How To Deal With Unreaonable Clients - Get Real !

After having laid down the scenarios in my previous article when you need to cut someone loose; there are situations where you can turn things around and have a good positive and profitable outcome for you and your client.  As in the lyrics to Kenny Rogers song, The Gambler, goes; real estate reminds me of a big gamble or a vicious poker game when taking a buyer or seller case on a contingency basis where you are literally betting your own funds and personal resources that you'll get a commission check out of it in the end. If you're good at "the game" you can walk away from the [settlement] table with something to count; if you're not, you can literally end up loosing the shirt off your own back.

"You need to know when to hold 'em....and when to fold 'em. Know when to walk away and when to run. You never count your money when you're sittin' at the table. There'll be time enough for countin' when the dealin's done. Now ev'ry gambler knows the secret to survivin' is knowin' what to throw away and what to keep. 'Cause ev'ry hand's a winner and ev'ry hand's a looser." 

Here are some strategies for turning those clients with unreasonable expectations or your "bad hands" your dealt from the deck of clients into winning hands if you know how to play them correctly:

Keep Their Expectations in Line

Is there a mismatch between your clients’ expectations and the reality of your local market? It’s your job to bring them back to reality and for them to get real.

Recognize How Expectations Are Set

First you must acknowledge that your “unreasonable” buyers and sellers are that way for a reason. They got their expectations from somewhere. Buyers can be inundated with negative coverage of the national housing market from the media or internet outlets, and are often overwhelmed with their choices. Sellers, meanwhile, might be stuck on the selling price of their neighbor’s house a couple of years ago, and can’t come to terms with today’s market realities.

Both buyers and sellers base their expectations on what they believe is good, reliable information; they don’t necessarily intend to be unreasonable. Rather, they believe they are being entirely reasonable based on the information they have.  Sometimes that information comes from a family member, a "friend" or an "adviser" who is pumping them with invalid or incorrect information; but who they inexplicably trust more than you, the licensed real estate professional with a proven track record of success. 

Therefore, in the initial meeting with the clients you need to address their expectations of the market and your expectations of them working WITH you, not against you. Don’t wait until they start to get upset or frustrated with you, or you with them; it’s too late by then if that happens. You have to deal with it right up front.

Get Buyers to Get Real

It’s your job to explain to buyers that while there are a lot of houses on the market right now, they don’t need to see them ALL to make a good choice. They need to know that you have been spending time filtering, culling, and carefully selecting properties for them to see based on a clear understanding of their search criteria and parameters and budget. 

If you understand what they’re looking for, you should be able to find their house within generally a few outings, or within under 30 or so showings.  Some situations are different, of course, but generally if you're buyer expects you to show them 50 or more, possible hundreds of properties something is seriously wrong which needs to be addressed up front.  If they want to pay you to be a "tour guide" indefinitely or per outing that's one thing; but if it's a contingency basis where you're getting paid the commission from the Seller at closing there should be some reasonable expectations on how long the process will take and the extents to which you will go to make sure they are happy.  Again, if they're paying you or financing that proverbial poker game that's one thing; but if they're not then that's a completely different hand you're being dealt and they need to understand how you work and what your limitations are. 

No one wants to waste time. You should be able to convince buyers that they’re going to find a great house with very little hassle and time wasted, and they should be happy to follow your plans. If you can’t convince them of that, you must accept the fact that you’ll be showing lots and lots of homes before your clients make a purchasing decision. But again all this needs to addressed or discussed up front in your initial buyer meeting consultation to avoid problems and conflicts down the road together. 

Get Sellers to Get Real

Although some markets are exceptions, home owners probably aren’t going to be able to sell their property for as much as they could have sold it five years ago. They might still be tempted to “test” the market with a price that’s not going to garner very much buying activity. That’s why it’s so important that you’re prepared to address their assumptions.  Also, you need to know what their absolute bottom line is up front and deal with those expectations.  As I tell seller clients, the more money I can sell your home for, the more commission I am going to make, so I am motivated by that and understand and respect their financial conditions or what they might expect or NEED to get out of the property and I am not trying to undersell or undermine them in any way. However, we BOTH must get real about what the market is doing and what our hopes and expectations are.  This will all be based on good factual, objective market data and research you can show them.  You should also discuss or address a plan whereby if the property is not sold within XX days or months, what the plan will be for adjusting or lowering the price.

