Couple feels guilty buying FSBO
Should Realtor be compensated despite no involvement in deal?
By Barry Stone, Monday, September 22, 2008.DEAR BARRY: Our Realtor has been showing us listings for several weeks. But last week, we found a for-sale-by-owner property and made an offer to the owner without calling our agent. Since our Realtor spent so much time trying to find a house for us, are we obligated to involve him in this purchase? --Rob
DEAR ROB: This type of situation is a sore spot with many real estate professionals. Your Realtor devoted many hours to your search for a home and now will receive nothing for those efforts. Unless you have a contract with him, you are under no obligation. However, most agents feel that the time and effort they spend showing property to a prospective client warrants some loyalty.
The seller in this case is clearly under no obligation to pay a real estate commission, nor is it likely that he would be willing to pay one. So there's probably no way to involve your Realtor in the current transaction.
The most fair and respectful way to have handled this situation would have been to inform your Realtor of your interest in the property, rather than contacting the seller directly. The Realtor could then have called the seller and said, "I have clients who are interested in your home. Would you be willing to pay a reduced commission if I bring you an offer?" At that point, the seller could have accepted or declined. If he had declined, you would have been free to make your own offer, and there would have been no misgivings about your relationship with your agent.
At this point, you can choose whether or not to inform your Realtor of the decision you have made. Expressing your concern and extending your apologies would probably be more respectful than to say nothing at all.
DEAR BARRY: I am looking for the legal definition of a bedroom. I bought a house that was listed as a four-bedroom home. Two bedrooms are in the remodeled attic, with short, doorless alcoves for closets. And I'm not sure if these rooms are large enough to qualify as bedrooms. Can you help me to figure this out?
DEAR CHRISTINE: Here are the basic requirements for a bedroom:
1) A bedroom must be at least 70 square feet in area, with no dimension less than 7 feet.
2) The ceiling must be at least 7 feet high above the finished floor. If the ceiling is sloped, 50 percent of it can be less than 7 feet, but no part of it should be less than 5 feet.
3) There must be an openable window for light, ventilation, and fire escape. For light, the window size must be at least 8 percent of the floor area. For ventilation, the openable portion of the window must be at least 4 percent of the floor area. For fire escape, the window must be at least 5.7 square feet in area. The opening must have a minimum height of 24 inches, a minimum width of 20 inches, and a maximum sill height of 44 inches. (Note: There are additional window requirements for basement bedrooms, but this has been discussed in previous articles.)
4) Contrary to popular belief, no closet is required in a bedroom.
To write to Barry Stone, please visit him on the Web at www.housedetective.com.
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Submitted by Rob Aubrey on September 23, 2008 - 3:55am.
Thanks for the bedroom definition. I had heard of some but not all.
As for the couple that bought the FSBO and feeling guilty. I notice some language "our Realtor" "client" is used.
Here is something to think about. If a Realtor helps someone and calls them a client the consumer has an implied agency can that agent expect the same.
I think if he or she were truly their agent they wouldn’t have forgotten the agent so fast.
The real lesson is to get a written agreement before you go out the door.
Submitted by Jim Gainer on September 23, 2008 - 5:10am.
Hi Barry,
You posted the 'requirements' for a bedroom with no authoritative reference. Where did you draw your definition from?
Submitted by Ken Lampton on September 23, 2008 - 5:13am.
These buyers are asking the wrong question. They ask "are we obligated to involve him in this purchase?" The proper question is "do we have a moral obligation to pay a fee to our agent, or is is okay to steal his time and expertise and give him nothing in return?" These folks should be very embarrassed about their behavior.
Let's say you take your car to the shop and ask thje mechanic to install a new engine. He works for two weeks and spends thousands of dollars to do what you have asked him to do. Then, the day the job is done, you sneak over to the shop in the dead of night and drive the car home. Would you have a moral obligation to pay a fee to your mechanic, or would it be okay to steal his time and expertise and give him nothing in return?
In either case you are a thief.
Submitted by Valasie August on September 23, 2008 - 5:37am.
