers: “Our law follows this norm as it is undisputed that the use of a ‘shill’ or false
bidder unbeknown to the sincere bidders at an auction is contrary to our public policy.”
see page 781 Rose v. National Auction Group, Inc.,
http://www.acrel.org/Documents/Seminars/Hammond%20Good%20Real%20Estate%20Auctions.pdf
-------------------------------------------------------
What is public policy ?
Agreements Contrary To Public Policy
154. Any agreement which is contrary to the policy of the law, or public policy, because of its mischievous nature or tendency, is illegal and void, though the acts contemplated may not be expressly prohibited either by the common law or by statute.
155. The test of public policy must be applied in each case as it arises, and therefore agreements which have been or may be declared contrary to public policy cannot be exactly classified. The most general are:
(a) Agreements tending to injure the public service.
(b) Agreements involving or tending to the corruption of private citizens with reference to public matters.
(c) Agreements tending to pervert or obstruct public justice.
(d) Agreements tending to encourage litigation.
(e) Agreements of immoral tendency.
(f) Gambling transactions.
(g) Agreements tending to induce fraud and breach of trust, (h) Agreements affecting the freedom or security of marriage, or otherwise in derogation of the marriage relation.
(i) Agreements in derogation of the parental relation.
(j) Agreements in unreasonable restraint of trade, including combinations to prevent competition, control prices, and create monopolies.
(k) Agreements exempting a person or corporation from liability for negligence
Read more: http://chestofbooks.com/business/law/Handbook-Law-Of-Contracts/Agreements-Contrary-To-Public-Policy.html#ixzz1szKh088P
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Simi Valley, CA
legal or not it's definitely bait-n-switch tactic.
i filed one of these fraud complaints over the net a couple of years ago and i never received any response (http://www.ic3.gov). pretty sure they don't have the resources to investigate every complaint.
what about?
http://www.change.org/
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If a car dealership makes fake advertisements like that they get fined, that standard does get applied across. I know a local auto dealership was fined a few million, and other heavy fines, for putting in fake prices in newspapers on Corollas.
I think you just have to report specific cases to the Feds, and if Feds investigate it they'll find the brokerage that put the price up. You literally have to send them the specific ad and it gets investigated.
If you send them a generic they can't really investigate it since no individual is attached to the case.