My parents' realtor wants to sell their house to her son. Conflict? How big of a problem?
August 11, 2011 6:01 PM   Subscribe

Realty-Ethics Filter - My parents are selling their house in California. Their realtor presented an offer, from her son and daughter-in-law. I understand it is legal in California for a realtor to represent buyer and seller both, but this seems like a particularly acute conflict of interest. Advice appreciated.

The contract they signed does say that she will be their exclusive representative and she did give them the option to not have her represent both, but she made it clear that she would still represent them and turn the representation of her son over to someone else in her firm. This seems nonsensical to me, since obviously, she would still be looking out first for the interests of her son.

The offer was for $10k below their asking price (not crazy, but still below), but they haven't even had their first open house yet and the offer has a 3-day expiration.

My parents are divided on whether this is actually a problem. My mom, who thinks it is more of a problem, is still a little stuck on how best to deal with it. I'm just concerned that this creates an incentive for the realtor to not work very hard to get other offers. I'd appreciate any advice.
posted by stewieandthedude to Home & Garden (23 answers total) 2 users marked this as a favorite
Sure sounds like conflict of interest to me! Could your parents perhaps talk to someone higher up the food chain in the RE company, or at least higher up in that office?
posted by easily confused at 6:11 PM on August 11, 2011

Get another realtor. There is NO reason to stick with this one regardless of legality.

She is looking out for her son, not your parents.
posted by hal_c_on at 6:13 PM on August 11, 2011 [3 favorites]

I would seriously give a lawyer a call.

When I had real estate hijinks, I had a very helpful call with a lawyer which took about half an hour, cost me less than a hundred dollars, and saved me SO much heartache.
posted by endless_forms at 6:14 PM on August 11, 2011 [4 favorites]

Very bad. She should at least offer to waive half her commission -- otherwise she's getting paid twice for the same work. (If she gives the job to another agent, she's probably getting paid behind the scenes by that agent.)

Otherwise you need to ask her to resign. She can no longer honestly serve as your representative. Who's to say she won't retaliate for not taking her kids' offer?
posted by miyabo at 6:14 PM on August 11, 2011 [5 favorites]

Definitely a problem, definitely a conflict of interest, definitely look into a lawyer and a new agent.
posted by These Birds of a Feather at 6:30 PM on August 11, 2011

That is hinky. Talk to her broker in charge.
posted by St. Alia of the Bunnies at 6:32 PM on August 11, 2011 [4 favorites]

I'm going to go against the grain here. Do your parents have confidence, based on comparable sales, that the asking price was legit? If so, this is potentially great: a quick sale. Their counteroffer can include that the buyer, Sonny, pick up a substantial percentage (half?) of the Realtor fee. If she's a broker, it's all she wouldn't earned anyway. Win win. Another counter offer idea: extend to after open house in case they get a better offer. Speedy sale is very good: avoided mortgage payment and hassle. If they're MIT confident about aing price, that's another matter
posted by carmicha at 6:46 PM on August 11, 2011 [2 favorites]

Is she willing to waive half the commission? If so, it doesn't necessarily seem insane; if not, it seems incredibly inappropriate, and I would be speaking to everyone else at that office to get a different agent and absolutely refusing any offer from her son that is below asking price.

If she knew her son was looking -- which she must have -- she should have disclosed this to your parents before they signed.
posted by jeather at 6:58 PM on August 11, 2011

There's a Real Estate organization in your state, and your state's attorney general has a website. Call them and ask. The Nat'l. Org. of Realtors has a code of ethics.

I don't see how the realtor can get your parents the best price while representing her son. To bring you this offer before an open house is pretty sketchy, and I would no longer trust the realtor.
posted by theora55 at 7:07 PM on August 11, 2011

The realtor is adhering to the letter of the California Association of Realtors code of ethics. I still wouldn't want her representing my interests in this matter.
posted by SMPA at 7:39 PM on August 11, 2011

Not cool to represent both ends of the deal, particularly if one end is related to her. You should assume you are getting the short end of the stick here.
posted by Gilbert at 8:24 PM on August 11, 2011 [1 favorite]

This is not about conflict of interest, it is about price. Either accept it or negotiate. Or reject and take chances in finding another buyer.
posted by JohnnyGunn at 9:14 PM on August 11, 2011

Just my opinion, but I'd fire her and find someone who had my best interests at heart rather than the buyer who just incidentally happens to be her son. 10K below asking price may not seem like much but someone who wasn't trying to get a sweetheart deal for the buyer, who she's also representing, would work harder to get your parents a better price. Regardless of whether she waives her commission or not, this seems like it's stretching the boundaries of professional ethics.
posted by motown missile at 9:37 PM on August 11, 2011

My parents are selling their house in California. Their realtor presented an offer, from her son and daughter-in-law. I understand it is legal in California for a realtor to represent buyer and seller both, but this seems like a particularly acute conflict of interest.

I misread this at first and thought that the potential buyer was the child of the seller. Ohh, it's the realtor's kid, and she'll give up direct representation, but...oh, no, this won't work. If you like your realtor, you can keep her, but I wouldn't entertain an offer from her son, period.

