Some Silicon Valley home buyers do not want to have their own buyers agent, but instead expect that they can find properties in the San Jose area that they want to see and request that the listing agent show it to them in a private appointment.  These same potential buyers may be surprised that the listing agent may refuse to show them the listing outside of a regularly scheduled open house – that is, if the seller is permitting open houses.

What’s going on?

In earlier articles we’ve discussed the need for a buyer broker agreement (verbal at the least, but possibly in writing) and why you, as a buyer, ought to have your own representation at the negotiation table.  (If you missed these, see the links under “related reading” below.)   Today I want to dispel the myth that the listing agent is required to open up and show condos or houses for sale to anyone who calls and requests seeing them and explain why that’s the case.

Showings of homes for sale are determined by the listing agreement or contract between the home seller, the listing agent or Realtor and the broker

The most important thing for buyers to understand is that the accessibility of the home for viewings depends upon the agreement, verbally or in writing, between the owner of the property and the agent/brokerage hired to market, negotiate, and sell the real estate.   It’s not an “on demand” situation where an interested buyer can insist on seeing the property as desired. Here are some of the expected scenarios and reasons why showings are somewhat restricted most of the time:

• Some properties are tenant occupied and it may be the case that you cannot even see the house or condo until after your offer is accepted. Most often it will be challenging to see homes with renters in them, but it is possible, usually, to see them prior to purchasing. (This is less true with duplexes, triplexes and four plexes. Apartment buildings are always sold “subject to inspection”.)
• Other times there may be a restriction such as 24 or 48 hours notice required for showings when homes are owner occupied.
• Most of the time, the seller has requested that any private showings, by appointment, involve ONLY pre-approved buyers. The sellers don’t want to waste their time with tire-kickers.  They want serious buyers.
• Most of the time, a seller will not want the listing agent to also represent the buyer and will expect serious home buyers to have a buyer’s agent.  If you are working with your own agent, that’s who should show the home to you.  If you have your own buyer agent, he or she can see what is involved in showing the property to you by looking at the agent version of the MLS (which includes showing instruction information and restrictions)
• Some sellers want open houses, some don’t.  For those selling a home during the holidays, often the for sale sign and lock box are removed and it becomes harder to get into these properties.
• Safety is a HUGE concern, both for home owners selling on their own and for realty professionals. Each year, Realtors and other real estate professionals are injured or killed in their line of work. If this surprises you, ask yourself how smart is it to meet total strangers at an empty house? It’s not.  If you want the listing agent to show you the house, expect to be asked a lot of questions (are you preapproved? if so, with who? how can we verify that?) and usually expect to meet the agent at the office first. Many Realtors will ask to photo copy your driver’s license prior to taking you to the home – this is for personal safety reasons. We realize that you will feel uncomfortable but please remember that real estate is risky for us and we absolutely must be cautious.

Related reading:

Do You Need a Buyer’s Agent? Or Should You Find a Home, Then Use the Listing Agent?

Silicon Valley Home Buyers: Should You Use a Buyer Broker Agreement?

Those of us who sell real estate for a living know that consumers want to hear back from us as soon as possible when they call or email (or text, in some cases).  What’s a realistic turnaround time for the response?

If not with clients or otherwise tied up, many Realtors (yours truly included) will pick up the phone when called during business hours. (Some won’t. Some do time blocking and return calls at set times, such as between 11am and noon and 4 and 5pm. Those who time block in this way will often put a message on their voice mail explaining when they will call back. Hopefully, that works for the caller!)    In general, Realtors and real estate sales people will not take calls or return phone calls while they are with other clients unless there is a really crucial event happening – and if that’s the case, they’ll let the folks they’re with know about it upfront.  Depending on how long the appointment is, then, the return call could be an hour or two or, in the extreme, at the very end of the day (if with relocating clients and doing a crash course in the area that goes 8 hours – it can happen, but is exhausting for all).

Once in awhile, a voice mail or text simply won’t be delivered by the wireless carrier in a timely manner. This is extremely embarassing and upsetting to everyone impacted by it.  So please keep in mind that it’s always possible that your message simply wasn’t delivered.

If something big is going on, check in ahead of time with your Realtor

If there is some momentous event or report looming, talk to your buyer’s or seller’s agent ahead of time to learn his or her schedule and availability.  This is key for reducing everyone’s stress!

