Focus Professionals, Inc Real Estate Blog

There is a brokerage in RI that has repeatedly requested a minimum 5% deposit when submitting an offer to them. While it is understandable that the brokerage desires to cover their commission as much as possible, and perhaps, stretching way over backwards to come to this, they might want to show their sellers that the buyer is “serious” — yet, I must argue that by definition, this is a discriminatory practice, which excludes a great many buyers from submitting offers on this brokerage’s listings.

PLEASE BE AWARE THAT THIS PRACTICE IS UNETHICAL, AND COULD BE CONSTRUED AS ILLEGAL IN CERTAIN CIRCUMSTANCES

Here are some of the reasons I say it is a discriminatory practice, and should be viewed not only as unethical, but as a breach of the Fair Housing Laws.

1) For a buyer who is seeking better than 95% financing, this practice would require that they submit a 5% deposit for the offer to be presented. This limits their financing options, and makes requirements of the buyer that are unreasonable. By not presenting this sort of offer to the seller, the buyer seeking more than 95% financing is by default discriminated against. Also, the seller is not being shown all offers, so the fiduciary responsibility of the agent is broken. See our remarks on Real Estate Agent Fiduciary Responsibilities

2) Many first time buyers do not have enough cash on hand to pay this deposit, and also cover closing costs and other expenses that they must cover, including things like moving expenses, insurance, inspections, appraisals, etc. They are qualified to buy, and can get a mortgage for the amount needed, but cannot cover all these out of pocket expenses and still pay the 5%. Thus, this sort of buyer is also discriminated against by this practice of requiring 5% to be paid to submit an offer. And again, the seller is then not being presented with all valid offers. Thus, discrimination exists against many first time buyers with this practice, and again, fiduciary responsibility is not being met to the seller.

3) By limiting the number of valid offers presented to the seller by prescreening them without consideration for the ability to purchase, but only with consideration given to the amount of the deposit, many offers that are from bank-qualified buyers, which may even be of higher amounts than other offers, the listing agency is not living up to their responsibility to present all valid offers to the seller. If it is stated that the offer is not considered valid due to the lower % deposit, that is nonsense, meaningless, and blatant discrimination against otherwise qualified buyers. This practice only helps the listing brokerage, as it assures their commissions are paid rapidly to the agents, since they have most of the commission, if not all of it, in the bank before the closing. Self serving practices are not ethical when they discriminate against certain groups of buyers.

These are just three reasons why this practice is discriminatory, and also why it is unethical in supporting the role of fiduciary to the seller. I can come up with many more reasons.

I am aware that many condo associations have restrictions in terms of deposit amounts, or in terms of mortgages, but these are associations which often also have votes on who can purchase a member property. This is very different than unassociated single family homes.

My point is this: it is an unethical and discriminatory practice to require any percentage deposit as a minimum in order to present an offer to a seller.

If you have been “required” to submit a 5% deposit in order to purchase a property, and want respresentation to assist you in purchasing a property, call us today 401-293-0631 or contact us here

I just posted a comment to Broker Bryant’s post about agency… he is again clear and to the point… but I thought I would elaborate my comment here…

I posted:

Bryant, again a clear and concise post… and unfortunately, I must agree with you…

I say unfortunately because one of the states we practice in, Rhode Island, has passed new legislation, which claims to abolish Dual Agency, but in typical RI fashion, really has simply changed the name, eliminating the word “Agency” but otherwise leaving the institution intact, and introducing a new classification: Transaction Facilitator… so now, according to the law in RI, there are:

1) Transaction Facilitators: “A licensee who provides assistance to a buyer, seller, landlord or tenant, or both, in a real estate transaction as a neutral facilitator who does not represent either party.

2) Designated Client Representatives: “A licensee who represents a buyer, seller, landlord or tenant in a real estate transaction and advocates on the client’s behalf.”

3) Dual Facilitators: “a licensee who assists a buyer AND seller, or landlord AND tenant in the same transaction and must be neutral as to any conflicting interests between the parties to the transaction”

and

4) Transaction Coordinators: “a principal broker or his or her designee who supervises a real estate transaction in a neutral capacity.”

–> Dual Facilitator????

Wait, did I miss something?

Well, as with all things Rhode Island, this is what the “community” wanted, so they got it…

We shall see how this goes… If I could, I would argue to get rid of this NEW category…

For you buyers and sellers out there, be clear on one thing, it is by definition impossible to represent the conflicting interests of two distinct parties to a transaction at the same time… If you are a buyer, and go to an open house, and use the listing agent to represent your interest, you can rest assured that your interest is not getting the best representation… Get your own agent to represent your interests and work on your behalf… you will benefit greatly…

So you have found the house that fits your needs best, or so you think, and you are ready to buy. Do you have an agent representing your interests? Or are you relying on the good will of the listing agent to look after your needs? There is a big difference, and here is a story that makes for a frightening read… we hope you never experience anything like this could have been, and the best way to ensure that it does not, is to get yourself a quality buyer agent to represent your interests in your entire process of finding, offering to buy, and purchasing your next home!