The realtor can try in all good faith to be utterly objective, and get her son reassigned to a colleague to act as the buyer's agent, etc. But she can't control the objectivity of her colleague.
posted by desuetude at 10:10 PM on August 11, 2011

Response by poster: Thanks, everyone. I appreciate the advice. It will be complicated, but I'll talk it through with my parents tomorrow and see where I can get them to be.
posted by stewieandthedude at 10:30 PM on August 11, 2011

Would you hire a lawyer to sue the lawyer's son or negotiate a contract with him? What if the real estate agent said she wanted to buy the house for herself? Obviously not, and I think the same rules apply here.

This raises a lot of red flags for me, especially since the property was apparently just listed and hasn't even had an open house. $10K below asking is a somewhat meaningless figure, because the asking price was presumably set by this agent, who may have been planning to sell it to her son from the beginning. A reasonable option if your parents really want to proceed would be for the real estate agent to discount her commission here and to use that money to engage a real estate lawyer for a couple hours to solely represent your parents' interests in this deal.
posted by zachlipton at 12:20 AM on August 12, 2011

To rephrase a few of the above points: this is about price AND it's about conflicting interests, (both professional and personal). The problem essentially is that the conflicts create a strong incentive for the broker to limit her marketing efforts, which otherwise would have been used to identify the most interested bidder. What are the odds that that person would turn out to be the broker's son?

Also, it's important to remember that once the broker finds the most willing buyer, she is obliged to try to convince that buyer to transmit as many doughnuts as possible. This might turn out to be more doughnuts than your parents or any other market participant would have considered reasonable. This obligation is out of line with the broker's professional (and maternal) duty to preserve her son's pastries. In reality, it isn't unlikely the broker has provided information about your parents' bargaining positions to her son (intentionally or otherwise), and that he has priced his offer accordingly.

In any case, the information disparity here does not benefit your parents. And your parents' interests have probably already been compromised in other ways. They really ought to find another broker, if not also a lawyer.
posted by L'oeuvre Child at 2:25 AM on August 12, 2011

The fact that they're making this offer before the first showing sets off my buzzer. When I first started selling things on eBay, more than 10 years ago, I often got private messages from people offering $X for an item if I would cancel the auction and sell it directly. I never accepted such an offer, which was good because EVERY SINGLE TIME this happened, the final auction price was substantially higher than the (private, against the rules) offers I'd received.
posted by jon1270 at 2:38 AM on August 12, 2011

I am reading the code of ethics, and I just don't think agreeing to sell your house, then a few days later saying she has an offer from her son counts as full disclosure or informed consent. Did she bring up that being a disclosed dual agent is allowed before the contract was signed? (These are in Article 1.)

Looking at Article 4, I'd say this is not actually adhering to the code:
Article 4
REALTORS® shall not acquire an interest in or buy or present offers from themselves, any member of their immediate families, their firms or any member thereof, or any entities in which they have any ownership interest, any real property without making their true position known to the owner or the owner’s agent or broker. In selling property they own, or in which they have any interest, REALTORS® shall reveal their ownership or interest in writing to the purchaser or the purchaser’s representative. (Amended 1/00)

Standard of Practice 4-1

For the protection of all parties, the disclosures required by Article 4 shall be in writing and provided by REALTORS® prior to the signing of any contract. (Adopted 2/86)
Yes, she disclosed the true position, but only after the signing of the contract.

Article 5 says much the same thing.
Article 5
REALTORS® shall not undertake to provide professional services concerning a property or its value where they have a present or contemplated interest unless such interest is specifically disclosed to all affected parties.
I have changed my mind. Your parents should tell her that she is in violation of the code of ethics, that they want to cancel the contract, and they should report her to anyone higher up than her in her office, and to the association of realtors.
posted by jeather at 5:06 AM on August 12, 2011 [2 favorites]

Ethics aside, personally, a quick offer only $10K below asking price would be a gift horse whose dental quality I would not spend a great deal of time analyzing.
posted by ook at 6:01 AM on August 12, 2011 [1 favorite]

The realtor presumably had input into the asking price, so an offer close to it from her family might just mean she suggested an unreasonably low asking price.

If you find another realtor, there is nothing wrong with looking at this offer. But there is so much fishy that the horse seems more Trojan than anything else.
posted by jeather at 6:51 AM on August 12, 2011

I think jeather makes a great point. If your parents are confident that the asking price is fair, however, and the realtor will accept half her normal fee, this might look bad but be OK. I had a realtor agree to sell our place for 5%, 4% if she found the buyer. I didn't worry too much about ethics, largely because the place had been on the market for so long, I knew that our main motivation was to sell. Had she brought the eventual buyer (which she did not), I wouldn't have worried about a few thousand here and there, because we wanted to sell more than anything. The fact that the offer came in so close to asking might supersede the ethical issue.
posted by troywestfield at 7:20 AM on August 12, 2011

zachlipton: $10K below asking is a somewhat meaningless figure, because the asking price was presumably set by this agent, who may have been planning to sell it to her son from the beginning.

This. This is the most important point. Unless your parents already know that the asking price is fair independent of any advice the realtor might have given while setting up the asking price, the whole thing needs to be wiped clean and started over. Even if your parents think that the asking price is fair, they should definitely ask for the realtor to reduce her normal fee.
posted by thewildgreen at 12:06 PM on August 12, 2011 [1 favorite]

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