Today, I was reminded of a house I bought from a bank in Arizona several years, ago. My cousin-in-law, Blair, was asking for advice on a property he was purchasing. I shared this story during my coaching to illustrate where in that purchase, I discovered there is a difference between unethical and illegal. I, myself, work hard to protect my reputation so the difference between ethical and legal is small for me. However, that difference can be difficult to judge in others because it comes down to the beholder and their motigstion.
I have found a similar difference in 'wanting to be liked' and 'wanting to be respected.' My co-founder at Post.Bid.Ship. once said to me, "Micky, if you keep insisting on non-participation in our termsheet (a term often called a double-dip and not adventageous to founders), then some investors may not like you." I quipped back with "My goal is not for them to like me, I want them to respect me." I share that example because there is a similar difference between what is ethical and what is legal and that difference varies between individuals and the desired goal.
While other buyers of bank property were offering $10,000 below asking, I told my real estate agent on this specific house to offer $3K above asking. Why? I wanted to go in with the strongest offer because it was perfect for me to remodel, live in for a couple of years, and then flip. Later that week while traveling for work, the selling bank called me and said “You are in a competitive bid situation and we will need you to raise your offer.”
I was caught off guard by her call. Why are they calling me and not my agent? Are they lying to get me to bid higher? How could I ever know? Did she even look at my offer and recognize it was strong or is this a automatic call that is made to squeeze more money from buyers? My response was “What is your asking and what was my offer?” I figure this would at least answer one of my questions, had she even looked at my offer.
She said “We are asking $220K and you submitted $223K”. I replied with, “That doesn’t make sense. My understanding is that bank owned properties are going for a discount to asking these days. Can I lower my offer to correct this issue?” Oh boy, I felt good about that question. This in business is called a signal. I was signalling that I was pretty firm, even somewhat surprised at my own offer.
She said “Let me talk to my manager and see what they say because we would prefer you not lower your offer.” Bingo! I just figured out she is not the decision maker. Yep, this is probably just a robo-call from a bank and this is part of their process.
I said “Sounds like a smart decision on your part. We will just pretend this call never happened and we will let my current offer stand for now. But know my next offer if you insist on one may not be as good.” This was my way of saying "This feels shady but I won't say anything if we can come to a mutual understanding." To make my signal stronger if she missed it the first time, I closed saying “If you can get someone willing to pay more than me in this market, take it because my current offer is the best you will get from me.”
That afternoon, the bank officially accepted my offer. When my agent called to give me the good news, I told her what the bank had done. She confirmed for me what they did was unethical since they didn’t call my agent. She was upset by it but felt I handled the encounter well, especially since it worked out in our favor.
If you liked this story, remind me to tell you about when I sold that same house and the eventual buyer called me directly to negotiate which I learned is also unethical. In closing, let me share with you what I learned. There is a difference between unethical and illegal and I have mad respect for the bank and the eventual buyer. Why? Good for them, at least they tried!
I tell you this story in case you find it helpful.