Have a real estate question? Submit it to the guru! I will answer you personally and may, with your permission, post it on the website. However, please do NOT use real names of persons involved in your situation–other than your own. I will not post your full name (or any name) on the website, unless of course, you ask me to.
- Ask the Guru – New York v.s. Pennsylvania
Dear Real Estate Guru,
I’m from New York State but I have a reciprocal license in Pennsylvania. I brought an offer in on a listing in Pennsylvania, and the agent told me she was not going to present it because the property was under contract. That’s illegal! And, it’s a violation of the Code of Ethics! I’m really steamed; what should I do first, go to court or file an Ethics Complaint?
Take a deep breath. It’s illegal in your state, New York, it’s not illegal in our state of Pennsylvania. New York law requires all offers be presented, in the words of my colleague from New York, Roseann Farrow, whether “too little or too late’. By law in your state, offers must be presented up to closing. Not so in Pennsylvania. In Pennsylvania, by law and agreement, the seller can instruct the agent that her responsibility to present additional offers terminates with the seller’s written acceptance of an offer. In the Code of Ethics, SOP 1-6, it says that REALTORS® shall present offers objectively and as quickly as possible. SOP 1-7 says that as listing brokers, REALTORS® shall continue to submit offers and counter-offers until closing …unless the seller has waived this obligation in writing. So, the Pennsylvania agent did not violate either license law or the Code of Ethics.
This brings up one of the most interesting distinctions between our two states. My colleague, Roseann Farrow and I just team taught a course we helped PRI develop called: “Crossing State Lines and Keeping It Legal”. We will be presenting this course at the Triple Play Convention this year. It is very important, when acting as a reciprocal licensee, to verify what the laws are in the neighboring state. Additionally, although Pennsylvania law allows the seller to agree that subsequent offers do not have to be presented, the seller and agent can also agree that subsequent offers will be presented. This is my personal practice, based on the philosophy we promote in the SRS (Seller Representation Specialist) course, which is: “What I know, my principal knows.”
For the next time, you may want to ask the agent what the seller and agent, in Pennsylvania, have agreed to with respect to the presentation of offers after the seller has accepted a written offer.
- Ask the Guru – Multiple Offers
Dear Real Estate Guru, I wrote a contract on a listing here at the end of April, when everyone was trying to get the tax credit. I hand delivered it to the listing agent. Later that night, she called me and said the seller had accepted another offer. She didn’t tell me there was another offer; when I mentioned that, she said I didn’t ask. Do I have to ask? And, my buyer had asked me if the seller would counter to their offer and I said they usually do. Was I wrong?
The REALTOR(R) Code of Ethics, in Standard of Practice 1-15, says that an agent may ask the listing agent if there are any other offers in on the property, and if so, which agent wrote the contract–with the seller’s permission. Here in PA, agents who use our standard listing form have blanket permission to disclose this, but again, should review it with the seller at the time of listing. You did not ask; the listing agent was not obligated to tell. I would be cautious ever telling a buyer what I thought a seller would do; some sellers will counter to offers, but some will not. If two offers come in simultaneously, the seller does not need to counter to both–or actually, to either.
- Ask the Guru – Right to Represent
The same student asked another question, which Roseann shared with me:
“Can a listing agent deny me the right to represent my buyer? I have a buyer who wants to see a HUD house, but I’ve been told by the listing agent that I must be on the HUD roster and obtain a HUD lockbox key in order to show the house. Can the listing agent do that?”
This is actually more than one question. The agency question is, “Can a listing agent deny a buyer’s agent the right to represent a buyer?” That answer is no, with some caveats. If no cooperation or compensation has been offered, the buyer can make the appointment with the listing agent and bring his agent along. His agent should not expect compensation from the listing agent; it would have to come from his client, the buyer. Depending upon the circumstances, the listing agent might insist on writing the contract; however the listing agent cannot block the buyer from getting advice from a buyer’s agent concerning the offer: price, terms and conditions. The second question is about the terms of cooperation. Agents must follow lawful instructions from their clients. An example of a lawful instruction could be: “Don’t show my house on Sunday.” An unlawful instruction would be anything against the law, as in: “Don’t show my house to any members of XYZ protected class.” In the HUD case, HUD has given the instruction to the listing agent that only those agents registered with HUD who have obtained a HUD key are to be given cooperation. This is in line with a Standard of Practice, 3-9, added to the REALTOR(R) Code of Ethics in 2010, which reads:
“REALTORS® shall not provide access to listed property on terms other than those established by the owner or the listing broker.” In this case, it appears that the listing agent is obeying the lawful instructions of his client, HUD.