Another consideration for the couple who purchased the FSBO is whether the properties shown and advice given by their Realtor prior to their selecting the FSBO helped them make the decision to purchase the home. If that is the case, then while they are not legally obligated to pay the Realtor for the purchase of the FSBO, they may feel that they have an obligation to compensate the Realtor for the contribution they made to the ultimate buying decision.
Valasie (Val) August
Managing Broker
Long and Foster Real Estate, Inc
Submitted by Walter Boomsma on September 23, 2008 - 5:48am.
NIF... not enough information regarding question one. Why did the buyers not value their agent enough to involve him or her in the transaction with the FSBO? If worth hadn't been established, who's fault is that? Showing listings does not earn commission. I think Val and I are on the same page here.
Not enough information regarding state regulations and the existence of a contract. An exclusive agency agreement would allow the buyer to compete with his or her agent. It wouldn't be the buyer's "fault" that they'd signed that agreement.
And a final comment that I personally object to agents feeling entitled to claim a commission based on anything other than fully earning it. This particular circumstance doesn't tell whether or not the agent did so. It's entirely possible (based on what we're told) that the agent did very little so I also object to calling these customers/clients "thieves." In fairness to them, the fact that they asked the question suggests honor.
Submitted by Louise Jordan on September 23, 2008 - 7:58am.
Barry,
Thanks for the information on the requirements for a bedroom. I have a few questions.
1) Is there an allowance for a door to the outside instead of a window?
2) According to the appraisers in our association, the room over the garage needs to be heated and cooled in the same manner as the rest of the house in order to be counted in the square footage. Would this apply to whether it could be a bedroom?
3) The window requirement for light seems quite large. In our area, we sell many homes with a finished room over the garage which is advertised and used as a bedroom. Some of these rooms are quite large and have a full window at one end which opens and can be used as a fire escape window. However, this one window would not satisfy the 8% rule in many cases. Is there ever an exception to the 8% rule for light?
I would also like to have the reference for the information so I can give the information to the agents in my office as well as to our Multiple Listing Service committee. We may need some changes in the rules about a bedroom in our online information.
Thank you for your time.
Louise Jordan
JordanRealty.com
Submitted by Sonja Boatman on September 23, 2008 - 1:45pm.
Where I practice (Pennsylvania) we work with Buyer Agency Agreements. These agreements provide that a buyer pay us an agreed upon commission if they purchase a FSBO who is unwilling to pay commission. That protects us from the situation described in the article & all parties are aware of it.
Submitted by Judy Peterson on September 23, 2008 - 3:31pm.
Kudos to Pennsylvania for the Buyer Agency Client Contract and to Realtors who are professional enough to only work with Buyer Clients. BTW,the few former FSBO Buyers I have worked with as their listing agent when they come to sell,lived to regret their purchase without representation. I especially recall one who described the nightmare of having overpaid and of the sellers inadequate property disclosures. Unrepresented buyers and sellers don't know what they don't know.
Realtor
Prudential Fox & Roach Realtors
610-889-5509
www.MainLinePaToday.com
Submitted by Jay Seville -- Arlington virginia condos on September 24, 2008 - 4:42am.
The only justice for the FSBO buyers/situation is that they likely overpaid for their home--overwhelming majority of FSBO buyers do who are unrepresented--after using a contractor's time, expertise and advice in making their RE decision only to then not pay him in the end. The reason they feel guilty or unsure of themselves is they already know what they did is wrong.
Imagine if I go to a financial planner for a series of meetings to help me buy the stocks right for my situation and what price we should pay for them and why. Then after 5 or 10 hours of these meetings I go out and buy the stocks online according to what I learned during the meetings with my adviser instead of using him in the transaction so as to make sure he was compensated for helping me to arrive at my destination in terms of a buying. Talk about unethical.
In the very least they should come up with an hourly fee to use in making a check to the brokerage to feebly try and clean their conscience. Those buyers are users. And that's not the best way to get the most out of life.
As most FSBOs overprice, the overwhelming purchasers of those FSBOs overpay. Nothing wrong with FSBO at all for sellers--especially if you're lucky enough to stumble across "floaters" who are willing to overpay.
jay
Submitted by Jay Seville -- Arlington virginia condos on September 24, 2008 - 4:50am.