Gather the evidence from your local MLS to show that a home priced too high will languish on the market and the adverse effect of it becoming a stale or stigmatized listing that no one wants.  Remember that even if you take this listing off of MLS, then put it right back back in with a "new pricing or marketing plan" the audit trail or total number of DOMP (days on market property) can be seen and not just the new DOMM (days on market MLS under the new listing number). Also, calculate the absorption rate and explain that pricing real estate is based on supply and demand, just like in other industries.  You also can show a seller examples of local properties that have stood on the market for six or more months. 

There's nothing worse than working with a seller who is not amenable to flexibility in their pricing and marketing plan; or one who, when is convinced to lower the price, does so too late and is constantly "chasing" the market to stay or be competitive with other homes on the market.  I would tell such a client something to this effect, “I’d love to get you the $500,000 that you need, but now that you’ve seen the numbers, I think you can see that this is not likely to happen in the market as it stands. After all, if you were a buyer looking for a house now, would you pay $500,000 for this house when all the others in similar or better condition are going for $450,000?”  The answer to this question will tell you whether they’re living in denial or not. If they stick to their guns, they are likely still living in denial. Offer them the option to sleep on it and carefully and objectively review the numbers on their own, then meet again tomorrow when they’ve had a chance to really evaluate the comps data with them.  If they don’t get real, don’t take the listing. The fastest way to have a roster full of unreasonable clients is to take on listings from sellers who are in denial.  

Also, whether they have much or any equity in the property makes a HUGE difference too.  Ask to see their most recent mortgage statement balance and don't just take their word for it how much they owe on the property.  I've had cases were a Seller has flat out lied and misrepresented how much was owed on the property or the existence of any tax liens, divorce situation or existence of a property settlement agreement, owner(s) might be going into bankruptcy, or any other encumbrance on the property which can and will affect the sale.  You need to make sure that you do not ratify a contract and attempt to go to settlement on a property unless you know the whole truth and nothing but the truth regarding that property.  You don't need to get that call from the settlement agent saying your seller client will need to bring a check for $XX,XXX to the settlement table or encounter any other "surprises." 

Give the sellers a reasonable expectation of when the house should sell, and tell them that they shouldn’t even think about worrying until after that date. Write that date on a wall calendar in their home or have them put it in their Outlook, BlackBerry, iPad, iPhone, Droid or whatever they use. Then give them something else to focus on. Walk in with a list of things that they can be doing to improve the value of their home or to help in the marketing. If they’re focusing on a “To Do” list, then they don’t have as much time to sit and wonder why the home hasn’t sold yet.

Prepare Them to Be Frustrated or Unhappy With You

Yes, that’s right. In your meetings with sellers (or buyers), you have to prepare them for the fact that at some point, they may become frustrated or unhappy with you. When things aren’t going well or the way they expect it, people naturally look for a scapegoat; and that scapegoat is often you.  Don't kill the messenger because you do not like the news.

If you prepare them for the fact that this is can happen — even though you’ve been doing your job exceptionally well — then they can be alert to avoid it. And, if it does happen, you can acknowledge that you prepared them for it, which can help to diffuse the situation. and refocus the effort.

Stuck In Unreasonable Mode?

If you have clients who won’t budge from unreasonable thinking, then you may have either failed in your objective to educate them on the facts and reality (pun intended) of the situation and to enable them to get real (pun also intended) LOL.  Or....you could have one of those clients or hands in poker that you just need to fold on and walk away from.  Remember that Kenny Rogers song....

Exclusive Buyer Agency Agreement ~ Bi-Lateral Accountablity ?

The real estate professional who is representing a buyer (or seller) has great responsibility to his client; a fiduciary duty perhaps, certainly an agency duty; a moral, ethical, legal one; in addition to other professional Codes of Conduct.  Why then are the duties and loyalties in working with a "client" uni-lateral rather than bi-lateral? 

Why should certain duties and obligations only apply to you, and not to them as well ?   If you failed to act in a given circumstance, under-performed, or committed an "Error & Omission" that could get you in deep trouble or jeopardize your license, there would be consequences and ramifications, wouldn't there be ?  Yes, of course there would.  So why then are our "clients" or customers held to no bi-lateral accountability or responsibilities ?  Why do they do the things they do and play the games they play with us. Why you ask ?  Because we allow them to and give them every opportunity to, that's why?

Imagine if when you went to go pump gas for your car, you could just drive off without paying and there would be no consequences or ramifications for that.  Imagine if you could walk into any bar or restaurant and order up like there was no tomorrow; steak, lobster, Dom Pérignon or Moët et Chandon champagne, caviar; all the finest -- then just walk out after you've consumed the meal.

