All is Fair in Love, War … and Home Buying?
As the Globe reported last week, and as I have been blogging about for the past year, many real estate markets around Boston have been pretty active, with bidding wars now again common in many locales. This is certainly true here in my town of Lexington, where multiple-bids on new listings is seemingly the rule and no longer the exception, particularly for houses priced under $1 million (which is roughly average list price in Lexington). However, there was one house priced at $1.3 million and another at $979,000 which both came on last week and had multiple bids.
Shhh, it’s starting to look like 2004 again.
When I am a listing agent, this is a good situation. Sellers are usually happy. But some can’t help but wonder if they could have gotten even more. Did they underprice the home? This is usually not the case. A house priced correctly in a healthy market will get offers below asking price, at the price itself, and some above. Now, if five offers come in, all starting 10 percent higher than your list price, OK, then maybe then it was priced too low.
However, the market here seems to have tipped dramatically to a seller’s market this spring. The demand seems particularly pent up. The competition among buyers is fierce. And on the emotional battleground residential real estate, such conditions can bring out the worst in people — buyers, sellers, and agents alike. All is fair in love, war, and, apparently, home buying.
I was working as a buyer agent in one recent deal. The buyers came to me via my website and because of my expertise in mid-century modernist houses. Their final offer was about $15,000 over the asking price. We found out they lost, in third place. I encouraged them that there will be other homes coming on the market. I wrote an email to them stating that, until we actually have a written buyer agency contract between them and me, I assumed we had a mutual verbal agreement (I used the politically incorrect “gentleman’s agreement”) to work exclusively together here in town, which they confirmed. So I shared with them insight, market data, our new listings coming on the market in coming months, and even word about a house that was not on Multiple Listing Service, a “for sale by owner” house being offered word of mouth. They went to the open house held by the seller and asked for our input on the house and price. We shared our feedback, informed by our combined 21 years of experience in town.
The seller of the house, coincidentally, soon called us to list the house, another mid-century modern. We signed up her listing, but she told us she had a low offer that preceded us, so we said we would list that buyer as an exclusion for a week in case the deal came together. When she showed us the buyer’s name, it was the same client we had steered to the house. The buyers went behind our backs, ignored our “gentleman’s agreement” and presumably figured they were so clever to find a little edge that cut us out of our commission, throwing us trusting suckers under the bus. They eventually came up to her price — which was the highest premium in many years for that particular neighborhood.
I emailed the buyers to ask if somehow my perception was off. Maybe somehow I had misinterpreted the above chain of events. Shockingly, they did not write back.
We lost two commissions there. Sure, I guess we are too trusting and should have insisted on a buyer contract. But I don’t know how else to operate in this business. If people approach us to work with my partner and me, I assume it is because they are impressed by our expertise and the way we do business, not to try to bleed information out of us and move on. We have quite enough success to not worry too long over such unethical behavior. But there are other agents who are not getting a solid enough level of business in this all-commission profession and we see some desperate behavior among such agents as well — trying to poach other agents’ clients, for example.
Sellers should be the happiest in these conditions, with buyers and agents tripping over themselves to sell their home. However, many hear about a tilt into a sellers’ market and automatically think their home values have increased by 40 percent since last fall. Or they get a solid buyer and refuse to budge when an inspection reveals significant issues, threatening to kill a perfectly good deal with reasonable buyers.
Then there is the seller of a house — for which I have buyers, who made an offer that was accepted. The buyers had their inspections and were about to move forward into the purchase and sale contract when the sellers told them they want out of the deal for personal reasons. The buyers could have forced the sale. A signed offer is, after all, a binding contract. They settled amongst themselves.