Recent opinion polls show real estate professionals rank higher than lawyers, business executives, and advertising people when it comes to public perceptions of honesty and ethics. The best poll scores go to the medical professions — nurses, pharmacists, doctors — worst go to politicians, lawyers, news reporters.
Of course, every profession — real estate included — has its lazy, unethical and unscrupulous practitioners. Usually it’s just a matter of time before their cheating catches up with them. But you don’t want to end up exposing their scam by being the one who fell victim to it. If you’re new to buying or selling a home, you need to be savvy about the most common real estate agent tricks. Before you decide to hire someone, do some thorough research.
Hiring an agent should be much like a job application and interview. You must confirm the agent is honest and competent. A good way is to get active referrals by asking the agent for details on their current and recent clients — sellers and buyers, lessors and lessees. Call some of these people and see if they recommend the agent. You can also inquire anonymously through their brokerage about some of their listings. The way questions such as “Why is the home being sold?” and “What is the lowest acceptable price?” are answered will tell you a lot about the agent. And remember, you can limit the term of your representation agreement as you like — effectively putting the agent “on probation.”
1. Getting suckered into paying advance fees
Real estate agents can request sellers hand over thousands of dollars in advance fees. In real estate, this is called “up-front” money and the excuse for it is often special advertising which must be ordered weeks or even months in advance. Don’t ever pay a real estate agent money in advance. Negotiate the fee arrangement you wish to make.
Common business practice is for agents to be paid a percentage commission at the close of the sale and all their services, including advertising, are compensated by this commission. The amount of commission is negotiable. The best agents will obviously command the highest commissions.
2. Unrealistic selling price for a home
Real estate agents who tell a prospective seller they can get an unrealistically high price for their home will easily get the listing because that’s what the seller wants to hear. A month or two into the listing, the agent then suggests the market has softened and the price needs to drop. But that month or so can be critical because quick and dramatic price decreases can signal that further price drops are on the way if the house does not sell quickly.
It is generally better to price a house correctly right from the start.
3. Conflict of interest in referrals of services
Real estate agents suggesting that a prospective home buyer use a particular mortgage loan broker, title company or house inspector may push a home buyer in ways that may not be in his or her best interest. A house inspector who gets a lot of business from a real estate agent may not want to find deal-breaking problems with a house. Research and choose your own vendors.
4. Calculating advertising efforts
Every real estate agent’s brokerage company seems to “have the best marketing program in town.” But once the listing is agreed to, all the promises and representations seem to be forgotten. Agents can use advertising to promote themselves, much like they use “open houses” for self promotion.
Demand specifics on the marketing program the agent plans, the dollars that’ll be spent and what they’ll be spent on.
5. Selective disclosure
Real estate agents have to disclose material events about a property but some avoid full disclosure. A young couple bought a house for a price that seemed like a “steal.” They later found out that the house had been the site of a multiple murder and was considered haunted. The couple could not then sell it after they recognized their duty to fully disclose. Besides, it seemed they were the only ones who were not aware of the house’s history.
You must make sure you or your representative is getting full disclosure from the seller and selling agent. Make them commit in writing.
6. ‘Double ending’ deals and ‘pocketing’ offers
Real estate agents for sellers can double their commissions by bringing buyers of their own. This is fine for the seller unless the agent tries to favor his offer just so he doesn’t have to share the commissions with another agent. In addition, real estate agents representing sellers but who have buyers of their own might conceal or “pocket” inquiries, offers or counteroffers from another agent’s buyer to protect their own buyer’s interest.
Make sure your agent commits in writing to presenting all offers fairly.
7. Selective showings of listings
Some real estate agents will determine which listings they’re going to show their buyers by screening them for high commissions or extra incentives and then only show those homes. Research listings yourself via the Internet.
Some real estate agents will construct and market attractive, but fake listings, or keep good listings active long after they’ve been sold. When asked to see these properties, they’ll offer another listing to see. Again, research listings yourself online.
Nearly all of these examples of misbehavior are strictly counter to local laws or codes of professional ethics, so agents who engage in them are not only cheating you, but cheating their community and their fellow professionals. All of us depend on an aware consumer as the first line of defense against transgressors. By learning these most common real estate agent tricks, you’ll guarantee yourself a clean home sale or purchase.