Is Money Everything?
When did money begin to trump morality in the real estate marketplace? I know that when I began as a real estate agent in 1980, buyers and sellers almost always kept their word. If the seller agreed to accept a million dollars, he sold for a million dollars. And if a buyer agreed to pay a million dollars, he paid a million dollars. Sellers did not secretly send out two contracts so that they could hold the one at a lower price in their pocket till they saw whether the higher priced buyer would sign. And buyers did not walk away from deals on which they had signed a contract, then hire attorneys to try to get the deposit back claiming some sort of fraud. What happened?
As I observe our brokerage business over the last thirty five years, this change distresses me more than anything else. Somewhere along the line money became the ultimate justification. In its name almost anything now seems OK, justifiable, even inarguable. “I know I said I wouldn’t, but this is A LOT MORE MONEY.” End of story.
This new paradigm expresses itself in our business in many ways, none more noteworthy than the process now informally known as “gazumping.” Here’s how gazumping works: a property receives expressions of interest from a number of different buyers. The exclusive agent decides to request best offers in writing by a certain time. The offers come in, and the seller and his agent choose the one they think is best. The lucky buyer is informed and … but wait! The buyers in second place, although told to make their best offer, have realized now that their offer, which did not win, was not actually their best offer after all. They will pay $50,000, $100,000, $500,000 more to secure the property. So what does the seller do now?
Thirty years ago, on the rare occasions when this happened, the seller simply said no. There was a process, a decision was made, everyone had an equal chance. But today, very frequently the seller cannot resist the enticement of a little (or a lot) more. After all, money is money. So his broker is told to inform yesterday’s high bidder that yes, we did accept your offer, but now something better has come along. We will get back to you if anything changes
Leaving aside the (apparently debased) value of a verbal handshake, gazumping is usually bad for everyone. In at least 20% to 25% of cases, the gazumper (ie buyer number 2) is seized by buyer’s remorse. 24 hours later he regrets his impulsive gesture and withdraws. At this point the gazumpee (ie buyer number 1) usually feels betrayed and furious, so she either a) no longer wants anything to do with the property or b) will sign the contract now for 10% less than the price she had previously offered. And even if she does decide to go forward, a climate of mutual mistrust has been created which likely interferes at every step in the deal process.
I believe that we, as real estate agents, have a part to play in this process. While we have a fiduciary duty to carry out our principal’s wishes, that does not mean we cannot express an opinion or urge a particular behavior on our client. A clear discussion early in the sales process, describing the risks of gazumping and urging the seller not to capitulate, can mitigate his temptation to discard the agreed-upon deal and go for the gold. And we can urge every seller not to accept an offer unless he really means it. In spite of the cultural messages which bombard us to the contrary, we all know: money truly isn’t everything. The value of a handshake, the value of giving your word: that is a currency which should never be debased.