And another thing, Barry's soft answer to the purchasers is pathetic and cowardly. Or he does not really value the job of excellent realtors--problem is that the majority of realtors are quite mediocre like most industries? And therefore why does Inman have him as a contributor?
This does not pass the smell test, Inman.
This website is also pathetic right now, Inman, and needs to be cleaned up. When I read an article and want to comment I have to login. And then when I login, am I there at the article to post my comments? No I have to go find the article on my own all over. Dumbness. That's a very unnecessary step--having to go find the article. Please clean that up at least, then it will make the idea of some kind of connect conference not seem silly when I can't even have a smooth read/comment experience on the Inman website much less spending $1000s to attend one of your conferences.
jay
jay
Submitted by Lynn Wilber on September 24, 2008 - 8:23am.
Lynn H. Wilber, GRI, e-PRO
Broker-Assoicate - Downing Frye Realty, Inc. - Naples, FL
www.NaplesWave.com
www.NaplesWave.com/NaplesBlog
The couple who bought a property FSBO without their agent must not have valued the agent's time or felt the agent's worth.
Back in the 90's I started using a Buyer Broker contract. While reviewing the contract with the buyers, I spent a good deal of time explaining the paragraph about my payment, especially in relationship to new construction and FSBO's. I called this paragraph the "I get paid" paragraph.
Many agents in our industry are afraid to ask Buyers to sign a Buyer Broker contract because they feel they will lose the Buyer. It has been my experience that Buyers who refuse to sign the contract just want to waste an agent's time. I once had a buyer tell me that they didn't want to sign the contract because they had an offer that was accepted on a FSBO and just wanted to see other houses to make sure they made the right decision. Guess how much time I wasted on them.....ZERO!
Unless an agent feels their own worth, they will have a hard time asking a Buyer to sign a Buyer Broker contract. In my opinion, the buyers in the above article should not feel guilty if the agent never explained how they are paid.
Submitted by Vicki Lloyd on September 24, 2008 - 5:12pm.
I don't understand why this question about buyer's buying from a FSBO was even addressed to Barry, a home inspector. He's NOT an agent, or a lawyer. It would make just as much sense to ask the opinion of your next-door neighbor. The buyers feel guilty (as they should) for wasting the time of the agent.
It happens, so agents learn to live through it, but it still hurts. The agent invested his time, which is the only "product" that an agent has to offer.
The advice to choose whether or not to inform the agent is totally unacceptable. That agent may be out wasting another $10 in gas previewing properties while the buyers are asking for advice. The correct answer is - "You STOLE that agent's time and attention. Morally, you owe him!"
The least those buyers can do is to call the agent, apologize and swear that they will refer all their friends to him in the future.
Vicki Lloyd, MBA, e-PRO, ACRE, Realtor
http://LiveLakeForest.com
(949) 457-0281
Submitted by Wenceslao Fernandez Jr, BS, Realtor, CDPE on September 24, 2008 - 8:23pm.
Certainly there are things both parties should have done to prevent the FSBO incident. Many buyers get into the psychology of buying and their Reticular Activator kicks in and suddenly, every house for sale jumps at them.
During a Sunday drive, it is very tempting to drive by a home and simply step out of the car to see the house.
Most have been mentioned like the Buyer agreement as a way to protect against this. Another is to provide the buyer with several cards and ask that if they choose to see a home wihtout first notifying their agent, to immediately volunteer that they're actually working with a Realtor and hand them their card.
Of course, most may forget to do this.
If the buyer feels so bad, there is still much they can do for this agent they seem to like and respect some. One of the best ways is to make sure they send him/her all the referrals they can.
www.MiamiRealEstateKing.com
Certified Distressed Property Expert
Miami-Dade County, Florida.
Submitted by Walter Boomsma on October 10, 2008 - 6:15am.
Just one follow up comment.
If time is the only product an agent has to offer, as a customer I'm not interested. Even if I am willing to work with somebody who only has time on their hands, I'm not interested in paying a commission for time. Doesn't make sense to tie the compensation to the results if I'm actually buying time, does it?