Agents do sometimes take time off, too. Communicate with yours to know when he or she is off, and do your best to respect that time. Real estate licensees who get too burned out are less effective in the long run.

In my practice, often I can call back within a few minutes if I am simply on the other line when I miss a call. Most of the time, my appointments (listing or showing homes) last only about 2 hours, so I can get back to callers within 2-3 hours 95% of the time.  On very rare occassions, I’ll have a marathon appointment and be tied up all day.

If your agent is really busy – and we all get at least some spells like this - know that he or she will probably call you back within a couple of hours. If you don’t get a response and it’s some sort of emergency, try texting (many agents now communicate that way – I do) but know that you are probably interrupting so it may not be possible for your agent to call you back immediately.

It’s all about expectations: if you know your agent’s availability, it won’t be frustrating for you or her/him if there’s a small amount of phone tag.

Finally, I should add that the best agents are not available 100% of the time!  This week I learned that in Santa Clara County, 78% Of the agents have sold either no homes or only 1 home this year.  Those agents may be more available – but they may not be the best agent you could hire.  When hiring an agent, do find out how busy he or she is generally. You’ll all be happier to establish realistic expectations upfront.

Frequently I’m asked if I (or another real estate licensee or agent) can help a consumer to purchase a foreclosure.  There are some nuances to this answer, but in short, it depends.

There are several stages in the foreclosure related sales in California.  Often, homes somewhere in this quagmire are listed on our Silicon Valley area MLS or multiple listing service.  If a property is listed in the MLS, then yes, we Realtors can help home buyers with a distressed sale purchase.

1. Pre-foreclosure (where payments have been missed and a Notice of Default or NOD has been filed – often, but not always, these homes are on the market and included in the MLS.  If they’re in the MLS, I can help.  Often these are short sales (but short sales are not always in pre-foreclosure – they may not have missed any payments).
2. Trustee’s sale, or actual foreclosure on the courthouse steps.  No role for a real estate agent here.  There are some big caveats and warnings! First,  often what’s owed against the home is more than it’s worth and the only way to purchase a home here is to pay off all the debts (so it may not be much of a deal!).  Second, if you buy here, you get NO inspection contingency and must pay cash for the house.  End of story – no backing out.  Worse, you cannot inspect it ahead of time!
3. Bank owned or REO.  These are usually listed on the MLS and if so, I can help you with it.  Sometimes banks hold onto them between the trustee’s sale and prior to listing them with a broker.  Often this is only for a month or two but sometimes it’s longer.  If it’s not on the MLS, it’s very very hard, or maybe impossible, to buy it.

While it’s not hard to locate homes where owners have missed some payments, it should not be assumed that these houses are either for sale or that the owners have any intention of selling them.  In my opinion, it would be harassment if consumers showed up on their doorsteps trying to purchase a house where a payment has been missed.  Most, maybe all, of the residents there would be offended.  They may be trying to get a loan modification (a friend of mine got one approved last week!) or have family & friends helping them to get back on track. If it is not listed in the MLS (which you can find at www.MLSListings.com – the public portal of our agent multiple listing service), the odds are overwhelmingly against it being available to you.

Lately I have been given a lot of incomplete FIRPTAs from listing agents in & near Silicon Valley with the request (or demand) that my buyers sign them.  They explain “we don’t have to provide the social to the buyers anymore”.  These well intentioned agents have mixed up two choices and provided something of a hybrid that cannot be used to satisfy the requirement of the form. Hence this post.

It’s not just happening to me and to my buyers. There’s an immense amount of confusion about how to properly complete and handle the FIRPTA form in California real estate sales.  Most of it would be solved if people (buyers, sellers, realty agents, transaction coordinators and brokers) would simply read it and not assume what the requirements are.  (Silicon Valley Realtors have long heard local real estate trainer Guy Berry admonish us in class to simply read the forms.  He scrawls in large letters on the board for his class on the purchase agreement: What does the contract really say?)

So let’s do that.  Let’s see what the Seller’s Affidavit of Nonforeign Status And/Or California Withholding Exemption really says. To begin with, I uploaded the 2 page FIRPTA document onto my Valley of Hearts Delight website, so you can access the entire document by clicking on the link (it will download into a new window – it’s a pdf).  You might be surprised, especially if you are taking your information second-hand and have not read this form yourself in the last two years. (And if in doubt about any of it, please contact a real estate attorney for clarification.)