Because of "drive-offs" or "walk-outs" gas stations require you to pay-before-you-pump or if a bartender did not recognize you as a regular patron they'd ask to "swipe your card" and the normal consumer wouldn't think twice about that, raise a fuss or walk away.  I wish I could be the real estate bar tender with a buyer and say, "let me swipe your card please" -- but why do we as an industry allow people to walk-out or "drive-off" on us all the time with no consequences or ramifications? Because we allow them to; that's why !

(update 10/2012: actually thanks to emerging technologies this IS possible now for sole proprietors or independent contractors to take credit card payments directly without the need for establishing a commercial account with MasterCard~Visa~Amex)

Should the buyer be going behind your back and contacting the listing agent or owner directly to be shown a property or writing a contract on it, or engaging in any other activity which undermines your ability as an agent to represent them ?  Should they in the first place disclose to you and furnish to you necessary information to determine or reasonably establish their ability to purchase the type of property contemplated ?  Should the buyer exercise due diligence, and also be working exclusively with the agent; or be running multiple agents around concurrently without disclosing that to the others, and have the attitude that who ever shows me the right house first will get to write the contract ?  (this goes to the heart of that "hire a taxi driver and locksmith for the day" thing I've talked about in a previous rant, uhm i mean blog  8-).

Furthermore, what happens if their life situation materially and significantly changes during the course of your [implied] agency agreement with them?  They loose there job, illness or death in the family, decide not sell the house because they just met that person of their dreams who's moving in, cannot buy the house because they just found out the wife or domestic partner is "expecting" and need to stay put where they are -- all the real life things that can and do happen which are no fault or beyond the control of the agent.

After substantively working with a "client" such as this, should they be allowed to just walk out on us without having to pay SOMETHING for our professional services, time, advice and counsel, and out-of-pocket expenses incurred on their behalf and for their benefit ??  They walk away with something; valuable knowledge and information about the market and about real estate in general; what are we left with ?

What if you were at a restaurant and ordered that big meal I described above and said, "oh... i just got an unexpected phone call and cannot finish the meal or those drinks I just ordered (which were already "served up" to you or which you partially or totally consumed) ... so see ya later... buh-bye, I am out of here [without paying]" ?? 

I am not saying that EVERY buyer or client is like this and would like to think that by and large most would be ethical or do the right thing (like paying the tab or the gas before driving off); but I cannot think of any other business or industry that lets the consumer just walk out without paying like real estate does. The only one that I can think of would be a lawyer taking a case on a contingency basis on a personal injury type of case; but the person is RECEIVING money in this case and not spending it like in real estate so the incentive to stick with the agent or representative who will be getting you money rather than helping you spend it is a completely different dynamic.

I hope to see one day Realtors band together with greater solidarity over this issue and help STOP making it easy or facilitating the consumer of our professional services with just walking out on us and leaving us stuck with the bill.  There's probably not one Realtor out there who hasn't got burned, so you KNOW what I am talking about here....

Until that day happens, I've got my "what-ifs" covered in my own personal Buyer Agency Agreement contract.  As I said in a previous blog post, your broker won't really care because he/she was not the one who got burned, and the NAR forms offer no protection for the agent.

So, instead of Realtors descending upon Capitol Hill this past week to lobby Congress about some other issue, they should have all been descending in droves upon their local or National board to get things changed and have the Association, who we pay good hard earned money to, be even more supportive of us.  They already are extremely supportive of us by the way, and the National Association of Realtors does an outstanding job overall; but this is just one area where I think they could take a much harder and stronger stand on for us...

Buyer Agency Agreement - Another Reason I Require A WRITTEN One

Although it was totally ILLEGAL and unethical of a loan officer or mortgage broker to do, here's what they told the "client" I had been showing properties to for quite some time as a "buyer's agent" during a tough Seller's market period:

"We can get you a better interest rate on your loan, but you'll have to dump your current Realtor and go with mine"

Since the buyer hadn't signed anything and didn't put down a retainer fee or deposit with me, what do you think they ended up doing ?  The right thing ?  Hell no, he heard "cha-ching" only in his head and probably didn't hesitate for a fraction of a second and said, "sure, I'll go with your guy no problem...

The loan officer stole the "client" from me and engaged in a GROSS, nefarious and egregious violation of RESPA; but what recourse did I have after the damage had already been inflicted ?  None !  I discovered all this later and the "client" openly admitted that this was what had occurred when I confronted them about it; and in an almost cavalier manner, said "what did you expect me to do?"  The mortgage broker who stole the "client" was obviously getting a "kick-back" from his Realtor so it was in his best financial interests not to see the client's deal consummated through me.  And to add further insult to injury I was the one who had referred the buyer to this particular mortgage broker.  Good one guys !!  I don't blame you, but only myself for allowing this to happen in the first place.  Where you find money; you'll find dishonesty, immorality and corruption.... 