- Ask the Guru – Pennsylvania forms
I get questions from my students, consumers, and the public about real estate issues. Some of them are state-specific, and some cross state lines. Here’s a recent question, and my answer. The question came from my good friend and colleague, Roseann Farrow, who teaches real estate in New York. Roseann had a student in her class who is licensed in both states and asked this question:
“Must a Pennsylvania licensee use a state-approved form for a buyer agency agreement?”
The answer is no; there are no ‘state-approved’ forms in Pennsylvania. However, about 90% of the licensees in Pennsylvania choose to use the standard forms developed by the Pennsylvania Association of REALTORS(R). This is because they are well constructed, follow the law, and if filled out properly, should be in compliance with state regulations. Regardless of which form a licensee chooses to use, in Pennsylvania, a broker is not entitled to a commission from a consumer unless the broker and consumer have entered into a written agreement which spells out the scope of work of the agreement and the fee to be paid. Also, in Pennsylvania, should a broker or agent choose to work on a non-exclusive basis with a consumer (either buyer or seller), they are required by law to furnish the consumer with a written memorandum of their agreement. For this reason, PAR has developed a “non-exclusive” buyer agency form. The form which is required in all instances in Pennsylvania is the Consumer Notice, which must be furnished at the first meeting, before any “substantive” discussion occurs between the consumer and the licensee.
- Ask the Guru - Appraisals
Today’s question was about appraisals, and whether or not there is a difference between a ‘re-fi’ appraisal and a regular appraisal.
Is a “Re-fi” Appraisal Different from an Appraisal for a Sale?”
A good REALTOR® friend called today and asked that question, which is one I get often. She followed up by saying: “I’ve been told that a re-fi appraisal will be higher than what you could actually sell the house for.” Well, it might be, but it shouldn’t be. When a lender orders an appraisal for lending purposes, the appraiser accepts the assignment with the lenders guidelines. The universally used definition of market value, which appears in the Limiting Conditions of every Fannie Mae appraisal report, and many reports for non-lender use is:
“Definition of Market Value: The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised, and each acting in what he or she considers his or her own best interest; (3) a reasonable time is allowed for exposure in the open market; (4) payment is made in terms of cash in U. S. dollars or in terms of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions* granted by anyone associated with the sale.”
There is no “special definition” for a “re-fi value”. In reality, what has happened, especially before HVCC, was lender pressure on appraisers, as in: “Hey, they aren’t selling, they’re just refinancing; their credit is great, but I need you to push this number a little higher to stay within our guidelines of 80% LTV.” And, compliant appraisers sometimes did that.
The agent who called me has a potential client whose house was appraised for $240,000 in January. Since then, a home on the same block, very similar, has sold for $210,000. Incredibly, the seller has been trying to sell the house on his own for $259,900! I asked her what the supply was like in the neighborhood, and she said: “We have tons of listings in that price range”. That prompted me to say: “Your seller needs to understand we don’t have any “Mother Teresa” buyers out there—by which I mean people so altruistic that they will pay him more than his house is worth, just because he wants them to.”
I didn’t see the original appraisal; the agent says comps from 2009 supported that value, to a degree. But, today’s comps don’t. All appraisals are a “snapshot in time”. That picture was apparently $240,000; today’s picture isn’t so bright. But, if you get asked by a consumer, is there a difference between a “re-fi appraisal” and an appraisal done for a sale, the answer is: NO! The good appraisers I know always ask themselves, before they ship an appraisal out the door: “If the bank had to take this back, do I honestly feel they could sell it at my appraised value?” I always tell my appraisal clients: “I will be honest and fair.” An honest and fair appraisal may not be the answer the owner wants, but it is the answer he ought to get.