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Secretly Recorded: While Showing A For Sale By Owner Listing

Blog by Amanda Blake | March 5th, 2012

I recently showed a for sale by owner property to some buyers I have been working with for a good 8 months now. About 10 minutes after I finished the showing, I received a call from the home owner, asking me if I had seen his security system in his house. I thought this was an odd question but indicated that I had not seen the equipment. The home owner quickly announced that his security system was recording the entire conversation I was having with my buyers in the house and he was extremely upset with me that I did not properly represent his house.

I'll be honest, I think it is a little creepy that someone was "spying" on me and recording my conversation. But what was more surprising is that the for sale by owner seller felt I had some type of obligation to represent his house. From a legal perspective, that is not how this business works and his expectation of me and his perspective on the situation was just wrong. The difference between the for sale by owner world and that of a licensed real estate agent is that in the province of Alberta, I am governed by laws and rules that I have to follow which this private seller did not understand.

As a real estate agent, when I am acting in the capacity of "Agency" which is the legal term for representing a client, I have obligations to the clients I am representing, called "Fiduciary Duties". Fiduciary duties include full disclosure. So when representing a buyer, full disclosure states that "an agent must inform the buyer of all facts known to the Agent that might affect or influence the buyers decision in a real estate transaction." I also have an obligation to obey my client's lawful instructions and ensure that I am exercising reasonable care and skill while I am performing all assigned duties. Therefore, when I have established an agency relationship with a buyer, I have a legal obligation to that buyer to impart any information that I have that may impact their decision to want to purchase the property.

The seller of this for sale by owner listing was upset with me because a) I had discussed the cost of replacing things that were aging such as the furnace, the shingles, the windows, etc. b) I had pointed out a window that was foggy and made a comment to my buyers that this is usually an indication that a seal is broken c) I had indicated the current asking price of the property was higher than what I felt the market value was and d) I discussed my experience in negotiating with other for sale by owner listings which was not a proper reflection of his situation.

Yes, my clients and I were discussing the cost of replacing the furnace, the shingles, the windows, etc. as the house was 20 some years old and most of the mechanical pieces of the house were original and would need to be replaced at some point. On an older home, these are things that are always a concern for a prudent buyer but the home owner felt that I did not properly represent his house with this conversation. In the home owner's opinion, everything was in great condition and did not need to be replaced.

After completing hundreds of deals representing buyers, I have learned that the quicker I am to point out any potential issues that may arise in a home inspection, the more smoothly the deal will complete which makes for a much more pleasant experience for both the buyer and the seller. I have built a very good reputation within Central Alberta in the real estate community that if I write an offer with a buyer, the odds of the deal collapsing because of issues with financing or a home inspection are very slim (unless there is a serious issue of course). My deals are considered "solid" and the reason for this is because I ensure that my clients have been well informed with all aspects of the offer. With regards to property inspections, I make sure that I educate my buyers on the process and ensure they have had a thorough look at the property, even encouraging younger buyers to bring friends or family through the property with them on the second showing for an extra set of eyes. So if a buyer decides they like a home, pointing out that a seal may be broken on a window is not something that is going to deter the buyer from purchasing the home. But what I have learned is that should these things not be pointed out to a buyer prior to them negotiating an offer, it can be very over whelming for a buyer to learn of these things all at once during a home inspection which happens after the negotiation. I have learned, buyers do not like surprises. I have also found that if a buyer can be made aware of potential issues prior to the negotiation, they can factor these things into their negotiation rather than completing a home inspection and then expecting to renegotiate the price for all of the surprises that were discovered.

The third issue the home owner had with my representation of his home was my opinion on his asking price. Now let's just be clear, as real estate agents we represent people not properties so as a for sale by owner, allowing an agent to show your home to their buyer means they have legal obligations to their buyer, not to you or your property. The clients I had shown this specific property to were clients that I have worked with for some time and we had viewed other properties together. Discussing price was something we did on each property, this was no exception. It was my opinion that the value of the house based on current comparable's would not be over the $450,000 price point, give or take $5,000 given the age, lack of renovations, etc. I don't recall the exact asking price of the property but it was somewhere in the $470,000's to $480,000's. The home owner was upset with me that I had valued his property so low when he had an appraisal indicating the value of the property was $460,000. It was at that moment I realized that this home owner was just not well educated with how things worked in the real estate world. If you have seen the variance in valuations as I have seen from tax assessed values to appraisals to the differences in market assessed values from various agents and then the variation of offers made by a buyer, to be low on assessing a value by $5,000 to $10,000 on a property valued at $460,000 is nothing. My assessment of market value at $450,000 works out to a 1-2% variance from the appraised value at $460,000 which is actually quite impressive. At this point of the conversation with the home owner, I felt sad for him that his perspective on the situation was overshadowing the opportunity he had to learn from my experiences and the bonus that his conversation with me wasn't costing him anything!

The last item the home owner took issue with was the conversation I had with my clients in regards to for sale by owner negotiations. In discussing the pricing and the mechanical upgrades that would need to be done to the property, my buyers opened up the conversation with having to negotiate an offer with a for sale by owner listing. Specifically, they wondered how receptive an owner would be to an offer that was reflective of market value and in this case, well below the asking price. I explained that in my experience, for sale by owner listings were inflexible in their negotiations for several reasons. First of all, for sale by owner listings have a stigma of being less motivated because they have chosen to limit their exposure by not listing with a real estate agent. Anyone that has been in sales understands that your best strategy to achieving your best price on a product is to make sure it has the largest amount of exposure to qualified buyers. So the only reason you would limit your exposure is because you are not overly motivated to sell in the first place. Secondly, for sale by owner listings have usually decided to list privately because they want to save money on commissions. If they are trying to save money on commissions then we can assume they are not willing to give up much on their asking price, albeit an assumption, it is a fair assumption. Thirdly, a for sale by owner listing usually hasn't had the education and advice from an agent to help them in understanding negotiations and pricing. Therefore, in my experience, for sale by owner listings tend to be priced above market value or higher than an agent would recommend and they also do not understand what the "typical" sale price under asking is so they become shocked when a low offer is presented to them, usually blaming the agent representing the buyer. I always explain to my buyers that usually when a seller sets an asking price, they are expecting to sell for close to what they are asking otherwise they would just reduce their price. Of course there are always circumstances where this is not the case but it would those circumstances not be considered the "norm".

At the end of our 15 minute conversation I was unable to change the for sale by owner's perspective on the situation but I felt good that I had been able to at least share my insight and perspective with him. I had nothing to hide with regards to the conversation I had with my buyers even if I was being secretly recorded so as creepy as it was finding out I had been recorded, I was not concerned with anything I had said. And I guess not everything I said fell on deaf ears as I noticed today, while I am writing this blog, the asking price of the property has been changed to $459,500.