Whether you're buying your next investment property or selling off one of your assets, it's likely that you're going to be reliant on a real estate agent at some point in the transaction – so how can you be sure you're getting the full story?
Blogger: Cate Bakos, director, Cate Bakos Property
As a buyer’s advocate, I hear them all. From cheeky auction quote ranges to tough negotiation tactics. Having worked in a real estate sales office in my early days in the real estate industry, I know why some agents do what they do, and what it all really means. I’ve decided to share my insights with readers to help them in their quest for property. I’ve documented my all-time favourite real estate agent fibs … all nine of them.
Fib number 1 – “We’ve got another buyer on this property”
Sometimes this is true, but often agents will suggest this to a buyer if they feel that the buyer is stalling on making a decision and they need them to move a little bit faster. The reason that an agent may try to create a sense of urgency may be because the vendor is getting anxious about the lack of interest or offers, or it may be that the agent’s exclusive authority period is coming to a close and they fear losing their listing to an opposition agent. Buyers should never dismiss the agent’s warning that another buyer could be interested in a property, but there are a few things that they can do to safeguard against being played. They should ask if a contract has been signed and presented to the buyer. While some agents may be willing to lie about this, it’s a direct question and it’s more unlikely that an agent would lie about something that a buyer could cross-check with the vendor’s solicitor. The vendor’s solicitor’s details are contained within the contract of sale. The buyer should also take note of the number of days that a property has been on the market. If the property has been on the market for 50-plus days, it’s likely that the exclusive authority is coming towards its end.
Fib number 2 – “We’ve had an offer of X”
This tactic is similar to the one above. Sometimes an agent will use it to incite an offer from a buyer who is showing signs of being interested but is delaying in presenting an offer. The key to understanding whether this is a straight out fib, fact or extrapolation is to ask the agent if the offer was a formal offer on a contract. If the answer is no, it means that the offer was perhaps a verbal offer. Worse still, it could be an extrapolation of the truth … a term I use for agents who ask a seemingly innocent question to a disinterested buyer at the open-for-inspection. I’ve seen it many times – in fact many agents ask me when they farewell me at the door: “Cate, what would you pay for this property?” I am certain that my estimate has been used in the context of ‘an offer’ before. Just because a buyer might suggest that they’d be willing to pay a certain price does not constitute an offer. Be clear with the agent about whether their ‘offer’ is genuine or not. As I say to everyone – “if it’s not on a contract, it’s not an offer. End of story.”
Fib number 3 – “The vendor would like the contract closed out tonight”
No vendor wants their contract closed out quicker than it allows for all competing buyers to have a fair go at putting in their offers (unless they are genuinely about to board a plane or the like?!) Agents who put pressure on buyers to submit their offers by 6pm that night either have an amazingly generous offer that they want to sign off before the unscrupulous buyer changes their mind, or they have a dinner to attend and don’t want to be bothered by a late night negotiation. Agents who close out offers with their “best and highest” process by a certain time in the morning or at midday make me think they have booked a game of golf and don’t wish to be interrupted. Some agents will argue that this method achieves a higher price for their vendor, but for those who chop out genuine buyers by applying an unfair time horizon, I feel it is just unfair and rushed. If, as a buyer, you genuinely need time to complete your due diligence, put a clause into the contract and make your offer firmly. Don’t let an agent push you away from making a fair offer. Just be mindful that an unconditional offer (without clauses) at the same financial magnitude as yours will win over your offer every time. Vendors like sure-things.
Fib number 4 – “We’ve got buyer interest in the vicinity of X-Y”
This is a famous Melbourne auction tactic used by the local agents. Auctions are typically underquoted (don’t ask me why?) and the agents play the pantomime the whole way along by pretending with buyers that the property is likely to sell for less than it’s true value. Some buyers get quite offended by the process, and many unsuspecting buyers waste money on property inspection reports in the false hope that that they could score a bargain. There are a few tips I have for counteracting this ridiculous game. First and foremost though is to do your own research and recognise other recent sales results in the area that have been achieved for similar houses. Don’t rely on the agents – they are committed to underquoting by any magnitude from 10 per cent to 20 per cent; with 15 per cent being quite normal in Melbourne’s inner and middle east. In fact, I attended an auction this Saturday just gone which was quoted at $670,000-plus and the reserve was $770,000. To get some factual information from the agents, some thoughtful questions can make the difference between a broken heart and a sensible purchase. These questions include:
* “What reserve are your vendors likely to set on the day of auction?” Most agents will be tight-lipped about this but they rarely LIE about a false figure. They’ll typically tell you that they haven’t discussed reserve with their vendor
* “What recent comparable sale would you say best matches this property?” (and it helps if the buyers have some which they are armed with to create genuine dialogue)
* “What figure did you quote on the sales authority?"
Just remember – an agent will be less likely to speak frankly with you if you are being loud, intimidatory, rude or insensitive to the presence their other buyers who are in the room. If they know you are genuinely interested, they’ll be likely to assist you with a bit more truth.
Fib number 5 – “We don’t really know what the vendor’s expectation is yet. They haven’t told us”
Every agent knows what their vendor would like. Every agent is required to let the vendors know what the likely selling range will be for their property. You can ask the agent a direct question in this case: “If I am interested in buying this property on the day, and taking into account the other buyers who may be bidding, what sort of limit do you suggest I set to have a strong chance at buying the property?”
Fib number 6 – “We’re happy to present any offer to the vendor prior to auction”
Unless you have specific reason to believe that the vendor would prefer to accept a reasonable offer prior to auction, DON’T take this bait. Such reasons could include a situation where a vendor has a specific date that they need to settle the purchase by, or they have a tough financial situation placing pressure on their timing to sell. But in many cases, agents who are managing auction campaigns ‘test’ the buyers by enticing them to present offers. It gives the agents a firmer idea of where the likely sales range will be and it helps them prepare the vendor for setting their reserve on auction day. The worst thing that can happen is that an agent will get an insight into a generous and emotional buyer who could stretch beyond reasonable market value. In this case, they could deliberately set a super high reserve so that the property passes in to this unsuspecting buyer and the agents then have the opportunity to negotiate an even higher price inside.
Fib number 7 – “Our vendor is a genuine seller”
Any vendor who spends money on a marketing campaign is a committed and genuine seller. Some vendors are greedier than others, some are more unrealistic. But regardless, they are genuine. The only time a vendor is not genuine is either when their circumstances for selling change, or if they pitch a sky-high selling price with the intention to only sell if they get a ridiculously good offer.
Fib number 8 – “Don’t worry about getting your legal representative to overview the contract before you sign. It’s a standard contract. It’s all good”
How would an agent know whether the title is as the buyer believes it to be, or if the conditions in the contract are acceptable for the buyer’s circumstances? And how would the agent know if the buyer’s lender will accept that particular title? The saying “Buyer beware” means exactly that. Don’t trust agents with legal matters. Firstly – they work for the vendor, not for you. Secondly, they are highly unlikely to be the vendor’s solicitor or conveyancer.
Fib number 9 – “Don’t worry about putting that request in the contract. We’ll be fine, no worries”
There is only one time where you are guaranteed to have your requests honoured … and that is when they are signed and agreed to in an executed contract. Relying on the agent’s word post-sale can be problematic. Many are wonderful and do honour their verbal commitment, but for those who don’t, there is NO legal comeback. Negotiate all of your terms when you document your offer and agree on your contract items. Retrofitting requests and neglecting to incorporate them into a contract just spells disappointment in many cases.