When Brokers are the Problem

In over thirty years of the real estate business it becomes evident to me that sometimes we real estate professionals are the problem, not the solution. Many of us spend so much time on our real estate education that unintentionally we think we know everything. We forget to listen to what our client really wants us to do. We are stuck in a rut with our normal procedures. We sometimes fail to understand the changing goals and motivation of our clients or ignore what our market is telling us. Both may call for a different approach. We forget to listen and adapt!

As a recent example, I have a friend who has 25 years experience in the home remodeling business. He works in a large Midwestern city. We decided that with numerous foreclosed homes in the market that we could possibly partner on a house that needed lots of work. He referred me to an experienced residential broker that he has worked with successfully.

This residential broker did an excellent job of targeting three properties to look at. All homes had the potential to resell after upgrade, even in a potentially difficult market. One home was completely trashed with broken furniture, pet feces, trashed appliances, junk, evidence of drug paraphernalia and it had been abandoned. Evidently, the home owners had walked away but let the home be used by some very unsavory relatives before the bank had taken full possession. The homeowners next door were mowing the lawn so this home did not deteriorate their neighborhood. My friend did a thorough inspection of the property and determined that there were no major structural issues. The bank seller would be expected to be motivated due to costs of cleanup and other unknown liabilities. Therefore, it appeared to be a potential opportunity.

In addition to the real estate business I have had the opportunity to experience the 1980s and sit on two bank boards. I think that I understand how banks typically view problem OREO (Classification as Other Real Estate Owned) properties. I traveled the U.S. in the 1990s, training Resolution Trust Corporation employees on how to market their owned properties. My experience with banks is that they sometimes decide to accept a bigger loss due to the multitude of similar situations that might be in their portfolio. Therefore, I was willing to make a quick full cash, no contingency offer with non-refundable earnest money of $10,000 if the bank would take our lower price.

At this point the residential Broker became the problem:

  • Quick didn’t seem to be in her vocabulary. She thought she needed to gain more information before she could prepare an offer.
  • She demanded her typical Exclusive Agency Agreement and wanted a year’s commitment. This was unreasonable for many reasons that I won’t go into. I offered to sign a document that said that if she found any property that we liked we would commit to buying the property through her, and if the property was not listed we would pay her a full acquisition commission. We would also make a commitment that after we upgraded we would give her a 120-day Exclusive Listing to resell the property. She wasn’t willing to compromise her normal Agency agreement even though we were trying to be very fair and protective of her effort.
  • She wanted to use her standard residential form, which included all kinds of inspection and contingency provisions. Since I was an experienced real estate investor and my partner had already done all of the due diligence we deemed necessary, we wanted to use a short, simple document that would avoid any legal misunderstanding to facilitate a fast decision by the Seller. She was indignant that we didn’t want to use her normal form that she helped to write. This state is not a mandatory form state so there was no reason that we couldn’t use a different type of purchase agreement other than her personal preference.
  • She never took the time to understand my experience or expertise and argued that my suggested approach in making an offer wouldn’t work. It might not have worked but she ignored what her client wanted and what had been successful for us in the past in similar situations.

Needless to say, the potential opportunity evaporated. I was not going to attempt a transaction in a market far from home without an experienced broker as a part of our team. It is unfortunate that we couldn’t work together because I do believe she was probably an excellent Seller’s representative. She just placed her ego and high opinion of her procedures ahead of serving the client. She did not really attempt to gain an understanding of her potential client, his expertise, goals, or objectives. She made no real effort to listen or counsel. The ironic thing is that she made a big deal about telling me how she was the trainer for her company’s numerous offices.

Unfortunately, I have witnessed this many times where the client has the motivation and resources but the broker is really the problem in obtaining a successful transaction. I would have to admit that I have probably done this a few times myself. I may have made a snap judgment on what a client should do. I may have believed that I understood the market better than they did or I may have thought my client’s ideas were different and just dismissed them too fast. I didn’t counsel properly. I didn’t listen.

With the downturn in the economy, we must adapt to new ways of doing business quickly. Brokers may need to make some modifications in their normal procedures and viewpoints. Most or all of our prospective clients will change from the typical motivations and goals we may be more accustomed to. To fail to conform as a broker will not serve your clients and will place a roadblock to new opportunities for both.

There is no better time for us to remember the fundamentals of what has made the Society of Exchange Counselors strong. We need to concentrate on our counseling techniques and improve our listening skills!!!

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  1. […] Welcome to the summer issue of the S.E.C. Observer! Steve Eustis, 2008 S.E.C. President, reminds us that although times have changed, many things remain the same; Jim Brondino illustrates why listening is the most important part of counseling; and Steve England demonstrates how real estate brokers can sometimes get in the way. […]