Jay Thompson is a former brokerage owner who spent over six years working for Zillow Group. He retired in August 2018 but can’t seem to leave the real estate industry behind. His weekly Inman column is published every Wednesday.
Occasionally the questions some agents ask on Facebook scare me.
OK, it’s far more often than “occasionally.” Sadly, it happens pretty regularly. Fortunately, there are some great agents out there who can answer complex questions without eviscerating the inquirer. Others provide sound advice but can’t hold back slashing the butcher knife. And, of course, some answers are as frightening as the question itself.
This week’s winner of “scary Facebook questions” is:
“How do you talk your buyer into paying more than appraised value for a home? Is there a script you use?”
Let’s break this question down into two parts.
How do you talk your buyer into …
The majority of the respondents focused on the “talk your buyer into” portion of the question, and the most frequent response, by far, was that you don’t talk a buyer into paying more. Some went further to explain you don’t talk a buyer into anything.
Yay for that. There is hope.
My answer to this question was, “You don’t ‘talk them into it.’ Ever. You don’t ‘talk them into’ anything. You represent them and have a fiduciary duty (in most states) to them.”
An agent’s job is not to talk the buyer (or seller) into doing something. We are advisers and educators. We represent their best interests. Sometimes we are also therapists and need to be handy with duct tape and baling wire to hold transactions together. In most states, agents have a fiduciary duty to their clients.
What is a fiduciary? According to the National Association of Realtors (NAR):
“As a fiduciary, a real estate broker will be held under the law to owe certain specific duties to his principal, in addition to any duties or obligations set forth in a listing agreement or other contract of employment. These specific fiduciary duties include: loyalty, confidentiality, disclosure, obedience, reasonable care and diligence, and accounting.”
In that description, there are some essential words, precisely, “will be held under the law … ” and “owe.”
Fiduciary duty isn’t a choice. You owe it to your client and are legally obligated to provide it.
In speaking to various E&O (errors and omissions) insurance carriers I used for my brokerage, they’ve said that breaching fiduciary duty is the third-most common reason for a brokerage to file an E&O claim (closely behind disclosure and dual agency issues), and the specific fiduciary duty that caused the most problems was loyalty.
“A duty of loyalty is one of the most fundamental fiduciary duties owed by an agent to his principal. This duty obligates a real estate broker to act at all times solely in the best interests of his principal to the exclusion of all other interests, including the broker’s own self-interest.” (NAR)
More critical words like:
- Best interests
- Broker’s own self-interest
Other people on the thread asked why the agent would want to talk a buyer into paying over the appraisal. He finally waded back into the thread and said, “to get the deal closed.”
Guess what? It’s not all about getting the deal closed. Of course, that’s very important and a large part of what an agent is retained to do. But you don’t get the deal sealed for you; you get it done for your client.
Fiduciary duty doesn’t care if you have a mortgage payment due, if the children need shoes, or if your car needs gas. Fiduciary duty obligates you to act at all times solely in the best interest of your client to the exclusion of all other interests, including your own self-interest.
Your client’s best interest might very well be passing on a home requiring an offer over appraisal. Their best interest may mean lowering their price range so they can afford to pay more. It might even require them to forgo buying for a time and look at other alternatives.
You don’t “talk your client” into something so you can get a commission check — no matter how badly you need it.
Fortunately, many agents understand and diligently honor their fiduciary duties. Unfortunately, some do not, as evidenced by their responses to the question.
“You are only overpaying for it in today’s dollars. In 3-6+ months, it may be worth more than what you’ve paid today.”
Sure, it may be worth more in 3-6 months. It might also be worth less. Who knows, your crystal ball? You are only overpaying in today’s dollars, those same today dollars that buyers may need for the aforementioned mortgage, shoes or gasoline.
Paying over appraisal for a home might be a viable solution for some; it could lead to years of financial difficulty for others. You can’t determine that. Your self-interest, your paycheck, doesn’t matter. You can only provide your client with all the information they need to make an informed decision.
“The current market conditions dictate this will be necessary to win an offer.”
Really, 100 percent of the available inventory requires paying over appraised value? If that is indeed the case, be sure to provide the data to prove it.
“Here’s how I do it.. Do you want to live in a house? Great – this is the situation right now. You will pay what the market says you’ll pay or you’ll live in a tent. Your choice. Keep me posted on your decision.”
Wow. Honestly, if my agent talked to me like that, I’d fire them. Be better.
“Be a man, pay the contract price”
WTF? I don’t even know what this means. I certainly don’t get what my gender has to do with anything. Be better.
“I don’t, if they are that ignorant to keep renting.. let them rent,” and “How do you like renting?”
Yay! More bashing people for renting, an issue that’s pretty widespread in this industry. Not all renters are second-class citizens. Owning a home doesn’t make you a better person. Renters are people too.
One commenter responded succinctly with an answer that, in my opinion, was one of the best:
“Market conditions and expectations should be covered in the original buyer consultation. If they understand the market they’ll be prepared to make decisions based on knowledge rather than having to be talked into it.”
Represent your clients. Be their fiduciary. Provide them information. Educate them. Guide them. Don’t “talk them into it.”
Is there a script you use?
The questioner was chastised a bit for asking about scripts. Scripts tend to get a bad rap in real estate discussions. Lots of folks think of a script as words you read from a sheet of paper or screen.
A script is simply a guideline of how to respond to specific questions and objections. Guideline is the keyword here. Don’t spit out scripts verbatim; no one wants to work with a robot. But don’t rule out using scripts and practicing them as a way to be prepared for objections and hone your craft.
Be careful out there
Facebook and other social sites provide a platform for the exchange of ideas. They develop a sense of community. That’s all fine and dandy. The problem with these groups is the misinformation that surfaces in them. People ask scary, ridiculous and downright dangerous questions. Answers to questions can be equally scary, ridiculous and dangerous.
Your broker is (or should be) your primary resource, especially for contractual-related questions. Go ahead and use these groups; just look at everything with a critical and skeptical eye.
Jay Thompson is a real estate veteran and retiree who lives in the Texas Coastal Bend, as well as the one spinning the wheels at Now Pondering. Follow him on Facebook, Instagram and Twitter. “Retired but not dead,” Jay speaks around the world on many things real estate.