How Shady Real Estate Agents Cheat
I've had many complaints from realtors about this article! They claim that all realtors are Honest Johns and have their customers' best interests at heart.
Let me make this clear: this is not an attack on the real estate industry.
There ARE plenty of good, honest real estate agents. But every industry has its share of shonky practitioners - unfortunately, that's just human nature. Take any large group of people, and you'll find a percentage who are prepared to twist the rules to their own advantage. And as we all know, the most fresh-faced, charming people can also be the most crooked, so we can't assume the nice guys are really the nice guys!
For most people, their home is the single biggest investment they'll ever make in their lives - so it's worth being aware of the tricks the unprincipled can get up to.
Why Shady Realtors Want to Sell Cheap
At the root of the problem is one huge misconception: that you and the realtor have the same goal in mind, which is to sell your property for the maximum price possible. That's simply not true. You want to sell at the highest possible price. The realtor just wants to sell.
You may be wondering, why on earth would a realtor not want the best price? After all, his commission is based on the selling price, so the higher the price, the more his commission.
The answer is simple - speed. If he holds out for the highest price the market can bear, that means more advertisements and more inspections. True, he will get less commission if the price is lower - but he will also have spent much less time, and will be able to move on to the next house much faster.
He can sell six under-priced houses in the same time it takes him to sell three full-priced houses, and the result will be more commission for him!
Of course, legally the realtor has to agree a figure with you and stick to it - he can't sell the property if you don't agree with the price. But the shady realtor has ways he can work on you, the seller, to persuade you to accept a lower price in the end.
How a Shady Realtor Reduces Your Sell Price
When the realtor comes to see your house, he points out all the good features of your property, and names an impressive price.
Once you've signed up, the agent starts showing possible buyers through your home. After every inspection, he calls to tell you how it went. To your surprise, he tells you he's disappointed to be getting negative feedback (which, strangely, he either never mentioned - or dismissed as unimportant - on his first visit!).
The first week, he may say some buyers didn't like the décor and would have to repaint the whole house. The second week, he'll mention buyers who felt the kitchen would need replacing. The third week, it might be a worn carpet or a damaged piece of guttering. Alternatively, he might claim he's getting constant comments on one single, but major flaw - such as the lack of sunlight in the living room, or the deck that needs replacing.
He may also say buyers have said what they might pay, e.g. "I'm getting some interest in the low three hundreds" means people have said they might pay $300,000 to $350,000 for the house. Whatever the range is, it's always substantially under the figure he first quoted. If you express concern, he'll say, "well, you have to bear in mind, they didn't like...."(whatever the latest flaw was).
You may have guessed by now that the buyers probably said nothing of the sort - or if they did, it was a casual comment. He's making it up to create doubt in your mind, to undermine your confidence in that impressive price he originally quoted. Week by week, he drip-feeds you negative feedback on the property, aiming to lower your expectations. Meanwhile, he's also working on the buyers...
"Hooking" the Buyer
It's illegal to quote a price the seller hasn't agreed to - but if the agent is having a private conversation with a potential buyer, and there are no witnesses, it's his word against theirs - so you can't prove anything, and will probably never know anyway.
If your property is for sale at a fixed price, during the inspections the realtor will be telling buyers you're "very negotiable" (whether you are or not). If your property is up for auction, the agent will be privately naming a price range that's well below what you're hoping to get.
I've caught more than one agent doing this, because I love viewing property - so when an acquaintance puts a house up for sale, I just have to go and look. Once it was an apartment selling for $380,000. I got talking to the agent and he told me, "If you're interested, I'm sure they'd take an offer of $340,000".
Next time I met my friend, I asked them how it was going. "Not good," she said glumly. "The agent is telling me they're only getting interest in the low $300's. He originally told us we'd easily get over $375,000, so we're really disappointed."
Of course he's only getting interest in the low $300's, if that's what he's telling buyers it's worth!
If you catch your agent out doing this, he'll tell you, "we quote a low price to hook the buyers' interest, then we can negotiate them up from there". I don't know why anyone ever believes this!
Clinching the Deal
Eventually, you will get an offer for the house - or auction day will arrive, and someone will bid.
Thanks to the agent, it's quite likely the offer or bid will be lower than you expect. When he presents it to you, you're quite likely to say so - to which the agent will reply, "oh yes, but do bear in mind that buyers have all been put off by the lack of sunlight (or whatever the problem was)". He'll tell you how you can never be sure what a property is worth upfront, but now it's been "tested in the marketplace".
This is all utter tosh. The property hasn't been "tested in the marketplace" at its true value, because the agent has been telling everyone it's worth less than it really is!
I experienced exactly these techniques when I sold my home following my divorce. Years later, I read an expose of real estate training and dirty tricks written by Neil Jenman, who has founded a group of real estate agents committed to ethical selling practices. I thoroughly recommend his books to anyone buying or selling property. It's worth checking out his website as he offers several free downloads, but the book that helped me most was Real Estate Mistakes. The book was written about the Australian real estate market, but it is equally applicable in the USA. I would recommend anyone buying or selling a property to buy it.
I've had several comments from realtors saying "I'm sorry you had a bad experience" and assuring me how wonderful most real estate agents are. So I should clarify that this article isn't based on one bad experience. Since reading Jenman's books, I've bought and sold several properties and I have come across those same techniques again and again. Luckily because of my awareness, I've been able to turn them to my advantage, especially when buying. Others are not so lucky.
I'm not denying there are good real estate agents out there. But if you embark on selling your home imagining that all agents are angels - you're an idiot!
- I Hate My Agent! : The Real Estate Bloggers
- Couple sues agent over real estate deal gone bad | Southeast Texas Record
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