ETHICS AND FAIRNESS IN SACRAMENTO REAL ESTATE

Five little words cost a third of my commission. Now there's a way to start a blog!

How did this happen? As with many unfortunate things, quite simply. After showing my clients many houses, we found THE ONE. It was perfect. We wrote an offer and it was accepted. Soon after, we went by the house to have a contractor bid painting. As we were taking a look at the work, we realized there was no heat or air conditioning upstairs. I told them I would look into it, as it would certainly affect the value of the house and the price we had offered.

Then, when I looked back on the computer printout, I discovered five little words that changed everything...."No heat and air upstairs" was written in the "agent only" remarks. I had missed it. I immediately called my clients, let them know of my oversight and told them that I would be happy to pay for the heat and air as I had missed it and had negotiated a price that possibly should have been less.

Do I resent this? No...because as with many things in my life, I learn more by my mistakes than with my successes. I will read "agent only" remarks more closely next time. Also, it is an opportunity to serve my clients well and hopefully, get referrals because I was willing to step up.

DUAL AGENCY...A GREAT EXPERIENCE IF DONE ETHICALLY

Dual agency is a fiduciary responsibility that a single brokerage shares with both a buyer and seller. In other words, the buyers Realtor and the sellers Realtor have their license with the same brokerage. Now, if they are actually two different Realtors with two different clients, it isn't a problem. Each Realtor is representing their respective client.
Where it gets dicey is when the same Realtor is representing both the buyer and the seller. In some states, this is illegal. In others, such as California, it is legal. As with all things, this type of dual agency can be done ethically or it can be an unmitigated disaster.
An ethical Realtor will know where the line is drawn and what may and more importantly, may not be shared with their clients. When they are with their sellers, they will make an argument for a fair price that will satisfy the seller. They will work diligently to have a fair resolution to repair requests. In other words, they put on their "listing agent" hat. When they are meeting with their buyers, they work towards an offering price that their buyers are comfortable with. They go over the inspection reports and deduce what items are fair to be on the list of repair items.
Note in all of this, fairness is mandatory. It does become more difficult when one of the clients or both don't have the sense of fairness that their Realtor does. In this case, it is incumbent upon the Realtor to do advise their client, but then do as their client asks. After all, the contract and the request for repairs are agreements between a buyer and seller...not the Realtor or brokerage.
Ethical Realtors can go to great lengths to ensure the correct approach to dual agency. Sealed envelopes containing all offers can be asked for by the listing Realtor and brought to the seller prior to opening. If there is any question as to appropriate representation, the Realtor can ask their broker or another Realtor from their brokerage to step in for negotiations.
It is a fine line, but can be done correctly and result in a great experience for all involved.

SACRAMENTO'S REAL ESTATE MARKET - A SWITCH WAS FLIPPED

Diane and Bill are going out to their favorite Sacramento restaurant to celebrate. Months ago they made the exciting and scary decision to purchase their first home. They researched the process for purchasing in the Sacramento real estate market and discovered that first, they had to get prequalified to be certain they could qualify for that perfect home and could give a letter reflecting this to the seller when they made their offer. Then, after talking to friends and family, they interviewed several Realtors, settling on one that they felt they could trust and, at the same time, one that they thought would make the process a smooth and enjoyable one. They were ready.
Then, someone flipped a switch and the Sacramento real estate market changed. No longer was there a plethora of homes to view. Homes in their price range started selling before they even had a chance to view them. In a strange turn of events, it was no longer a buyers market, even though homes were still very affordable. Simply put, there were too many buyers and not enough homes to buy.
This is not a unique story in the Sacramento real estate market, or the California one for that matter. In an industry where a normal inventory is 5-6 months (the amount of time it would take to sell all of the homes on the market at any given moment in time), Sacramento's inventory is below 1 month. Prices are still competitive, but certainly not dropping any lower. As a local lender put it, interest rates are truly at an all time low.
The result of all of these factors is that most properties priced well are receiving multiple offers and selling over the asking price. 3-6 offers for a property is not unusual. That translates to many buyers having their offers not being accepted multiple times...a frustrating experience for the buyers and their agents alike.
Enter the appraiser and a whole new set of issues arise. The properties list price was determined by the comparable properties that have recently sold. Unfortunately, with the shortage of inventory and resulting shortage of sales, there aren't many com-parables for appraisers to use. Their only option is to go back further in time, which was in a different market where there was inventory and sales were slow and as a result, sales prices were lower.
Who are the buyers who are winning out in this market? Cash remains king. If buyers can make an all cash offer, their odds of having their offer accepted increases dramatically. If they cannot offer all cash, then certainly make the largest down payment possible. Offers should be written as cleanly as possible - don't ask for the refrigerator, a pest clearance or participation by the seller in closing costs. If a buyer is purchasing through an FHA loan, they should probably be looking at homes that have been on the market a while where the sellers will be more motivated to go through the FHA process.
The market has turned a corner. Those who were waiting for the perfect time to buy are too late...that was last year. Oh, and Diane and Bill had their 7th offer accepted and they are on their way to their first home!