So, this is yet one more real life anecdote and lesson why the "client" cannot or should not always be trusted in an informal or "implied" agency situation even if you are acquaintances or so called "friends" with them.  Business is business as they say...

Had I had that WRITTEN and EXPRESS Exclusive Buyer Agency Agreement, with my own added Addendum and stipulation of extended "Procuring Cause" if the buyer walks or unilaterally revokes the buyer agency agreement; I might have had some solid grounds to seek legal recourse against my former "client" and the loan officer or mortgage broker.

Buyer Agency Agreement - Fool Me Once.... Fool Me Twice

I actually had a case once where after showing and describing to who I thought was my "client" numerous properties both in person and via e-mail listings (yes, Peter, this one is for you) he ended up putting a contract on a property that I had shown and described to him.  I had just trusted him and handled it informally and had not asked him to sign any buyer agent agreement.

Could I claim "Procuring Cause" and try to lay claim to any part or portion of a commission or even a "finders fee" ?  No !  Without any type of buyer agency agreement in place, I had absolutely no recourse whatsoever.

I got burned on this one and this is why I will not work with a "Buyer" unless I have an Exclusive Buyer Agency Agreement in place that also calls for or has a provision or stipulation in it that even if the Buyer Agency Agreement expires or is revoked or rescinded unilaterally by the Buyer; that if they subsequently put a contract on a property that was "shown or described to them" by me within a certain period after either expiration or unilateral rescission of the Buyer Agency Agreement, my broker and I are legally entitled to claim and assert "Procuring Cause" and lay claim to the buyer agent/broker commission, either through legal action against the Buyer and/or through Association of Realtor arbitration with the buyer broker/agent who received the commission at settlement.

It would be the fault, and legal culpability, of not only the buyer for failing to disclose to broker B the existence of my "extended" Procuring Clause provision but also broker B failing to ask buyer if they were still under any type of enforceable contract with another buyer agent, licensee or broker.  This is also why, when I am working with a Buyer who does sign my Exclusive Buyer Agency Agreement, I also have a stipulation regarding the aforementioned so that neither myself nor my broker find ourselves in a dispute over the commission later.    

I simply will not be the chump that does the dirty work and shows a "client" numerous properties; then when they are ready to put a contract on a property they run to to their friend or buddy who is a licensee to write the contract and collect the commission. (Kristy, this one is for you).

I had another incident exactly like this where a woman (Angela, this one is for you) was using me to show her properties and would call me frequently for other landlord/tenant advice; then one day I happen to run a search of local public records on her (as I suspected I had been or was being "hoodwinked") and much to my shock and surprise I see that she had just bought a property.

And the crowning glory of them all is this one: after showing what I thought was a true "client" numerous properties on weekends over the course of a couple months, certain red flags starting going up and I flat out confronted them and asked whether they were REALLY looking to buy a home or not.  They confessed, and said they were new in town and were told if they just called a Realtor they could get a free sight seeing tour and be driven around and shown numerous areas of the metro area to get a feel for things and where things were if they just pretended to be house hunting !!


Fool me once.... shame on you; fool me twice... SHAME ON ME.  I WONT BE FOOLED AGAIN !! 

Unfortunately the National Association of Realtors (NAR) Buyer Agency Agreement forms absolutely SUCK !!! and provide little to absolutely NO agent protection provisions or clauses; they are overly buyer friendly and allow the buyer to walk under any circumstances even after substantively engaging the services of the agent/broker. They could not give a damn whether you get burned or not.  Your broker who sits in his office won't give a damn either, because there's no loss to him and he wasn't the one out their beating the streets with a deadbeat or sociopath "client".  

So... being a Paralegal and thinking about all the "what ifs" and based on past experiences such as those described here in this post, I developed and drafted my own Agent Retainer/Deposit Agreement & Exclusive Buyer Agency Agreement Addendum that is incorporated by reference and attached thereto or made apart of the Association of Realtors form.  It is perfectly legal, binding and enforceable.

First Born ?

It has been said that you ideally want to be the first born.... and the third listing or buyer agent the person has gone through.  By the time they've been through a couple of other Realtors they are just beginning to listen and respect the professional advice and counsel you are trying to give them. I like that Frank Sinatra song, "I Did It MY Way" -  that's all fine and good... but not at my expense baby !

Exclusive Buyer Agency Agreement

"Brian, we'd like to go out this weekend and be shown some properties. What time can you pick us up?"

