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Thursday, July 17, 2008
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33 comments:
I got a kick out of this link someone posted on BubbleMeter.
Waiting in line: then and now
http://latimesblogs.latimes.com/laland/2008/07/waiting-in-line.html
Nice.
At least we know that the people in those condos have a nice tent to fall back on after the REO.
Oops, was that too snarky?
Novawatcher,
Perfect.
I have a question about canceling exclusive buyer agent contract with real-state agent. When I signed the contract, I was told that if I need to get out all I have to do is ask. Now they are holding it hostage and not willing to let me out, even though I am not going to buy any house.
Is there any legal option or I am just at mercy of real-state agent? Is this behavior ethical on part of agents?
I am glad I was able to see this side of my agent and am refusing to do any business in future.
Just start asking them to take you a dozen places every week and continually reschedule things until even you lose track of where you are supposed to be and when.
Ring their cellphone off the hook, call late at night to "leave messages" to reschedule the next morning's appointment.
Insist they deliver written offers with absurdly low prices and bizzare conditions.
etc etc
Crap - in addition to Leroy's very good advice, you can suggest that if they dont let you out, you are going to "out" them on the housing blogosphere.
Blogs like this are filled with potential buyers (someday), they are a commodity worth more than gold to an agent these days. If they dont let you out, mention you will let us know who they are, in which case all of us on this blog will do our best to avoid them like the plague when we do decide to buy.
You can also go over the RE Agents' head (to the Managing Broker) and complain - they should release you from the Contract as well
Or just don't look at homes since you aren't buying now anyway...they can't force you to look!
Joe_Crap said...
“I have a question about canceling exclusive buyer agent contract with real-state agent. When I signed the contract, I was told that if I need to get out all I have to do is ask. Now they are holding it hostage and not willing to let me out, even though I am not going to buy any house.
Is there any legal option or I am just at mercy of real-state agent? Is this behavior ethical on part of agents?”
What? This doesn’t make any sense. First of all, there should be a drop dead date on the contract. Second, it should be only exclusive to the homes the realtor showed you/informed you of. Third, if you’re not going to buy anytime soon, what’s the problem? What kind of “legal option” would you or the REA have if no transaction has taken place?
Parsing mortgages
Part of that weak economic outlook can clearly be attributed to mortgages. In a surprisingly short conference call with analysts, Dimon suggested that losses in JP Morgan’s prime mortgage book could triple in the foreseeable future as the credit mess moves out of subprime and into Alt-A and jumbo loans.
“Prime looks terrible,” he told analysts on the call. “And we’re sorry, and there’s nothing else we can say.”
The company currently holds $34.4 billion of jumbo mortgages, along with $2.5 billion of Alt-A mortgages. Net charge-offs among prime loans in the second quarter rose to $104 million, more than double the $50 million recorded just one quarter earlier. JP Morgan jumped in headlong into jumbos and Alt-A mortgages during 2007 — obviously an ill-timed bet, given where the market has headed.
“We were wrong, we obviously wish we hadn’t done it,” Dimon told analysts. “We’re very early in the loss curve.”
Home equity loans are also proving to be problematic; JP Morgan holds $95.1 billion in the category, and saw net charge-offs rise to $511 million in Q2 from $447 one quarter earlier. High CLTV seconds in particular are “performing poorly,” according to the company’s investor presentation.
Chief financial officer Michael Cavanagh suggested that roughly 10 percent of the seconds on JP Morgan’s books are currently underwater — meaning that the borrower owes more on their combined mortgages than their home is worth.
“That could be headed to 20 [percent],” he said on the earnings call. “We can’t predict how homeowners will react when they go into negative equity.
“We’re assuming they won’t act well, but it’s possible things aren’t as bad as we expect.”
Subprime losses aren’t going away, either, thanks to housing price declines; net charge-offs in Q2 reached $192 million, up from $26 million one year earlier and $149 million in Q1. 30-day delinquencies also continued to post increases, suggesting that more losses are yet in the offing.
