Is it ethical to submit 6 letters of intent when the buyer can afford only one home?

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Real Estate Agent with Bradbury Team Prudential Patt, White Real Estate

Out of the blue, I received a letter of intent on a property I have had listed for almost a year!  The agent never showed the property.  It was a low ball for sure, and only mentioned that the investor will pay cash in less than 30 days.

When replying with our counter offer to the Buyer's Agent, Agent X from "that red real estate company" told me that his client asked him to put in 6 letters of intent on numerous properties.  Sight unseen.  If they got one seller to "Bite"  they would withdraw their other letters of intent.

The property is now $40,000 under the original listing price, and is now priced less than any property has sold for in that neighborhood.  The letter of intent was $35,000 under our current price. 

Is it ethical for an agent to place letters of intent, without including a pre-approval letter, knowing that that buyer can only afford one property?

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Anonymous

An agent's fiduciary duty is to his client.  As long as the client doesn't ask for something illegal, my understanding is that we're obliged to follow the direction of the client even if we don't necessarily agree with the client.  Of course, one always has the choice to drop the client and cease representation.

I know the listing agent is obliged to present any and all offers but I'm not sure whether a Letter of Intent qualifies.

Thanks for a thought provoking post!

Dec 01, 2007 01:51 PM #1
Rainmaker
12,635
Don Price
Advanced Real Estate Services & Staging - Pinehurst, NC

I'm unsure what a letter intent is or how binding it would be - we us an offer to purchase and contract.

I really don't see this as an ethical issue.

Need more information.

Good luck

Dec 01, 2007 01:55 PM #2
Rainmaker
137,385
Dallas Chambers
RE/MAX Agents Realty - Conyers, GA

One thing for sure, intentions are not the same as a contract.  I share feedback with my sellers which includes opinions, comments and often good intentions from the prospective buyer, but until I have a contract in hand to present, it doesn't count for anything more than good or bad intentions,comments, feedback, etc.

 

Dec 01, 2007 02:01 PM #3
Rainmaker
108,823
Linda Tremblay
Long & Foster Real Estate, Inc, PA License #AB065488 - Doylestown, PA
Associate Broker - Bucks County, PA Real Estate Services

I believe a letter of intent is to be used to see if there is any negotiating room without going into formal contract.  Since a letter of intent is basically no more than a verbal offer, I think it is ethical for the buyer to put in as many as they want.  I heard of someone recently putting in about 30 of them on properties on the market 150 days  or more.  He said he received 6 counters and ended up buying 2-3 properties. 

If your seller has an interest, counter verbally.  If not ignore it. Just let your seller know it is not a legimate offer until a contract is writtien and value in given (ie escrow monies). If your seller receives a written offer that is better, he can negoitiate it and forget about the letter of intent.  Of course as soon as he counters a legimate offer, the letter of intent is null and void

PS I like the dragon

Dec 01, 2007 04:46 PM #4
Rainmaker
357,665
Donna Yates Real Estate - serving
ReMax Town and Country - Blue Ridge, GA
North Georgia Metro & Mountains
I don't have the answer but I wanted to see the comments you get so I can learn about this sort of situation.  Thanks for putting it out to the rainers for their thoughts.  I always learn something on this site each and every day.
Dec 01, 2007 06:22 PM #5
Rainmaker
1,547,641
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Authentic Feng Shui Expert
Donald, I didn't know either but came on to read some of the responses.  This wasn't a question I had seen before.
Dec 01, 2007 08:19 PM #6
Rainmaker
1,004,137
Donald Bradbury
Bradbury Team Prudential Patt, White Real Estate - Quakertown, PA
e-PRO, Realtor - Bucks County PA - 610-952-3578
Dec 01, 2007 09:22 PM #7
Rainmaker
1,004,137
Donald Bradbury
Bradbury Team Prudential Patt, White Real Estate - Quakertown, PA
e-PRO, Realtor - Bucks County PA - 610-952-3578

Linda Tremblay, Bucks County Real Estate:

Linda:  As always, you have some good comments.  I thank you for your input here.

Don

Dec 01, 2007 09:23 PM #8
Rainmaker
1,004,137
Donald Bradbury
Bradbury Team Prudential Patt, White Real Estate - Quakertown, PA
e-PRO, Realtor - Bucks County PA - 610-952-3578

Dallas Chambers:

hmmm.  THanks for your feedback Dallas!

Dec 01, 2007 09:25 PM #9
Rainmaker
1,004,137
Donald Bradbury
Bradbury Team Prudential Patt, White Real Estate - Quakertown, PA
e-PRO, Realtor - Bucks County PA - 610-952-3578

Don Price:

Thanks Don.  I see by all the comments here that you are right.