What is the purpose of the Seller’s Affidavit or FIRPTA?

Why do we have this form at all? The very first part of page one answers this question. (Words in red are mine.)

Internal Revenue Code (“IRC”) Section 1445 provides that a transferee (buyer) of U.S. real property interest must withhold tax if the transferor (seller) is a “foreign person”.  California Revenue and Taxation Code Section 18662 provides that a transferee (buyer) of a California real property interest must withhold tax unless an exemption applies.

So for starters, we are told that buyers must withhold tax from the sellers unless an exemption applies when they buy real estate in California. That’s what this FIRPTA form is all about: it tells the buyer that there is an exemption.  By completing this form and providing it, the seller is giving an affidavit that he or she is not subject to the withholding tax for either the Federal Government or for the State of California. The buyer is off the hook for holding money back in escrow from the seller.

In case the seller doesn’t already understand how serious this requirement is, the next line in the form continues with underscoring its gravity.  It’s the seller’s form, so “I” refers back to the seller (or transferor).

I understand that this affidavit may be disclosed to the Internal Revenue Service and to the California Tax Board by the transferee, and that any false statement I have made herein may result in a fine, imprisonment or both (bold is mine, not original).

I think that makes it pretty clear that the FIRPTA should be treated carefully. Unfortunately, that’s often not the case.

What information must be provided on the FIRPTA?

The next section has a few areas which are required to be completed by the seller (none is said to be optional).

1. The address of the property being transferred (or sold)
2. The seller or transferor’s information:
   1. Full name
   2. Telephone number
   3. Address
   4. Social Security Number, Federal Employer Identification Number, or California Corporation Number

It is usually the fourth item which is not provided when agents or sellers balk at this requirement but many times they also do not want to provide their telephone number either if this is being given to the buyer.

Does this completed FIRPTA, with Social Security Number, have to be given by the home seller to the home buyer?

Luckily, the next few words provide relief from the panic that sets in when sellers, who are rightly worried about identity theft, realize that the law says that they must give their personal information to the buyer of their home.   The bolding is in the original document, not just for emphasis here.  Read on:

Note: In order to avoid withholding, IRC Section 1445(b) requires that the Seller (a) provides this affidavit to the buyer with the Seller’s taxpayer identification number (“TIN”) or (b) provides this affidavit, with TIN, to a “qualified substitute” who furnishes a statement to the buyer under penalty of perjury that the qualified substitute has such affidavit in their possession. A qualified substitute may be (i) an attorney, title company or escrow company (but not the Seller’s agent) responsible for closing the transaction, or (ii) the Buyer’s agent.

This is good news for sellers.  While the FIRPTA form still MUST BE COMPLETED, it can now be given to the title or escrow company (or an attorney, if that attorney is handling the closing).  So to recap, here are the choices:

1. The completed FIRPTA may be given to the buyer OR
2. The completed FIRPTA may be given to the closing agent which acts as a “qualified substitute” (title company, escrow company, attorney or buyer’s agent) and the qualified substitute in turn gives a document to the buyer gives the buyer a statement saying that the completed FIRPTA is in its or their possession

The statement by the qualified substitute does NOT provide the personal information directly to the buyer, so this is by far the choice most sellers and agents prefer.

Near the bottom of the page, in huge type font, is an admonishment to the buyer, if the affidavit is given to him or her, to not misuse the TIN or SSN.

Buyer’s unauthorized use or disclosure of Seller’s TIN could result in civil or criminal liability.

Some real estate agents (and offices or even whole brokerages) sometimes deliver the FIRPTA to the buyer or buyer’s agent with the key info blacked out, whited out or missing, and demand that the buyers sign it.  Buyers cannot do that.  Under the signature line, it states

(Buyer acknowledges receipt of a copy of Seller’s affidavit.)

This first page of the Seller’s affidavit is not complete unless the personal information is included (there are check boxes to be selected also, but as these are not a source of confusion or contention I will omit them from this discussion).

Remember, if the seller should pay the withholding tax but doesn’t, the only protection a buyer has is this completed form.

Summary:

• The FIRPTA must always be completed if the seller asserts that no withholding should be kept to pay taxes
• The completed FIRPTA may be given to the buyer but it is not required IF a statement of qualified substitute is provided by the person or entitity in possession of the completed FIRPTA to the buyer
• It is a fairly common mistake for listing agents to give the buyer a FIRPTA with sensitive information blocked out or omitted, but this is a confusion between the two options and does not satisfy the requirement of the form

What does the qualified substitute tell the buyer about the seller?