Total provisions for credit losses — including mortgages — hit $3.46 billion during Q2, more than double year-ago totals, although a $969 million drop from first quarter’s provision charges.
http://www.housingwire.com/2008/07/17/jp-morgans-dimon-prime-mortgages-look-terrible/
"Robert said...
Second, it should be only exclusive to the homes the realtor showed you/informed you of."
Dont be so sure of that. Some of these are written (and unfortunately interpreted by the courts) such that the realtor is entitled to a commission whether he showed you the house, you found it on your own, or any other reason whatsoever.
Crap could have no involvement with the guy, buy a house on his own off craigslist, and the agent shows up out of the woodwork asking for his 6%... If it truly was an ELA, theres a decent chance he could recover it too.
Your larger point is correct though. If Crap truly isnt going to buy a home during the exclusive agency period, there is no problem.
"Dont be so sure of that. Some of these are written (and unfortunately interpreted by the courts) such that the realtor is entitled to a commission whether he showed you the house, you found it on your own, or any other reason whatsoever."
anon is correct. I signed one of these stupid things and it had a 90day limit. So after I realized the guy was lazy and worthless (very quickly), I just waited 90 days for it to expire.
But I read it carefully and it said if I bought within that 90 days, no matter how, no matter who from, the lazy dirtbag would have been entitled to money, even if he had nothing to do with the sale.
I had a similar problem with a relator. As part of a divorce we were going to sell our house. We put it on the market, and the relator was this aweful woman who only wanted to deal with the ex. At one point the agent tried to get me to sign a power of attorney over to my ex for a week I was on vacation.
I eventually decided to keep the house and buy the ex out. The agent called me and told me I could not do that and if I tried to sell it within 90 days she would sue me. I asked her to remove the for sale sign. After 7 days I threw the sign in the ditch.
FYI/ I have decided to rent another year. I rent a house that currently lists for $450,000 for $2000 a month.
It ain't broke so why fix it.
The contract was written for 6 months (expires in DEC), and I should have paid more attention while signing it. I just took his word and, trust me, I have heard the same language from other agents I have used in the past.
I probably wouldn't have cared much if he had said no problem when I asked for cancellation. But I guess for me it is now matter of principle. He basically wanted to be compensated for his time. When I questioned him that legally he can't ask for money, he backed off.
I just don't like to leave legal documents for 6 months, because things may change and I may see house with price that would be hard to pass up.
Crap - nexttime, just strikethrough the provision you dont like, and put in whatever you agreed to verbally. It doesnt need to be fancy/lawyerese -- plain language will be fine.
Some agents will object and say you cant do that -- bullcrap -- there is nothing sacred about those stupid laserpro docs, despite what they may say.
Again, just strikethru what you dont like, insert the language you want, and both of you initial the change. In my experience 90% of them will whine, but will accept and countersign. The other 10%???Well, lets just say this is a good way to find out early who is going to reneg on their word...best to figure that out now, before they become your agent.
I agree. I have learned my lesson with respect to trusting agent who I thought would be representing my interests instead of just making money.
I tried to reach out to broker, but he hasn't returned any of my calls. They are pretty much on the same script, because I spoke to agent's manager who was a bigger jerk.
Joe Crap,
Go with the "release me in writting" or I'll out you on a blog. That's probably your only legal outlet. You're not happy with the agent, you've asked to be released and they won't release you; leave the deatials... professional. Sorry you had to learn this lesson the hard way.
I'm snickering at the condos comment... ghad was the real estate frenzy crazy. I just hope the comment in the latimes blog about the need for the soupline to complete the series doesn't come true. :( I'm not predicting that. We're just going through the scary time.
Got Popcorn?
Neil
The Anonymous said...
“Dont be so sure of that. Some of these are written (and unfortunately interpreted by the courts) such that the realtor is entitled to a commission whether he showed you the house, you found it on your own, or any other reason whatsoever.”
Then don’t tell the realtor you bought a home.
