A reader sent in an Ask Curbed query about broker shenanigans, and it just seemed like the perfect question for our old friend/blogger/broker Property Grunt. Instead of putting the question directly to you guys for discussion (which you're free to do in the comments, of course), we thought we'd pose the dilemma, and then let the Grunt tee off on it first. Here's the original email:
I am a first time homebuyer. I went to an Open House in Brooklyn and really liked the apartment I saw. I offered the full asking price for the unit. The broker got back to me and said he spoke with the seller and said it's a go and even recommended some lawyers for me to use. But I discovered that the following Sunday he held another Open House with a HIGHER asking price! I was never notified of this. While this isn't illegal I certainly find it to be highly unethical and certainly not a practice recommended by REBNY. What should I do? Please keep in mind that nothing has been signed but I do have e-mails of correspondence.Talk about an awkward situation. Here's PropGrunt's reply:Wow. I haven’t seen one of these in awhile. What you just experienced is just a variation of the broker tactic I like to call “Last Buyer Standing.” It is a where buyers bitchslap each other by overbidding for an apartment until someone is left holding the bag. The difference between a bidding war and “Last Buyer Standing” is that in “Last Buyer Standing” brokers and sellers will do things to enhance the feeding frenzy process. A broker will engage in having an extra open house even though there is an accepted offer for the apartment or continue to show it until the contract is signed. Or they may pull the ultimate power play and raise the price of the apartment in the middle of a bidding war just to see who is crazy enough to stick around. About two years ago there was an epidemic of insanity because buyers were throwing bales of cash at anything with a Manhattan address. And because of the lack of inventory a lot of those buyers carpet bombed sellers with tons of money just to secure the deal. Now from what I can ascertain from your description this is how I think it went down. After you made the offer for the apartment and began to proceed to the contracting stage, the seller and the broker decided to keep showing till the contract phased concluded. This is reasonable since a lot of things can happen on the way to signing a contract. Maybe you change your mind. Maybe the broker peeks at your financials and realizes that there is no way in hell that you will get past the board so the broker is going to look for back ups. Or maybe the broker already paid for the ads and it would be a waste of money not to have the open house. So I am going to have side on the broker for this one.
That is not to say you do not have a grievance. In fact you have many. Correct me if I am wrong but since you do not mention that you have a buyer’s broker -- resulting in a direct deal for this broker. Therefore that broker will get a bigger cut than he would have if this was a co-broke. This broker should have been honest with you about the situation and told you that until the contract was signed the apartment had to be shown since it was part of his job. Even if the broker was in fear of losing you, it was probably very stupid of this individual to think you wouldn’t find out. Especially with the current state of the market, a direct buyer is solid gold.
Now as for the price hike, there is actually a perfectly good reason why this was done. Since the seller and broker already have an offer at ask, that would be you, the last thing they want are offers that are comparable or lower. So they set the ceiling higher to eliminate any offers that are at least under the original asking price.
Now if the broker is really crafty what they will do is use your offer as leverage by alerting buyers of an offer. And if the buyer is ignorant they may assume that the offer is at the new asking price or somewhere in the ballpark. And if they have irrational exuberance in their blood then they may put in an offer over the new asking price just to make sure they do not get outbid. Of course this is all very risky because the buyer maybe aware that the apartment was originally priced lower and if the broker is telling them there is an offer on the table it might not be even close to the new asking price, let alone the original asking price.
The bottom line is that although the broker did not do anything illegal, he still committed an act of douchebaggery. Therefore you have the privilege, no make that the responsibility to get a better deal. Or at least make that broker’s life a living hell. Remember. You are the one with the leverage because you kept your word throughout this whole transaction and did not try to lowball the seller.
What you should definitely do is contact the broker and the manager and let them know that although no contract was signed that the broker acted in a dishonest manner and they not only wasted your time and but disrespected you as a direct buyer. Remember to put them at the disadvantage by informing them that you are considering bringing in a broker to represent your interests because the seller’s broker performed quite poorly in their duties and the seller’s is acting in a manner that shows they are not serious about selling.
If they start to bitch and moan, just tell them because of their actions they have lost credibility with you and the only way for you to feel secure in working with them is if certain concessions are made. And remind them part of their fiduciary duty is to present any deals that are made to the seller if they threaten to kill the deal.
Of course all of this all this assumes that no other counter offers have been made. So be prepared to walk away if you are not in the mood to play “Last Buyer Standing.” Also they may try to use the relationship they established to manipulate you. F**k em. Remember, if they took you seriously in the first place they would have been honest with you.
It is important to remember that part of the brokerage business is dealing with enormous amounts of customer abuse. So feel free to enjoy putting the screws into the broker.
P.S. Using any lawyer that the broker recommends is tantamount of letting the fox in the hen house. Find your own attorney.