Unethical, and Possibly Illegal, Property Practices to Watch Out For: Part 3, Agreeing to a Cash Offer Without the Clout

by Isaac Benmergui, Esq on December 30, 2013

That is to say…. If a client can’t back up that promise with the actual green, that presents the broker with a very messy situation. It’s happened before, though, and rightly so. Oftentimes, a property faces multiple offers, so everything gets very competitive. To get on top of that list for the seller, though, a buyer might offer an all-cash incentive agreement. As a broker, though, that’s a major no-no. Why?Money

Because the broker knows what the buyer can handle! This is especially the case if the buyer was pre-approved for a loan. Automatically, the broker will know just what the down payment could be, so if by chance that cash offer is more than the pre-approved loan stipulates, you may be facing a case where you had “faith” in the buyer, but the “truth” of it didn’t measure up. Sellers get cranky when they don’t get their offers as stated, and that’s bad for business for brokers.

Many times, common ethics for brokers is to inform their buyers that sellers will require what’s called a “proof funds” letter. Without it, a seller can’t accept the offer, no matter how lucrative, no matter how many tangible dollar signs there are. Of course, buyers can waive that loan contingency and still make that offer with sellers biting all the way. Misrepresentation, though, is a bad omen for even worse business….

The best thing to do is walk away if a client demands to try and stretch when he or she knows there’s no give. It’s tough, because that client is essentially revenue for the broker. But it’s better to be ethical in the industry than hated by sellers. In the end, business dies if no one is willing to do it with you.

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