Joe,
Do what Leroy suggests, that is request to view several properties, submit low-ball bids, call at all hours, AND
4) request is writing delivered by certified mail to rescind the contract because the realtor is not meeting the obligations set forth in the agreement. inform the realtor of your intend to seek action (that is sue the RE)
if he still refuses,
5) file in small claims for breach of contract(sue the realtor and the RE company) that denies you the right to pursue alternative modes for purchasing a home. (be sure to DOCUMENT the times, events that occured where the RE d/n meet the terms of your agreement to show houses and submit bids)
my guess is ASAP you'd get out of the contract.
Joe: I did not sign an agreement when I was looking and had no trouble finding an agent to work with. I had a couple refuse to work with me but we were looking at so many opens and FISBOs that I didn't want to *have* to share commission if not warranted. And for Realtors, we are in a 100% buyers market. There are WAY more of them than buyers. Finally, if you buy a house with that agreement in tact, that realtor will find out. That's all they do all day is figure out how to get paid to do next to nothing.
"Robert said...
Then don’t tell the realtor you bought a home."
Sure you can do this, but understand there is inherent risk in this strategy - the agent may find out.
A good number of these agents will keep track of their exclusives who did not buy. Occasionally they will do a grantee search in land records for the name "Joe Crap". If the name pops and if it is within the timeframe alotted, the next communication Mr. Crap will receive is from the agent saying you violated the exclusive listing - that will be 3% please!!!
A wise man once told me, dont ever trust a real estate agent. Advice we should all take to heart.
Tell him to smell the glove. Any agent that would keep you hostage is probably not looking out in your best interest when buying/negotiating anyway. Point that out to him.
Any chance you can post the redacted text of your agreement? Maybe we can give you a little bit of advice, although what Leroy said sounds like it will work. Just don't cross into criminal harassment territory :)
The Anonymous said...
“Sure you can do this, but understand there is inherent risk in this strategy - the agent may find out.”
Come on folks. I think we’re giving realtors too much credit. Sure, business is slooow right now, but I find it hard to believe that these folks are focusing in on tax records and matching up names and dates to previous clients to see if they’ve bought.
Furthermore, I find it hard to believe that a court would side with a realtor if you purchased a home in which the realtor had absolutely nothing to do with it. If someone has done a case search and found such, please discuss the findings, especially the wording of the agreement.
However, if you’re that scared of the realtor, I would agree with the lowballs, asking for confirmation of the offer, call at all hours etc.
Lastly. I concede, I have signed non-exclusive agreements with realtors in the past. But if you’ve been reading the bubble blogs in the last few years or even recently and you signed an exclusive agreement with these sharks, the onus is on you. You were warned.
As luck would have it, I have a client who was burned on a very similar fact pattern. Our client bought without telling his broker and the broker found out via a search on land records.
Long story short, we lost and lost badly. The brokers attorney was incredibly agressive and would take nothing less than full commission to settle the case. Unnerved by his agression I checked the caselaw and was a bit shocked - nearly 90-95% of all cases went in favor of the broker - essentially he gets his commission no matter what.
As it turns out this attorney and his broker/client have just about made a living out of pursuing unsuspecting buyers who have breached their exclusive listing agreements. It was really disgusting, and I was tempted to litigate it just to see if we could take the guy down a peg or two. Nevertheless, the caselaw was so heavily against us, it made no sense spending money on attorneys fees for a 90% chance of losing, so my client settled for 100% of the commission and minimal attorneys fees.
Joe Crap - I understand your frustration, but I would be very careful about this. I think Leroy The Anon and Wannabuy have good advice. However, I personally would not be willing to take the risk of breaching the agreement and hoping the realtor didnt find out. In most states the realtor has 3 years to bring a case against you - personally it is not worth breaching the agreement, and then worrying about whether or not the guy will find out between now and 2011. Sorry I couldnt be of more help.
CRT said...
As luck would have it, I have a client who was burned on a very similar fact pattern. Our client bought without telling his broker and the broker found out via a search on land records.
Long story short, we lost and lost badly. The brokers attorney was incredibly agressive and would take nothing less than full commission to settle the case. Unnerved by his agression I checked the caselaw and was a bit shocked - nearly 90-95% of all cases went in favor of the broker - essentially he gets his commission no matter what.