Not much.  Some title companies draft their own forms, but California Realtors have access to the CAR forms online and may use Form QS (sample at link, which takes you to a pdf of the qualified substitute form.)

A word about qualified substitutes in California

In northern California, typically a title company handles the escrow functions.  (In southern CA, often there’s a separate escrow company, which sometimes is owned by a real estate firm involved in the transaction.)  Many title companies are willing to be the qualified substitute and to receive the completed FIRPTA and provide a statement to the buyer that they have it.  But not all title companies are willing to do this. The California Association of Realtors keeps a list of which companies will do it and you can find it on the CAR website: FIRPTA Qualified Substitute Service.

What are the exemptions to using the Seller’s Affidavit?

There are a number of reasons why it may be legitimate to skip this form altogether:

1. The seller is a foreign person and the withholding tax must be paid
2. The sale is less than $300,000 and the buyer intends to use it for personal use (with some caveats)
3. The back of the Seller’s Affidavit (link above for full document, on page 2) provides explanations of exemptions
4. Other exemptions listed on the IRS website

What if the seller refuses to provide a completed FIRPTA to the buyer or qualified substitute when it is required? Or if the buyer knows the information on the Seller’s Affidavit to be false?

The IRS website (see link above) states:

The certifications in items (3) and (4) are not effective if you have actual knowledge, or receive a notice from an agent, that they are false. If you are required by regulations to furnish a copy of the certification to the IRS and you fail to do so in the time and manner prescribed, the certifications are not effective.

In other words, you may have to withhold the money due to the federal and state government, or you may owe this money yourself if you are the buyer. Please consult an attorney!

What is the liability of the real estate agent if the FIRPTA is false and the agent knows it?

The IRS discusses this, too, on the same page as above. The agent may be liable for the withholding tax too, but the damage is capped at the amount of commission paid. This next small paragraph is addressed to buyers:

If you receive either of the certifications discussed in item (3) or (4) and the transferor’s agent or your agent (the transferee’s agent) has actual knowledge that the certification is false, or in the case of (3), that the corporation is a foreign corporation, the agent must notify you, or the agent will be held liable for the tax. The agent’s liability is limited to the amount of pay the agent gets from the transaction.

So if you, the buyer, or your real estate agent, knows that the FIRPTA is not on the level, you may be liable for the taxes due.  Please seek the help of a good lawyer immediately!

Before signing the Seller’s Affidavit or any other form, Silicon Valley home buyers & home sellers should read and understand what they are being asked to sign.  Take your time and do it!  It is very risky to breeze through this, just as much as it is to rush and be incomplete with the contract or disclosures.  Be wise and be careful.

Other issues: Broker Policies and Agent Practice

Sometimes a brokerage will have a very clear policy about the qualified substitute, but particular offices or agents may ignore it.  For example, a large, local brokerage with a fine reputation is Alain Pinel, Realtors. They have a document for their agents explaining how the FIRPTA and qualified substitute is to work – and it’s correct.  But this year I closed a transaction with a very pleasant APR agent who had no comprehension of this form.  It took me many emails with links and explanations to try to get across what should have been known already from within the brokerage.

Disclaimer: this post is not intended to be legal advice.  Please contact a qualified legal professional if you seek legal advice.

For further reading on the FIRPTA form and laws:

Definitions of Terms and Procedures Unique to FIRPTA (IRS website)

Federal Withholding: Foreign Investment In Real Property Tax Act (article on CAR site)

FIRPTA for Real Estate Investors, Brokers and Agents (article on About.com by Jim Kimmons)

Ever hope that a “bias” will help you get your offer through when competing against multiple offers? Or that your agent’s friendship with the listing agent might sway the balance in your favor?

You’re not alone. And you’re right to suspect that it might happen. So does the opposite – “secret deals“.

Most of the time in Silicon Valley there’s one offer at a time on a house, and the property is listed in the MLS, so there’s really not a lot of favoritism or bias going on.  (Unless of course your agent or you make a really good OR really bad impression, which can also sway your ability to strike a favorable deal.)

