7 DIRTY TRICKS IN REAL ESTATE
Here are seven of the dirtiest tricks in today’s deceit-ridden real estate world... By Neil Jenman
DIRTY TRICK 1 – “INSIDER TRADING”
Fortunately, this trick is rare. Here’s what happens: Homeowners (usually elderly folk) who do not know the value of their home call an agent. They make the mistake of telling the agent the price they hope to get.
Never tell agents what you want, always ask them what they can get for you.
It may have been years since the owners checked their home’s value. The last time, an agent may have quoted five hundred thousand dollars. Now it’s worth $1.7 million, but the naïve owners are clueless. They may say to the agent, “Do you think we can get a million?”
The worst crooks in real estate will salivate when they meet such uninformed sellers. They will say something such as, “Well, yes, we may get you more.”
The dodgy agents arrange for a distant relative or a mate to buy the home for, say, $1.2 million. Later, they sell the property for $1.7 million. Or, they keep it a few years, so it doesn’t seem obvious. They have, in effect, stolen half a million dollars from the sellers.
The best way to avoid being caught by this trick is to get a valuation from a registered valuer BEFORE you contact any agents.
And then, always get quotes from at least three agents.
DIRTY TRICK 2 – “INVESTMENT SCAMMERS”
This trick is widespread. Thousands of naïve investors are caught. Here’s how it works: Companies set themselves up as “experts” in the investing field. They claim to search for the best buys for investors. They promise to show you how to build wealth through a property portfolio. Or how to retire safely.
They prey on your fear of being poor and then, when you trust them, they make you poor.
They have glowing references from dozens of happy buyers – all of whom are yet to realise they have been scammed.
The scam here is simple but deadly: The properties are massively over-priced, sometimes by several hundred thousand dollars. Buy one of these properties and you can set yourself back decades financially. You may even be wiped out financially.
Ironically, these investment scams seldom involve estate agents. The properties are sold through slick companies with wonderful websites or trusted accountants and financial planners – rats who rip-off their trusting clients.
The best way to avoid being caught by these companies is to stay away from them. If you want to invest in real estate, buy from a local real estate agent – and always get a valuation from a registered valuer, one with no association with the salespeople from whom you are buying.
DIRTY TRICK 3 – “SHORT-SELLING”
Without doubt, this is the biggest “cost” when homeowners sell. And most sellers never realise they have been tricked by it.
Here is the trick: Your property is short-sold, usually tens of thousands of dollars below the price it should have sold. The buyers were prepared to pay more than they did pay.
So, why didn’t they?
Because most agents are hopeless at negotiation.
Most homes (more than 80 per cent!) are short-sold. Most real estate agents (more than 90%) have never read a book on how to negotiate effectively.
The ignorance of agents – and their methods (such as auctions or bait-pricing) – cost sellers tens of thousands of dollars.
The best way to avoid being caught by the short-sell trick is to hire a skilled negotiator. To discover which agents are skilled negotiators, ask this: “Can you give us some examples of your ability as a negotiator and how you can get the highest market price for our property?”
If you are not greatly impressed by the answer from the agent to whom you asked this question, this is not the right agent to hire. Find another agent.
Or call Jenman Support on 1800 1800 18 or email support@jenman.com.au.
DIRTY TRICK 4 – “NEEDLESS ADVERTISING”
Convincing home sellers to pay for advertising is the most common trick in real estate. Most real estate advertising is a complete waste of money for sellers.
In many cases, sellers can even get a higher price if they avoid advertising.
The major purpose of advertising is not to promote your property to buyers, it’s to promote your agent to future sellers – all at your expense.
Most agents have already got names and details of buyers who are searching in their area. Before asking you to pay for advertising, they should contact buyers known to them.
But most agents are too lazy to follow up buyers – they would rather use your money to attract buyers known to them. It’s outrageous. Most sellers get stung by this advertising trick because they don’t realise what’s going on. Like so much in the world of real estate, things are very different from how they appear – or from what agents claim.
Let’s be clear: If you are a seller, you go to an agent to find a buyer for your property. You do not go to any agent to buy thousands of dollars worth of advertising promote the agent.
To avoid the advertising trick, follow the Golden Rule of Real Estate: “Never pay any money to any agent for any reason until your home is sold and you are happy with the price and the service.”
DIRTY TRICK 5 – “DUMMY OFFERS”
By law, agents are obliged to pass on all offers they receive on a seller’s home. Agents love this law because it gives them permission to tell owners about low offers on homes. And the more offers – at low prices – the more the owners become “conditioned” to lower their prices.
Many times, however, these offers are dummy offers.
In his upcoming book, The Real Estate Short-Sell, the author, Jim Grigoriou, recounts an interview with a member of a major real estate agency. It is company policy in this agency for all sellers to be given a dummy offer after the first open inspection on the property.
The trick is to make the dummy offer around 20 per cent less than the owners expect. This softens them up early for the inevitability of soon getting genuine offers that, while better than the dummy offers, will be less than the sellers expect.
Whether a property sells for a small price or a big price, agents get a big commission. Therefore, getting the sale takes precedence over the price.
To avoid the dummy offer trick, make it clear that you will not consider any offer unless the details of buyers making such offer are supplied.
DIRTY TRICK 6 – “ENTICING NO CHANCE BUYERS”
This is a callous trick that hurts buyers, especially those looking at properties for auction. The buyers want to know one thing: the likely selling price. And the agents want to do one thing: entice many buyers to the auction.
The best way to entice buyers to an auction is to make them believe they’ll be able to afford the property.
Thousands of buyers have attended auctions, all being told they have “a good chance” of buying a property, only to see the bidding start thousands of dollars above the price the buyers were told – and, of course, well above the price they can afford.
This entice trick has two devastating effects on buyers: First, it costs them hundreds, if not thousands of dollars in wasted pre-inspection reports and legal fees. Second, it breaks their hearts and causes enormous emotional distress.
Callous agents often boast how they had “a dozen competing bidders” at a home. As only one bidder ever buys a home, it means all other bidders lose money and get emotionally hurt.
Well done, agents. Welcome to a system where people must lose no matter what the result.
To avoid this trick, ask agents to confirm any quote in writing. It is amazing how agents give different prices if they know they will be held accountable for what they say.
DIRTY TRICK 7 – “PRETENDING TO CARE”
Years ago, a well-known agent told me: “Mate, I have mastered the art of faking sincerity”. He later insisted he was joking.
But this is the nature of most agents – fake sincerity. No matter how much agents may seem to care about you, they almost always give you advice that is in their best interest not yours.
Rarely will agents suggest that sellers not sell or that buyers not buy. Rarely will agents show sellers how they can save money on needless expenses or how they can negotiate a better price.
Watch carefully and you’ll soon spot the fake sincerity.
To minimise the chance of getting tricked by a smooth-talking charlatan, look for clues with everything the agent wants you to do.
Decide if what you are being advised seems solely for the benefit of the agent.
For example, if they want you to spend money on “extras”, ask them if they are getting any kickbacks (which they call “rebates). If so, their advice cannot be trusted.
As the man who trains thousands of agents across Australia tells agents, “F— everyone else, it’s you versus you.”
Oh, how it hurts to see such callous treatment meted out to so many good and decent people whose only fault is to be too trusting.
Knowing these tricks and how to avoid them will help you to avoid being caught.
