This is the second in a three-part series warning home buyers and sellers about the top tricks real estate agents use to steal their money. These articles are meant to help you avoid getting fleeced by your real estate agent.
sell to buyers
Although we all know that agents act for sellers, many are experts at befriending buyers and making them feel like they are on our side, working to help us get the best property at the best price. If you’re buying property, you need to be on your guard against various sales traps, including lock-in, stock swapping, price gouging, spider web, and sealed offer scam.
1. The block
Of all the real estate agent tricks, the block is probably the one people least expect. Most of us assume that agents want to sell us properties, so it doesn’t occur to us that they might be interested in preventing us from buying. There are several reasons why an agent might try to block us from buying a property. The most obvious is that they have planned a cut and grab for themselves or one of their contacts and therefore do not want us to interrupt their plans by buying at a higher price than they are offering. Another reason may be that the broker has a buyer who is also taking out a mortgage through that broker or a partner mortgage broker. The agent may earn almost as much commission selling the property as selling the property, and therefore may be less interested in helping a buyer with cash or who has arranged their own mortgage. In both cases, an agent may deny a seller our offers or, if relayed, may discourage the seller from accepting them by suggesting that we may not be in a good position to buy. An investigation by a journalist found that of six offers made to real estate agents, only two were passed on to sellers.
2. Stock change
Buyers may be looking for their ideal home, but agents can only sell the properties they have on their books. Also, they have to change their stock if they want to reach their sales targets. Unless an agent is lucky enough to have properties that perfectly match the buyers’ requirements, the only way they can get their monthly bonus is by convincing buyers to take whatever it is they have to sell. So the art of a successful agent is to influence buyers to commit and take what is available instead of waiting for their dream property.
There are several ways to get buyers to engage. The easiest thing to do is to use fear to push yourself into making an offer. An agent may tell you that he has the perfect property, that it just came on the market, but that he will have to act quickly before someone else takes it. Or if a buyer is hesitant, the agent will use the ghost buyer trick and claim that several other buyers are also interested. To add some color, the agent may also say that one of the phantom buyers is a cash buyer and therefore in a much better position than you are. Or an agent can arrange for multiple buyers to view a property at the same time. This is intended to make buyers believe that there is competition for the property and can get buyers infected with auction fever, which is always a great way to spur them into action and drive the price up. Usually, an agent will say that prices in the area are going up, so if you don’t buy quickly, you’ll end up paying a lot more in a few months. And there’s the sandwich: Here the agent shows the buyer three properties, the first and third are unsuitable or out of range for him and the middle one is closer to what he wants. This helps create the impression in the buyer’s mind that there are few properties that fit his requirements and makes him more open to being lured into something that is reasonably close to what he was looking for.
3. The price bomb
Research has repeatedly shown that about 70% of homebuyers spend on average 20% more on their homes than they originally anticipated. Therefore, regardless of what a buyer tells an agent about their price limit, the agent already knows from experience that the vast majority of buyers can be pressured well above their price limit if they are shown a property that they like. like. The easiest way for the agent to raise the price is to state that he already has several offers on a property, so if he is interested, he will have to make a pretty big offer. Or, an agent can use rollup: show you four or five properties, starting with the cheapest and moving to the most expensive. Most buyers, when they see a property they really like, stretch their financial limit rather than let someone else take the property. Another tactic is to show you a house that is well over your financial limit. By comparison, any subsequent property will appear to be reasonably priced. Or the agent could use the taunt: take him to an expensive property and then suggest that it’s a shame he can’t stretch his budget to buy such a perfect home. This is particularly easy if the agent can use the buyer’s partner or family to add to the emotional pressure.
4. The spider web
In addition to real estate sellers and developers, agents have a wide network of people who can help them increase their profits. For example, if an agent convinces a buyer to use a particular mortgage adviser or supposedly independent financial adviser, on an average loan, the adviser will pocket around £2,000 and the agent between £1,000 and £1,500. Even if a buyer has financing available, an agent might tell buyers that “it is company policy” to make sure all buyers get the best loan deals available, and therefore, whether they like it or not, the agent does an appointment for you to meet with a mortgage salesperson with business connections to the agency.
Similarly, an agent will typically get generous kickbacks if he transfers buyers to lawyers and surveyors he works with on a regular basis. An additional advantage of using lawyers and adjusters known to the agent is that they will tend to overlook problems with the properties to allow sales to go ahead. In any town or even areas of a city, most agents, lawyers, and surveyors will have worked together in the past and none will want to bother the others. So even when a buyer believes that their lawyer and adjuster are representing their interests, the lawyer and adjuster are likely to be more sensitive to ensuring a good relationship with the real estate agent rather than worrying about a buyer’s interests. we will probably never try again. When I started questioning both my solicitor and the surveyor about things they had apparently ‘overlooked’, the solicitor paid me £6,000 and the surveyor £2,500; this may be because they were very nice people and they liked me; Or it may have been because they realized their cozy little deal with the realtor had been rocky, and were therefore anxious to avoid any possibly embarrassing explanations. Any buyer who gets caught up in the web of the agent’s business partners can find it a very expensive experience.
5. Sealed offer scams
If there are multiple buyers pursuing a property, the seller and agent may ask all potential buyers to send their “best and final” offer in one envelope by a specified date and time, with the understanding that the highest offer will be accepted. . This is a wonderful way to raise the price since the competitive nature of buyers can cloud their common sense. But the sealed offer process is open to abuse. For starters, the seller doesn’t have to accept the highest offer: a slightly lower cash offer may be preferable to a higher offer from someone who needs time to arrange financing. Also, once the bids are open, the agent can easily go back to the bidder with the deepest pockets and suggest that if he raises his offer by a certain amount, then the property is his. If he believes a potential buyer has access to more money, the agent may also lie about the highest offer level or make up a phantom offer to increase the price. Or, if they want to cut and grab to get the property for themselves, a developer, a family member or a friend, then an agent may hold back some offers.