Sometimes, though, homes sell “off” the MLS.  This happens more some areas than others (Palo Alto, Saratoga and Los Gatos come to mind), particularly in high end or luxury homes or homes owned by celebrities.  When this occurs, the marketing is done by word of mouth to favored offices or agents.  Sometimes only a few people know a property is available at all.  This is not the majority of the time, and in fact is a small minority, but if you are trying to purchase a home and there’s not much inventory, you want all the help you can get.

Why the favoritism?  Part of it is friendship and reputation.  Certain agents are well known for doing a good job for their clients and being fair to the other parties too.  Most Realtors want to work with agents on the other side of a transaction who are competant, hard working, fair minded, communicative, and thorough.   They don’t want to work with someone who seems unprofessional, doesn’t understand the contract, is overly emotional and who cannot educate and guide his or her client.  Those latter agents are nightmares and some real estate agents will go to extremes to avoid working with agents on the other side of a deal whom they perceive to be “bad”.

Key point: your real estate agent’s reputation is important!  This is also true if you hire a listing agent to assist you in selling your Silicon Valley home.  Most agents have an either neutral or good reputation.  An agent with a stellar reputation will make agents want to show your home and write an offer (because they know that it will be a fairly smooth transaction and they will be treated fairly). But if you hire an agent with a bad reputation you may either have trouble selling your home or not get as many offers as you might have otherwise seen.  A bad or disliked agent (there aren’t many of them but they do exist!) can virtually stigmatize your property.

There are many good, ethical Realtors in Silicon Valley.  Unfortunately, like in many other professions, there are a few bad apples in the real estate industry too. But hire well and you will find that doors can open for you.  Don’t be afraid to ask your agent to do old fashioned networking on your behalf too.  That 1 or 2% of homes that sell “off the MLS” may be the ideal home for you, so make sure you discuss finding those properties too.

Related Posts on this Silicon Valley Real Estate Blog:
Silicon Valley Home Buyers: Should You Use a Buyer Broker Agreement?
What Do Silicon Valley Real Estate Agents Do?
How Important is Marketing When Selling a Silicon Valley Home?
Why Is There So Much Paperwork When Buying or Selling a Home in Silicon Valley?
The Arbitration Clause in the Real Estate Contract: To Sign or Not To Sign?
What Is A Default in a Real Estate Transaction or Contract?

Being an FHA home buyer in Silicon Valley is a challenge right now, especially if you want what everyone else wants: a nicely updated and remodeled home in a good area with no “issues”. (Issues meaning things like high voltage lines, busy roads, flood plains, or being too close to stores or spots not everyone wants to be near.)

The Problem with Condominiums and FHA

I need to start by explaining that things aren’t always the way they look.  We tend to think of condos as looking like apartments, with no yard, for example.  We think of townhomes as a two story or more home with neighbors on the sides but no one above or below.  And we think of houses as freestanding buildings with a yard around it.

That’s really how things look.  But how these different types of homes are owned may be another thing altogether.  For FHA home buyer purposes, this makes a huge difference.

Some townhouses and even some houses are not owned the way they look, but are held in condo ownership.   A good example of this is The Villas of Almaden, a beautiful &  gated community at Meridian and Coleman in San Jose’s Almaden Valley. Structurally, many of the buildings are houses – but they ar “condo ownership” and are stored under the condo label in our local MLS. What makes these buildings be condos? Practically speaking, in addition to their own space for their particular unit, the owners also own a percentage of everything else, such as the pool, grassy areas, tennis courts, private roads, etc. They also have a share of the liabilities of the condo community, too. 

If you are an FHA buyer and you want a San Jose area condo (or any home which is held in condo type ownership), you have to make sure the complex is FHA approved. We had the option of getting individual units spot checked until February 1st, but that has now been eliminated. Getting an entire complex approved takes time, perhaps 60 days, and money – and most buyers don’t want or cannot take on that kind of financial liability (and most sellers don’t want it either). Here is the link for the HUD site which will list for you the condo communities which are FHA approved.   So it is important to know if the townhouse you’re looking at is owned like a townhouse or owned like a condominium.  It can be painfully disappointing to think that a home can be bought with FHA backed financing, only to later discover that it can’t due to the type of ownership and lack of approval of the asociation.

Houses Are Simpler, But Not Always Easier for FHA Buyers

If your heart’s desire is to purchase a house in Silicon Valley, or a townhouse (not held in condo ownership) or PUD (planned unit development), at least you don’t have to get the entire neighborhood’s approval, so that one hurdle is cleared.  What you will find, though, is that there is a lot of fear by listing agents, and thus by their seller clients, about taking on an FHA buyer.

