Stories in Real Estate: Sellers Beware

Here in the Athens area, our real estate market has been very strong for the last couple of years. Currently, our inventory is low which has created a competitive market.  In some cases, we see multiple offers and some properties might even sell over list price.  However, not every home is experiencing the same market or successful sale.  Over the years, we have seen and heard of some bad experiences for sellers even in an ideal seller’s market. I think they are good stories for anyone to hear and to keep in mind as you consider selling in the future.  After all, you don’t know what you don’t know.

“The For Sale by Owner”– In this case, a represented buyer was attempting to purchase a home that was a For Sale by Owner.  The owners had informed the realtor and the buyer that they were planning to divorce but wanted to sell their home first and then divide the assets between them.  An agreement was reached that required the represented buyer to list and sell their home in order to purchase the For Sale by Owner house.  The represented buyer’s home went under contract and on to a successful closing. All seemed well as the movers were packing up the buyer’s belongings to move them into their new house.  That’s when the sh*t hit the fan so to speak.  Less than a week before closing, the seller of the for sale by owner house informed the buyer and realtor that he would not be selling his property.  Apparently, during the contract time line his wife had filed for divorce and the settlement was not looking good for the husband. That being the case, he didn’t want to sell the house anymore. Unfortunately, he signed a contract which instructed the represented buyer to sell their house in order to purchase his property.  The buyer fulfilled their end of the contract and the realtor/broker informed the sellers that it was the buyer’s intention to execute the contract and sue the seller for performance if needed.  Keep in mind, the represented buyer had already sold their home based on a contract to purchase the For Sale by Owner.  The realtor and broker had to do their job and protect the client.  The scenario was carefully explained to the seller and he was advised to seek legal advice.  Not being attorneys, the realtor and broker could only advise that he speak with an attorney asap.  What the seller did not understand is that contracts are enforceable, and that he was now obligated to perform on the sale or be sued. The seller then claimed that he could not make a decision until he knew what his damages would be from a lawsuit.   Granted, it is impossible to know the outcome of a lawsuit in the beginning, but this one had a predictable outcome.  In a lawsuit, the seller would likely still have to sell his house, but now pay attorneys to do it.  In the end, he got some good advice from an attorney and sold the house. Thankfully, the buyer was well represented and therefore understood their rights in the contract.  If not, the buyer could have been without a house to live in or buy.

“The Flat Fee Broker”– In this scenario, the seller was working with a flat fee broker.  In case you don’t understand what that means, I will explain.  In most cases, realtors work for a commission based on a percentage of the sale price.  But nowadays, some discount brokers offer a flat or low fee to place your home in the MLS.  They advertise it as a lower cost to the seller because why would you pay a large commission.  Afterall, who needs a realtor(sarcasm).  What these brokers do is offer a minimal amount of service and then have the seller still pay the buyer’s agent because the discount broker still understands that most buyers are working with realtors.  The goal for the discount broker is to get a lot of easy listings that pay them a flat fee.  They hope to make money easily without much fuss because they don’t offer much help in the transaction.  I am sure this works out for some people, but for others it can go wrong.  Afterall, you get what you pay for in this world.   In this case, the seller needed some professional advice, but he avoided that advice by going the discount route.  In short, this seller signed a contract to sell his house to a represented buyer without fully knowing what he could he afford to purchase after selling his home.  Any good realtor would have had this discussion before listing the property for the seller. When this all came to light for the seller, the discount broker was radio silent and no help at all.  Sadly, this seller had to sell his home and now is renting.  However, he is now working with a good lender and the buyer’s agent to get things in order so that he can buy what he wants in the future. 

My goal here is not to bad mouth other brokers or For Sale by Owner properties, but to try and shine some light on what can go wrong.  In some cases, a for sale by owner listing makes sense for the owner.  Especially, if the house is upside down on debt to value.  There are a lot of moving parts to buying and selling a home.  Loans, appraisals, inspections to name a few, and that’s after you go to contract.  With that in mind, be aware that you could use some professional help in your sell or purchase. Don’t be afraid to call someone, and if you do be sure to do your research on who you hire.