CRT, what was the wording in the agreement that made all purchases inclusive, even if the realtor had nothing to do with the sale?
Robert - I do not remember the exact wording, but the langage that is found now in the standard exclusive listing agreement is interpreted by the courts to give the realtor a commission on any sale during the period of exclusivity.
As I recall, the key for the courts is not so much the exact wording, but the duration of the exclusivity. Generally anything for a period of less than 6 months is always upheld, between 6 months and 1 year, it varies by state, and for periods beyond 1 year, it is seldom upheld.
CRT said...
Robert - I do not remember the exact wording, but the langage that is found now in the standard exclusive listing agreement is interpreted by the courts to give the realtor a commission on any sale during the period of exclusivity.
Can someone post a “standard” exclusive agent agreement?
As I recall, the key for the courts is not so much the exact wording, but the duration of the exclusivity. Generally anything for a period of less than 6 months is always upheld, between 6 months and 1 year, it varies by state, and for periods beyond 1 year, it is seldom upheld.
Hold on there CRT, you lost me. In that case, even a non-exclusive agreement would be exclusive. The exact wording is everything. Exclusive of what? Of the homes the realtor showed you? Any and all homes? If its “not so much the exact wording” but duration, then even an agreement “beyond one year” is just as valid as one for 6 months.
Robert - the issue here is one of precedent. To a certain degree, the exact wording doesnt matter because courts have long held (rightly or wrongly) that when a buyer enters into one of these relationships with a broker, the intent of the parties is that, unless the document states clearly that in these situations the broker will not get a commission, the presumption is that the broker is entitled to a commission EVEN IF HE HAD ABSOLUTELY NOTHING TO DO WITH THE SALE!!! I know this can be a shocking conclusion - it was to me in law school when I first heard about it. Nevertheless it is what it is.
On the other hand, the courts recognize from a public policy perspective, that you do not want to have a buyer beholden to a broker forever. Thus, the second part of the question is if it is an exclusive agreement, how long is the duration. Generally if it is longer than 6 months, then it is going to be held invalid. Thus, the exclusive dealing provision could say it is effective for 10 years - courts generally look at it and say sorry, its only good for 6 months.
Again, the overriding concern here with the duration is one of public policy. Say I have a contract saying I will sell you my kidneys for $25K. In that case, it doesnt matter what the actual document says - public policy is such that no such provision will ever be held enforceable.
That said, the decisions are much more nuanced, and I can think of at least a dozen counterexamples in certain situations. However, when dealing with residential real estate contracts, this is likely to be they type of reasoning that is applied. It may not be "fair" or it may not be "right" but thats the way the courts operate - it is what it is.
I should say the most common (similar) example that most people are familiar with are non compete provisions in an employment contract.
Say when you got hired, you signed a contract stating once you leave, get fired, etc. you cannot get another job in this same line of work for a certain period of time. Generally, the courts will enforce this - meaning if you were found working in violation of this provision you were very likely to get at least an injunction, or pehaps have to pay your old boss damages.
That said, one of the big exceptions in employment contracts is duration. Here the general rule is anything longer than 3 years is unenforcable. Thus, if the contract said you cannot compete for 10 years, the courts will disregard what the contract says and limit the duration to 3 years.
CRT, you sound as if you mistake me for someone looking for an argument. Yes, we have established that some/most agreements stipulate that the realtor gets a commission “EVEN IF HE HAD ABSOLUTELY NOTHING TO DO WITH THE SALE!!!”, I do not find that shocking.
However, your explanations are confusing i.e. “unless the document states clearly that in these situations the broker will not get a commission” but you then follow up with “Again, the overriding concern here with the duration is one of public policy”, and not what the contract states?
Furthermore “the courts recognize from a public policy perspective, that you do not want to have a buyer beholden to a broker forever.” Well, CRT, if the contract stipulated 6 months, 12 months, 24 months or “forever” and it was signed by both parties…..