These days, with foreclosures as they are, and bank owned properties on the market in near record numbers, always be sure to get an inspection done on your new purchase home. Whether it is new construction, or a pre-owned home, being sold by a private seller, or a bank, do not miss this opportunity to verify the condition of the home.

Banks will most often not make any allowance for faults found in the inspection report, but at least you know what you are getting into, and can back out if there are substantially material defects. This sounds obvious to most, but you would be surprised at how many people waive the inspection clause when a property is being sold AS IS. 

But here is the sinister aspect of all of this: we have seen several homes in the last couple of months that, when the inspection was performed, the house was in relatively good condition, and while it may have had some defects, the buyers were still going ahead with the purchase, only to find upon a walk through of the property on the day of the closing, that someone had entered the property, and literally removed all traces of copper, such as wiring and pipes, removed the boiler units, and removed, of course, all of the appliances!

The seller’s agent, in the most recent instance of this, did not encourage the buyer (who was unrepresented by a buyer’s agent) to do the walk through. I am not saying that the seller’s agent had foul play in mind, and you can make your own judgments there, but it is certainly a standard practice to do a walk through on the morning of the closing, and for what ever reason, this agent did not advise it. Of course, they were the listing agent, and did not represent the buyer, what ever the buyer thought, so it is understandable that they did not have the buyer’s interests at heart. But the buyer read our website section on the process of buying homes, and insisted on doing the walk through. They later sent us a letter stating that our website had saved them great aggravation and trouble, and that in all future instances of their buying property, they would use our buyer services.

Not trying to toot our own horn here, but just imagine what would have happened if they had NOT done the walk through of the property that morning! We did not make any money on this transaction, but we are very pleased to have provided information to the buyer that saved them from serious trauma.

Be sure you have representation when you buy a home, and make sure you do your home work and understand what processes are best to ensure a quality purchase and a quality process. 

We have changed our name! We are now called Focus Professionals, Inc.!

We are doing this so that we can expand into several markets where we had not previously done business, and where, unfortunately, there was another firm with a very similar name to ours which had been there previously.

Of course, our excellent personalized and professional service will not suffer from this change, but we like to think will actually improve.

If you are looking for a buyer agent in your area, think of us! If you are looking to sell your property, think of us! If you are an investor and are looking to either sell or buy property, think Focus Professionals for all of your real estate needs.

What would you do if the house you wanted to buy was a bnak owned foreclosed property, and you had your offer accepted, and then received, after a 3 week delay, a counter P&S with clauses that are impossible to comply with?

It so happens that we have a buyer who has placed an offer on a bank owned property… The offer was accepted, and we drafted a standard Purchase and Sale Agreement, the same as used in all Rhode Island purchases. So far so good, and so far everything is going as usual, yes?

So after three weeks, the bank comes back to the sellers agent with an amendment to the P&S, which deletes more than two thirds of the language there and which then goes on to list a slew of other requirements… I have detailed some of the requirements below:

1) The seller reduced the time frame for the buyer to have an inspection performed, and to notify to the seller of any issues to 7 days from receipt of the modified P&S… that is, the buyer has to have the inspection done, receive the report from the inspector, and mull it over, and respond to the seller in a total of 7 days. If the buyer fails to respond within the time frame, the seller assumes that the buyer has waived the right to inspections, and to notify the seller of any issues, and is then obligated to buy.

2) The title work on the property must be performed by the bank’s own title company, and the buyer will receive a preliminary title report from the seller, which may be inaccurate, and which must be responded to within three days of receipt. Buyer must pay one half of escrow fee, which will be payable to the bank’s escrow company, within 5 days of receipt of the instructions from the Escrow Company. The bank goes on to say that if there are any faults in the title, the bank is not obligated to remedy or cure those faults, even if the buyer notifies them within the specified time frame of 5 days.

3) Title shall be conveyed to buyer from seller by quit claim deed in a form reasonably acceptable to SELLER…

4) Seller reserves all oil, gas, and mineral rights to property.

5) If seller shall not perform any obligation under the contract, the seller is not to be considered in default unless buyer shall have provided seller with written notice describing such failure to perform, and buyer hereby waives all rights to specific performance and waives the right to file a lis pendens on the property for any failure to perform on the part of the seller. Of course, the seller retains all such rights, and the buy is to be considered in default if any deadlines are missed.

6) Seller has unilateral right to terminate the agreement for any cause what so ever.

Besides the date and deadline issues, which are impossible to comply with (the seller wanted the signed P&S returned by 10AM the following morning, when it was only sent to the buyers agent at 5PM the day before, for example), there are just so many issues with this contract.

What do you think? We are thinking we will counter back to the bank, with the original P&S…

Something comes to mind… something about the old adage, having your cake and eating it too… what it gets down to is this: the seller wants to be able to continue to market the property even during the purchase process, and wants to be able to accept any offer that comes in after they accepted yours, with no recourse to you… in other words, if someone else comes later and makes a better offer, they can cancel your contract at will… sound good to you?