Are You a Victim of These Common Real Estate Myths?

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Realtors® are expected to demonstrate competence in working with or representing buyers, tenants and owners. Ninety-nine percent sincerely try to fulfill this requirement. To do so, Realtors® must know the “rules of the game”. Imagine playing Monopoly or some other fairly involved game with someone who has never played that game before. They don’t know the rules. They have no clue that Boardwalk is a better property to build houses and hotels on than Baltic Avenue. They don’t understand the value of accumulating all the properties of one color or accumulating all the utilities or railroads. Who do you think will win the game every time? Right, the person who knows and understands the rules of the game.

In order not to be caught in the embarrassing position of “not knowing the rules” and possibly looking less than “competent” in the eyes of your buyers and sellers, check out the following MYTHS which trip up many, many agents.

MYTH #1 – “The contract has expired.” There is absolutely no language and there has never been any language in our GAR Purchase and Sale Agreement which “automatically” terminates the contract if the closing date is not met. Georgia case law has long upheld that the contract remains viable and valid even if the last written agreed-upon closing date has passed. What DOES happen if the parties have not entered into a written amendment to extend the closing date is that the contract becomes VOIDABLE by either party upon written notice to the other party. So if the closing date is looming and the parties are frantically trying to get ready to close, there is no “automatic termination” of the contract. The seller may elect to terminate in writing, but most do not unless there is an attractive back-up offer in the file. Deals close all the time in which the closing date in the contract has passed, but neither party pulled the plug on the deal and persevered till closing.

MYTH #2 – “Listing agents can’t shop offers.” Let me be frank: Any listing agent who does NOT shop offers is not doing his/her job. The listing agent’s goal is to bring in the best possible offers for the seller client. Are you allowed to reveal the details of offer A to buyer B? YES, so long as it’s in the seller’s best interests.  Suppose offer A is full price. Buyer B may be willing to offer more if given this information. Have you ever attended an auction? All bidders know the highest bid and decide whether to enter the bidding or not. Suppose offer A is a lowball offer. It would probably not be in the seller’s best interests to reveal how low it is, but to simply say, “My client hasn’t authorized me to divulge that information, but is very interested in seeing your offer.” NOTE: Never, ever, ever, ever, ever tell an agent that you have another offer unless it is actually in your hand. They can sense that you are fibbing and your credibility and integrity are at stake.

MYTH #3 – “’As-Is’ means the buyer can’t do an inspection or other Due Diligence”. “As-Is” is not mutually exclusive with Due Diligence. “As-Is” simply means that the buyer gets what they see (and don’t see) without any repairs or replacements. Since most “as-is” properties tend to be owned by banks and corporations who have never physically occupied the property, the Seller’s Property Disclosure Statement, if there is one, is mostly blank or marked “Do Not Know”. So how’s a buyer to find out what “as-is” really “is”? By checking “Due Diligence” and indicating a time period AND acknowledging that the property is being sold, “As-Is”. If the inspections are disastrous, buyer can terminate the contract. Also consider the fact that Due Diligence allows MUCH MORE scrutiny than just a physical inspection. It’s the time to check out the school, the sex-offender website, cruise past on a Saturday night, meet the neighbors, sniff the air, drive the area and much, much more.

MYTH #4 – “Short sales aren’t binding until the seller’s lender approves the contract.” The seller’s lender(s) do hold the trump card in the short sale process, but they do NOT own the property! The seller/owner still owns the property and a Binding Agreement happens when the seller accepts and conveys the acceptance of an offer to the buyer (or vice versa). The Short Sale Contingency is merely a seller financing contingency which must be satisfied prior to closing, just like the buyer’s financing contingency. Think this one through and you’ll wonder how you ever misunderstood it.

Look smart, act smart, be smart! Know the contract frontward and backward. The contract is the “rules of the game” in real estate.

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9 Responses to “Are You a Victim of These Common Real Estate Myths?”

  1. Francine Henderson Says:

    Thank you so much!

  2. Bill Boyd Says:

    Great Article!

  3. Carolyn Nicholes Says:

    Excellent information that all agents should know regarding these common myths!

  4. Greg Barnum Says:

    In many foreclosures, binding agreement date is, according to Seller Addendum, often deemed to be the date Seller gives VERBAL notice that it agrees to terms. This becomes day #1 of Due Diligence. It doesn’t matter what you put in GAR contract stips about Binding Agreement Date or Due Diligence Period, because these typically get wiped out by Seller Addendum. Fully executed (i.e. signed and received by both parties) contract may be days or even weeks away, and meanwhile your Buyer is paying for inspections.

    The advantage of this foreclosure model over the short sale model is that at least you have the bank’s approval–you just don’t have it in black and white. But in either case, there is that sense that the bank could pull the rug out from under you for reasons that are not always predictable or even rational, much less businesslike.

    While Buyers may gain some clarity and perhaps comfort from thinking of this limbo as a Seller’s financing contingency, the sense of powerlessness that remains is a part of the territory with distress sales. All real estate contracts have an element of uncertainty until checks are cut at closing, but as a Buyer’s agent, one should prepare the Buyer to expect feeling less in control than normal with foreclosures and especially with short sales.

  5. Britt Argo Says:

    Great tips. Refreshers are always helpful in an ever changing real estate market.

  6. Bob Morrison Says:

    Great information from Ann, as usual. I particular smiled when I read Myth #2. I can’t count the number of times I had this occur in dealing with multiple offers (in the good ol’ days!). I was always surprised when the listing agent would tell me, “I can’t give you the details of the other offer, that’s against the law”! I would always nicely tell them they might want to check on NAR’s web site and then give me a call back. Or when I had the listing, the buyer’s agent would begin a conversation with, “I know you can’t tell me how much the other offer is, but…” I would always reply, “sure I can” and then I would tell them if it made sense or decline if I thought it would hurt my seller. I learned this lesson a long time ago from a very trusted advisor – the same one who wrote this blog. Thanks, Ann.

  7. Suzie perlstein Says:

    GREAT article! As usual, I learned something new, (disclosing the price or terms of an offer if it will help the seller….I have to admit I was one of those who did not know this) and the others I learned thru experience (Broker Support), but this is a great article, one I will kepp on my desktop to have handy for client questions.
    As usual, thanks Ann!

  8. Jamie Hook Says:

    GREAT INFORMATION! Kevin should send this out to every agent in the company.

  9. betty floyd Says:

    EXCELLENT EXPLANATION. It is nice to have reflesh information on today deal. Thank you Ann to clarify and to help us to look smart!

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