(of course the caller would not want to hear any of this, all they want to do is just be shown properties and have someone drive them around -- for free with no strings or commitments involved or attached.) -- Tim & Debbie this one's for you.  I understand you went through several Realtors before finally buying a place.  I feel shot at and missed and am glad we didn't end up working together, or I'd be one of those first couple or few who got burned. or whose services you "stole" before you finally wisened up and got with the program.

This is how I weed or cull the serious from the curious and the prospects from the suspects.  Any real or serious able, ready and willing home buyer would not or should not have any problems with these reasonable and fair requests below.  A lawyer would not just go jump in his car upon request and start filing motions, pleadings, court orders, etc without first being retained and knowing everything about the case, right ? RIGHT ! My script would go something like this:


I am just as anxious as you are to get started and I appreciate the opportunity to be your Realtor and look forward to working with you.  I am a licensed professional, however, and before we just jump in the car and go out looking at properties we'll need to sit down together first at my office and discuss a few things and put together a plan of action or strategy together based on a clear understanding of what your needs and search criteria or parameters are -- otherwise I'd just be your "taxi driver and locksmith for the day" which I can do for a fee of course.  Before going out with a prospective client I require four (4) things:


1)  A signed Buyer Agent Agreement form

So I know whether I am representing you in the capacity as an exclusive Buyer Agent, or merely assisting you as an uncommitted agent and who will actually be working as a sub-agent for the Seller.  This makes a big difference in fiduciary duties, disclosures, and the approach I'll be working with a person. In other words, am I your actual and designated exclusive buyer agent and representative for not only today but beyond until you buy a house and go to closing on it, or would I just be showing you properties for the day as a Seller's sub-agent?  If it is the latter that you want, or you want to work with multiple buyer agents at a time, then I'd in essence just be the taxi driver and locksmith for you of the day, in which case I charge $XXX per day to take you out. If we write a contract on a property today, and it goes to settlement; then I will gladly refund that amount for today's services to you.

2)  Agent Retainer Fee Deposit

If after meeting and having an initial free consultation with me you decide that you would like to retain my professional services for as long as it takes to find the right house for you and to go to closing on it, then we will need to sign that Exclusive Buyer Agent agreement that I just spoke about previously, and I also require an Agent Retainer Fee Deposit, which you can pay by check.  I will not cash that check but will merely hold it  in your file as a deposit (all of this is clearly spelled out and stipulated in my agent retainer agreement form).  Generally speaking, the Seller will pay the buyer agent brokerage fee or commission for you and you would be getting my professional services free of charge or no direct out-of-pocket expense to you; however, until such time as you do go to settlement I will be the one who incurs actual out-of-pocket expenses advanced to you or on your behalf.  Therefore, the deposit is required to cover or recuperate actual out-of-pocket expenses i will be advancing you in the event that you do not buy a property for any reason.  While I wish I could take every case on a "pro bono" basis or receive some type of government grant for my professional services; this is how I make my living...      

3)  Buyer Has a Lender's Pre-Qualification or Pre-Approval Commitment Letter

I need to know what type of financing you have applied for (VA, FHA, Conventional) and what lender conditions or requirements are involved in the purchase of our new home which may impact what price range we are looking for homes in, the amount of down payment required, etc.  If you own a property now and are going to keep it as an investment property and rent it out, will your lender require you to have your property already leased out prior to you entering into a sales contract for your new home ?  If  you are "trading-up" for a newer or larger home (or even trading-down for a smaller one) will your lender allow you to do a "bridge-loan" type of arrangement where you can settle on your new home and carry the mortgage also on your existing home until you have your present home under contract ?  All these things can, do and will affect timing considerations on contract presentations as well as the contract's terms, contingencies and closing dates. I need to know or have some idea about all this before we just jump in the car looking at properties; unless of course you opt for that "hire a taxi driver and locksmith for the day" arrangement.

4)  Are there or will there be other people influencing 
or part of this transaction that I may not be aware of ?

If there are parents, grandparents, boyfriend/girlfriend, domestic partner, financial adviser, spiritual adviser, mentor or any other person or party that will be involved in the decision making process, or who is not on the loan application or who will not be on the deed, but who will be involved in the process of buying a home with you; I need to know and meet with everyone who you (and I) will be working with -- whether that be directly or indirectly.  If there are others involved who I may not be aware or need to give you "approval" for you putting a contract on a property, we will all need to go out looking at properties together to the maximum extent possible; as I cannot be showing the same property on multiple occasions to  multiple people in your party.  If this does apply to you, then we (uhm.. I mean YOU) can rent a bus and we can all go out at one time and show up at each property like The Partridge Family bus !  LOL  : )