With multiple offers, the one(s) with FHA backed financing are usually the first ones eliminated.  (It’s not just due to the FHA, but also due to the fact that usually FHA buyers have very little cash down.  We are finding a lot of appraisal challenges because prices are rising fast.  With more cash down, an appraisal problem is less of an issue.)

Sometimes even with single offers, though, FHA buyers are running into trouble.   In some cases, the MLS will instruct agents, “No FHA Offers“.  In a few of those, it continues, “home cannot pass FHA guidelines” or otherwise indicating that the property needs too many repairs to get past the FHA requirements.  In others, though, the listing agent isn’t so direct and either won’t say that FHA offers will be rejected or simply behaves badly because he or she doesn’t want to work with one.   This is frustrating but is part of the challenge we are finding today.

The Stigmatized FHA Offer

Why are FHA offers viewed so dimly?

• usually there’s very little cash downpayment (hence, any appraisal issues will be a big problem)
• the FHA requires the home’s condition to meet certain standards & if the home needs work, the deal may not close
• FHA backed loans usually take longer to be fully approved and to close
• overall, there simply appears to be much more risk to the seller that the transaction will fall through or need to be renegotiated

There’s quite a bit of variation among FHA offers  in term of the amount of cash involved.   I have seen FHA buyers have downpayments ranging anywhere from 3% to 20% down (some have offered less down and then asked for the sellers to credit them back that amount, trying to do a 100% financed deal).  Why would anyone with 20% down do an FHA backed loan? Because the parameters are less stringent than conventional loans.  So the FHA opportunity is one which can appeal to a lot of buyers who otherwise would not qualify for a conventional loan.    So one mistake that I see with listing agents and sellers is not apprciating that this variation exists among FHA buyers.  They are actually not all the same!  The super small downpayments significantly hurt FHA buyers’ odds of having their offer accepted.  The larger the down, the better your chances are that the seller will be comfortable with your contract.

A huge plus with FHA is that the downpayment can be gifted, partially or in full.  If you are an FHA homebuyer in Santa Clara County and your relatives want to assist you with the downpayment, you’re in luck!  It’s easy to factor that in, and easy to improve your postion if you can up your downpayment amount that way.

There’s also a lot of variation among the lenders working with FHA home buyers.  Some lenders say that FHA borrowers need 21 days for a loan contingency and 45 days to close.  One Los Gatos mortgage broker says she can do it in 21 days.    The new guidelines for the Good Faith Estimate is slowing everyone down – the question is, how slow does it need to be? The GFE has to be done before an appraisal is even ordered.  That alone stalls things by about 3 more days than before these new guidelines were in place.  The really long time frames do hurt FHA home buyers chances.  If it’s possible to work with an FHA lender who can perform more quickly, it will greatly help the stigma of the FHA offer.

Right now it’s a seller’s market in much of Silicon Valley, which means that it’s hard for buyers to buy in general.  Add to that FHA backed financing and it’s tougher still.  But don’t give up if you’re a buyer & don’t assume the worst if you’re a seller!  FHA buyers are very anxious to get into a home, and their motivation is probably the most important element of all in terms of the likelihood of having a successful close.

Last week I got an email from someone who’d seen a Silicon Valley house she liked from a real estate agent whom she didn’t like.  She wondered, “do I have to buy the house with that agent?” 

The answer, of course, is not always clear. It depends on your relationship with the agent.  It may also depend on why you choose to buy the home with someone else’s assistance.

(1) Your relationship with the real estate agent

Did you sign a buyer broker agreement with that Realtor? If so, you may owe a commission to her if you buy the home through someone else.

Did you write an offer on that property with the agent? If so, again you may owe a commission to him if you hire someone else to help you purchase it afterwards. 

In many cases, there is a verbal contract that you are working with a Silicon Valley real estate professional exclusively. This does “count” too but it may be easier to change your status if it’s a verbal agreement.

(2) Problem agents, problem consumers.  Do you want or need to break the relationship with your current agent? 

Is your agent giving too pushy? Doesn’t seem to know what he or she is doing?  Too hard to reach?  Too busy to really assist you? Or doing something else that you perceive as a “red flag”?  Sometimes agents should be fired. 

