Legitimate and honest tactics real estate agents use can be helpful, however there are some agents who use tricks to deceit both buyers and sellers while benefiting themselves. Find out how you can recognise these tactics before it’s too late…
1. Underquoting
If you are buying, you are almost certain to encounter underquoting. Now that dummy bidding has been stamped out of the marketplace, agents have adopted underquoting as the tactic of choice to attract multiple bidders to the auction. Promoting quality real estate below its true market value will generally attract a crowd of hopeful bidders. When it comes to agent’s price guides, believe nothing and check everything. This is not to say that every agent underquotes. However, the easiest way to protect yourself against underquoting is to do your own research on price. If you assess the home as being worth more than the agent’s price guide, you are probably right. If you are unable to determine fair market value prior to bidding at an auction, you may be best off not bidding until you learn more about the current market conditions.
Solution
Make your offer based on your own market research and your financial capability. The agent’s price guide is irrelevant, particularly at an auction which is an event that unfolds in an undetermined manner.
2. Over quoting
Since Adam and Eve decided to sell their house, real estate agents have been over quoting the expected sale price in order to win listings. In a rising market, over quoting does minimal damage to sellers as the buoyant conditions bridge the gap between the agent’s quote and the true market price. In a falling market, the gap between the agent’s quote and the true market price can widen. Every percentage point the market declines is the vendor’s lost equity. Even in stagnant or falling markets, there will be competitive bidding for accurately priced properties.
Solution
Select an agent on their selling strategy not the price they quote. The right strategy delivers the right price. You can also write a clause into the agency agreement where the agent accepts a reduced commission if they fail to achieve the price they quote.
3. Conditioning
Conditioning is a tactic where the agent praises a home to gain the listing and then systematically bombards the owner with negative feedback to get the price down once on market. Owners are often shocked and disheartened to find their overly positive agent is suddenly negative about everything. Don’t fall for it! Fire an agent that conditions you with systematic negative feedback.
Solution
Only sign a short exclusive agency agreement. There are no ‘standard agreements,’ everything is negotiable. If the agent is conditioning you with manufactured negatives, fire them.
4. Upfront expenses
Agents want a ‘motivated vendor.’ One of the most common and easiest ways for agents to get the vendor motivated is to have the sellers spend huge amounts of money upfront. Print advertising, expensive internet advertising, renovations, stylists, vacate the tenants, video tours – you name it. If it costs money, some agents will recommend it, provided the vendor is paying.
Solution
Tell the agent at the outset you will only pay for the marketing on a settled unconditional sale. If the property does not sell for any reason, the agent wears the expenses. More importantly, the agent may produce an economical campaign that gets the job done just as effectively with less financial risk to the client.
5. Signing a long agency agreement
Time heals all wounds. It also wears down all objections and objectors. Auction agents love adding a clause to their exclusive agency term that reads along the lines of ‘the agency shall be granted exclusive selling rights for 90 days after the auction date.’ If the agent really ‘has buyers’ and feels that your home ‘would do really well under the hammer’ why do they need 90 days on top of the 30 day auction campaign? The agent’s talk is tough and confident, but is quickly diluted by the need for 120 days to sell one property!
Solution
Read the agency agreement carefully. Many people only scrutinise the agency agreement when they are trying to work out how to dismiss the agent. This is the worst possible time to learn that you are committed to the wrong agent for 120 or 150 days. Give the selected agent an all up maximum 60 day exclusive agency period. You can and should be able to extend their term by 14 or 21 day periods after the exclusive period expires, if they are doing a good job. Above all, maintain control of your home and the agency it is listed with.
If you’re looking to buy your next home through auction, we recommend checking out Secret Auction Tactics for Buyers before bidding.
