How Real Estate Agents Can Cheat Sellers

You should regard your realtor (I'm an Aussie, so I call him a real estate agent) the same way you regard a used car salesman.

Yes, I know that's a generalization. There are honest realtors out there - as well as honest used car salesmen! - but the sad truth is, the percentage of bad apples is high. And because buying or selling a home is the single most expensive thing most people will do in their lifetime, the penalty for being sucked in by one of these sharks can be very high. So it pays to be careful. If you understand how they're trained, you have a better chance to avoid being taken in by their sales tricks.

In fact, even the "sharks" aren't fundamentally nasty people. Many of the real estate houses teach very hard-sell techniques. Imagine it, there you are in a roomful of eager new recruits, being taught how to fool a seller into selling their house for less than it's worth. The teacher is a successful agent, authoritative and convincing, and the other students aren't expressing concern - maybe you're just being naive?

Too often, by the time the newly-qualified realtor hits the streets, they've swallowed the sales pitch so thoroughly they simply can't see that what they're doing is unethical.

Here's how an average real estate agent is taught to sell:

• When he comes to your house, he will love it - just love it! He'll ask you what price you're looking for and readily agree you've got it right - in fact, it may be worth even more!
• Having got you excited at the prospect of getting a good price, the agent then moves on to discuss whether to offer it for sale, or by auction.
• He wants you to sell at auction. If you just put the house up for sale, he may be stuck showing people through it for months, especially if your price expectations are high. With an auction, he only has to show the house for a few short weeks, then the auction will take place - and even if the bids are low, there's a good chance he can pressure you into selling - especially after he's softened you up (see the next section for how!)

You've signed up, and now the agent starts showing possible buyers through your home. After very inspection, he calls to tell you how it went. To your surprise, he tells you he's disappointed to be getting negative feedback.

The first buyer may say the asking price is too high because he doesn't like the decor and would have to repaint the whole house.

The second buyer may say the kitchen is looking tired and he'd need to allow to replace it.

The third buyer might notice the carpet is worn.

Alternatively, all the buyers might comment 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 what you had in mind. 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 none of the buyers said anything of the sort - or if they did, it was a casual comment rather than a major complaint. He's making it up to create doubt in your mind, to undermine your confidence in your sale price. 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...

If your property is for sale at an advertised price, the realtor will be telling buyers that you're very negotiable (whether you are or not). If your property is up for auction, the agent will be quoting a price range that's well below what you're hoping to get - perhaps not in print, but certainly in conversation with prospective buyers.

If you catch your agent out doing this (as I did, when I went to see a friend's house while it was open for inspection), he'll tell you, "we quote a low price to hook the buyers' interest, then we can negotiate up". I don't know why anyone ever believes this!

Most people, when they're looking to buy a house, end up looking at the top of their price range. It's human nature - you start out looking at the cheaper places, but there's always something wrong with them, so you move steadily up the price bracket until you're at full stretch. There is absolutely no point in the agent "hooking" buyers like this, then hoping they'll bid another $20,000 because they can't bear to lose the place. They haven't got it!

Besides, do you look at the price of a house for sale and expect to pay more than the advertised price? I don't, in fact quite the opposite - I set out to bargain a few thousand dollars off.

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!

You may be wondering, why on earth would a realtor want to sell your house cheap? 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 offers your house at a lower price, it will sell faster. That means fewer advertisements and fewer inspections. True, he will get less commission, 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!

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'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 have your interests at heart - you're an idiot! 

*

All text copyright Marisa Wright. Photos from Flickr.com - "Sold" sign by Aaron Webb, House Keys courtesy of MykReeve.