You most likely can break that agency relationship with a problem agent if it’s a verbal contract only and you haven’t written an offer on the property in question, but you must  clearly tell him or her that you are not going to continue working together and then have a gap in time between then and when you do write an offer on the home (at least a few days, if not a few weeks).  You can break the agency relationship verbally or in an email or both, but it needs to be clear so that there is no misunderstanding. A call or voice mail followed up by an email would be very clear.

You can terminate the agency relationship  very nicely and graciously, of course.   It is not necessary to tell him or her why you are electing to discontinue the relationship, but he or she will certainly wonder so you may nicely share your reasons.  I would just say try to be pleasant and thank the agent for the time spent.

Sometimes there are a few problem consumers working with ill-will who think that they can work with an agent, see a lot of homes, and then simply either go directly to a seller or listing agent or bring in an out of area friend or relative to write up the offer and close the deal.  If a consumer does this not because of a difficulty with the first agent but just in order to save money (or get a rebate) etc., it is possible that the first salesperson will cry “foul!” and press to be paid a commission.  The lawsuit in this case would be what’s called a “procuring cause” lawsuit.  Procuring cause means that the first agent was really the reason why the consumer purchased the home, and therefore is entitled to a commission (which the buyer might be forced to pay if doing a last hour agent switch).

A good example of a procuring cause lawsuit is the case of Jerry Seinfeld, who had to pay his agent $100,000 when he bought a home without her because he could not reach her one day.  Impatience will cost you!

(3) Discussing expectations.

Sometimes Realtors don’t clearly discuss expectations upfront and that can lead to problems all around.  If you are thinking of buying or selling a home, talk to prospective agents about how they work, communicate, make themselves available etc.   There are many commonalities between agents but also many differences.  

Some agents will preview everything in sight and show you the best six or seven homes and expect you to choose from their list after one time out. Others may be willing go to twice and show a few more.  (Most consumers do buy a home after seeing less than 15 nationally but here it tends to be a larger number, probably because of our higher price tags.)

Other agents will expect you to find the home on your own and call them when you find the right one.

(4) What do you want? How do you want to be working with an agent?

In most cases, real estate professionals only get paid if there’s a sale and it closes escrow.   Some will request a buyer broker agreement, which is like a listing contract but for a buyer.  Make sure it’s not for too long of a period, and that if you are really unsure there’s a cancellation clause.

There are some other options out there, though, besides the tradional arrangement as to how a real estate professional can be compensated for assisting you with your real estate needs. 

Paid consulting (hourly or flat fee) is a newer option that might fit in some cases. For instance, if you think you want help from an agent only up to a point but then want an out of area licensee (friend or relative) to help you write an offer and negotiate the escrow, perhaps an option would be to hire someone to show you homes and prep you for an hourly fee.   (Learn more about consulting by visit the site for the Accredited Consultants in Real Estate, a group to which I belong.)

Another option is to consider teaming up. Perhaps your out of area friend or relative would be willing to either split the escrow OR pay a referral fee as compensation for time and energy spent.

An open discussion with your real estate professional about your wants, needs, hopes and expectations will enable your relationship to be stronger and better, and will be one less area for stress as you take the plunge into homebuying.

Recently I’ve had the uncomfortable experience (a couple of times) in which potential clients were overly secretive about their situation. One was in Los Gatos, another in San Jose.

I’m going to be blunt here: it is really hard to help when we, as agents, don’t know what is truly going on. It’s not a whole lot different than keeping important things from your doctor or lawyer. If you want help, it is imperative that you tell your hired professionals what is going on.

For that matter, if you are interviewing agents to list your home or to help you to buy your next home, expect those agents to ask you about your needs and motivation. Hiring an agent (and the agent agreeing to take you on as a client) is a two way relationship. Both sides need to be clear and honest with each other.

Let me give you an example. Years ago, I had some prospects (not yet clients) in Monte Sereno who inquired off and on for years about selling their home. At one point, it became a “hurry up” situation. Luckily, they told me the truth: one of them had been diagnosed as terminally ill. The sick one did not want to saddle the survivor with selling the home after the death.