Dec 01, 2007 09:26 PM #10
Rainmaker
623,323
Randy Prothero
Island Style Realty Inc. - Mililani, HI
Hawaii REALTOR, (808) 384-5645
I get the incomplete contract for $100,000 below anything reasonable that comes through the fax.  This guy sends them to 100s of properties here.  I guess if he gets one it is worth it.
Dec 02, 2007 04:00 AM #11
Rainer
10,175
Michele Samph
Coldwell Banker Heritage - Quakertown, PA

That is very creative, is it wrong? I'm not sure how I feel about it. I will ask you when I get into the office which listing that is, or do I know?

Dec 02, 2007 08:19 AM #12
Rainmaker
1,004,137
Donald Bradbury
Bradbury Team Prudential Patt, White Real Estate - Quakertown, PA
e-PRO, Realtor - Bucks County PA - 610-952-3578
Thanks Michele.
Dec 02, 2007 10:30 AM #13
Rainmaker
1,004,137
Donald Bradbury
Bradbury Team Prudential Patt, White Real Estate - Quakertown, PA
e-PRO, Realtor - Bucks County PA - 610-952-3578

Randy L. Prothero - Hawaii REALTOR®

Thanks Randy.  I guess you are right

Dec 02, 2007 10:31 AM #14
Rainer
67,172
Keith Perry
Coldwell Banker - Hiram, GA
REALTOR - West Metro Atlanta

Hi Donald, the investor is "fishing". It is a tactic that is taught at investor seminars to purchase a property as cheap as possible. I would check your RE laws on it.

Dec 02, 2007 11:26 AM #15
Rainmaker
1,004,137
Donald Bradbury
Bradbury Team Prudential Patt, White Real Estate - Quakertown, PA
e-PRO, Realtor - Bucks County PA - 610-952-3578
Keith and Robin:  Thanks  I believe you are correct on that one
Dec 02, 2007 06:49 PM #16
Rainer
23,918
Jim Willis
Rose and Womble Realty - Virginia Beach, VA
Knows Virginia Beach Area Real Estate
Ethical and Legal are not the same--obviously. Legal maybe; Ethical--- HIGHLY questionable. Who knows for sure or is it state by state or only if you get caught is it legal and/or ethical. Interesting Post. 
Dec 03, 2007 11:26 AM #17
Rainmaker
1,004,137
Donald Bradbury
Bradbury Team Prudential Patt, White Real Estate - Quakertown, PA
e-PRO, Realtor - Bucks County PA - 610-952-3578

 

Thanks Jim Willis:  The agent made it clear the buyer could only purchase 1 property, but they put out "BIDS" on 6 properties.

Dec 03, 2007 12:17 PM #18
Rainer
54,699
Chad Baird
Re/Max Spirit - Dayton, OH

I've submitted more than one intents for investors.  Like you said, they are lowballs, but if we get a bite, the offer is then presented via an actual offer.  Its not unethical. Its a fishing game.  The owner can play or not.  The owner should at least counter the offer contingient upon Proof of Funds and written contracts.  If the buyer cannot produce that, then you know its not a legit offer. 

But unethical?  No.  Its like saying its unethical to advertise " I will sell your home" and the listing does not sale.   You said you could sell it, and it did not sale.  Does that make you a liar or unethical?  I think not.  It's your foot in the door for a listing.  Well letter of intents are a foor in the door as well.  It reduces alot of paperwork. 

 

Dec 03, 2007 12:58 PM #19
Rainmaker
1,004,137
Donald Bradbury
Bradbury Team Prudential Patt, White Real Estate - Quakertown, PA
e-PRO, Realtor - Bucks County PA - 610-952-3578
Chad Baird:

I've submitted more than one intents for investors.  Like you said, they are lowballs, but if we get a bite, the offer is then presented via an actual offer.  Its not unethical. Its a fishing game.  The owner can play or not.  The owner should at least counter the offer contingient upon Proof of Funds and written contracts.  If the buyer cannot produce that, then you know its not a legit offer. 

But unethical?  No.  Its like saying its unethical to advertise " I will sell your home" and the listing does not sale.   You said you could sell it, and it did not sale.  Does that make you a liar or unethical?  I think not.  It's your foot in the door for a listing.  Well letter of intents are a foor in the door as well.  It reduces alot of paperwork. 

 

Thanks Chad.  This is a great comment.  Thanks so much

Dec 03, 2007 02:26 PM #20
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Rainmaker
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Donald Bradbury

e-PRO, Realtor - Bucks County PA - 610-952-3578
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