Simply put…according to your statements, it matters not what the contract states, unless it states that the contract goes for more than XX months. If that is indeed the case, there is no situation (even with a non-exclusive agreement) in which the realtor will not get a commission, so long as the contract is not longer than XX months.
CRT said...
I should say the most common (similar) example that most people are familiar with are non compete provisions in an employment contract.
Say when you got hired, you signed a contract stating once you leave, get fired, etc. you cannot get another job in this same line of work for a certain period of time. Generally, the courts will enforce this - meaning if you were found working in violation of this provision you were very likely to get at least an injunction, or pehaps have to pay your old boss damages.
That said, one of the big exceptions in employment contracts is duration. Here the general rule is anything longer than 3 years is unenforcable. Thus, if the contract said you cannot compete for 10 years, the courts will disregard what the contract says and limit the duration to 3 years.
Well, I was beginning to see where you were going until this.
For your example above to work, it would not matter if you got “another job in this same line of work” as the contract states. You just could not get a job for XX amount of time.
Robert - sorry about the all caps I dont think you are trying to argue the issue. I just wanted to highlight it because I found it personally shocking when I first learned it.
As to the larger issue, lets try a few examples:
A. Contract provision states - "the realtor gets a commission if the buyer purchases at any time within 6 months, and whether such purchase is performed with or without the realtor's assistance".
Facts - person buys without realtor help in 4 months
Outcome - Here the wording is clear. Courts will determine the realtor is entitled to a commisison.
B. Contract provision states - "the realtor gets a commission if the buyer purchases at any time within 6 months" nothing else.
Facts - person buys without realtor help in 4 months
Outcome - Even though the contract said nothing about the realtor's help, the courts deem that the presumption is that the realtor will get paid whether he finds the house or not. Thus, the courts will determine the realtor is entitled to a commisison.
C. Contract provsion states "the realtor gets a commission if the buyer purchases at any time within 3 years" nothing else.
Facts - person buys without realtor help in 4 months
Outcome - Court will again determine the presumption was the realtor was to get paid whether he showed the house or not. However, the court will then determine the 3 year part is against public policy. Therefore, the court will limit the contract to 6 months, but since the purchase was within the 6 month period, realtor is entitled to his commisison.
D. Contract Provision states - realtor will only get his commision if he shows you the house (note, it is extremely uncommon to see this - normally you would have to write this into the contract yourself)
Facts - person buys without realtor help in 4 months
Outcome - Court will not give broker a commisison because the contract explicitly stated he will ONLY get the commission if he shows the house.
Hopefully this helps clear things up a bit.
CRT said...
Hopefully this helps clear things up a bit.
Yes it does. Now back around to the (my) crux of the matter. In the past I have signed non-exclusive agreements and/or a specific agreement about a specific house.
A non-exclusive agreement in that if the realtor did not physically show me the home/did not contact/inform me of the home, the realtor was not entitled to a commission.
A specific agreement about a specific home in that the agreement was for that home and that home only.
I read these contracts several times very carefully and, at the time, was satisfied with the wording. Given the scenarios you’ve brought up it makes me wonder and I will be even more careful in the future.
Now, I remember distinctively a time where I called the listing agent (this is in MD) to show me a home. Was greeted by said agent, was shown the home, then after showing some interest in the home the realtor handed over a document. The document, in general read (and I am paraphrasing): “Blah blah blah, a realtor can represent a buyer, or a seller. Which do you wish for this realtor to represent? (Check buyer or seller)”.
To clear up any misunderstanding, I asked the realtor if she was the listing agent (yes). I.e. the seller contracted you to list this home (yes). I then promptly checked “seller” as in, I wanted her, the listing agent, to represent the seller, not me the potential buyer. She was taken aback in that I did not want “representation”. Gave me the whole “protect my interest” song and dance.
Now, what I imagine happened (this was some time ago), was that the realtor was just with the same broker/office. And the broker/office was the actual “listing agent” and this agent worked in that office. Still, very much a conflict of interest and I remember telling her so.
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