It helped me to help them in knowing the truth. I cannot give tax or legal advice, but I recognised from what they were telling me that it would probably save the survivor a TON of money to hold onto the house until after the spouse’s death because of the stepped-up basis. Now I can’t say that to them, but knowing it, I could and DID say, “before you list with me or anyone else, tell your tax person what you just told me, and tell your tax person that you are thinking of selling now”. That couple’s CPA told them to wait. They did. Had I not known the real reason for the sudden uptick in motivation to sell their home, I could not have assisted them. Their openness and honesty saved the surviving spouse hundreds of thousands of dollars.  (By the way, my urging them to talk with a tax professional, which I knew would result in my not listing the house any time soon or maybe not at all, is an example of behaving as a fiduciary, of putting their interests first, and that is how agency should work if you hire well.  That is what your Realtor or sales person is supposed to do.)

In contrast, I’ve had conversations with seller prospects who did not want to tell me why they were selling, or where they planned to move after the sale. I’m not sure what the concern was, but simple questions were responded to along the lines of “you don’t need to know that”.  You might be surprised that it can, actually be relevant.

Perhaps even more challenging is when I’ve worked with clients and suddenly one or both seem to flip out – out of the blue as far as I can tell.  This has happened to me a few times and it was very perplexing and upsetting to have clients who should have been happy get angry and upset over virtually nothing (or “go on the attack”, which has happened too).  Most ever time, though (luckily it was rare), I later learned that something huge and bad was going on with them which had nothing to do with the real estate transaction or with me: a divorce, a bad diagnosis with a now sick family member, or something equally weighty and difficult.

It probably seems that if this happens, it’s not relevant to the Realtor.  But in truth, if we understand our clients’ situation better, we can often be more accommodating.  In the case of my clients who seemed to go a little crazy without warning, had I understood that they were undergoing some additional issues, I might have been able to work with them better, making it easier on both them and me. I have a background that includes volunteer work with people who are grieving and with hospital chaplaincy – I am trained to listen and to be supportive.  But it’s hard to offer any kind of support if I’m left in the dark!

If you want to buy or sell a home, you really take on a partner when you hire a Realtor. Your real estate agent has a fiduciary relationship with you and as such is someone who you should be able to trust.  Do your due diligence in hiring, but once you do select and hire a real estate agent, trust enough so that you can have a functional relationship that will be a win-win. Being overly secretive with your real estate agent will hurt your chances of hiring well and will likely undermine your ultimate goals. When you hire a Realtor, it’s important to explain your motivation and situation so that he or she can help you the best to get what you want the most.

Thank you for reading this Silicon Valley Real Estate Blog:
an invitation to chat about your goals in buying or selling a home

Thank you for reading this Silicon Valley real estate blog.  Many consumers want to “go it alone” while they get educated on the Silicon Valley real estate market.  If you’d like to go from having information to gleaning knowledge, though, you’ll need to connect with and hire a good Realtor who’s experienced & communicative, who can both guide and teach you without pressuring you.  Please call or email me if you’d like to chat about buying or selling a home in Silicon Valley.  I am happy to provide a no-cost, no-obligation initial consultation. I am not pushy! We can talk over the phone or meet at my office or a coffee shop – whichever is more comfortable for you.

Mary
mary (at) popehandy.com
408 204-7673

A real estate agent is someone who’s taken a course (or more) and passed a state exam and is licensed by the state to sell real estate.

A Realtor (pronounced REEL-TOR, not real-a-tor) is an agent who’s ALSO a member of the National Association of Realtors, which is a voluntary trade group. Realtors promise to abide by and take very seriously their Code of Ethics. Ever wonder what is in it? It’s not short and is quite comprehensive. Take a look:

http://www.realtor.org/mempolweb.nsf/pages/code

Please understand that not everything that is legal is also ethical – Realtors have a higher standard of practice. Often non-Realtors (at least in Siliocon Valley) are not full-time agents but dabble in real estate. Realtors are usually full-time and work as professionals.

Finally, if you have a problem with an agent who’s not a Realtor, you have to complain to the state. With a member of NAR, who is almost always also a member of the state association (CAR – the California Association of Realtors) and local (either SILVAR – the Silicon Valley Association of Realtors or SCCAOR – the Santa Clara County Association of Realtors), you can take action locally for most any issue and do not need to go all the way to the state level. Agents work hard to remain in good standing with the local, state, and national boards.

In the San Jose area, most of the large realty firms are “all Realtor” offices. Usually becoming a member of NAR, CAR and either SILVAR or SCCAOR is a requirement for joining the company. In other areas and in other states, in can be different. So it’s mostly the independents where you’ll find a real estate licensee who’s not also a Realtor. But ask!

When you interview an agent, then, the first question to ask is this: are you a Realtor?