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The tactics and games real estate agents play

Written on the 4 May 2016 by James Cagney

There are many ethical and respectable real estate agencies in Australia but the games that some real estate agents play and prey on unsuspecting vendors from time to time must be EXPOSED.  Do not be conned by unscrupulous real estate agents who use the tactics mentioned above and obviously do not have your best interests at heart.
I have dealt with a number of slick con artists in my time but it still amazes me how many are drawn into property marketing.  Possibly because they believe that there is a "fast buck" to be made. The cost of property is high and the "big ticket" commissions seem to draw these people into the business. I have never personally heard a real estate agent say "I am in the business because I want to make people happy by buying a lovely home that they will love together with their family to enjoy".  It's all about the money they make on the sale. 
That is why most real estate agents do not last in the business past the first year. The statistics are that 80% of real estate agents fail in the first year.  Of those who remain, a further 80% leave the industry within the next 5 years.

The majority of real estate agents deal in the owner occupier market. They do not think long term because you are probably going to live in the house for many years so there is limited repeat business to be had. Once the client signs the contract the service they get from the agent dissipates because they have to keep looking for new listings and sales to make money.
If you phone to complain that there is no one in the real estate agency who is prepared to help you they blame that very bad sales agent who has disappeared without trace for your problem.  Sometimes I think the agent is hiding under the desk.

You need to be aware of the games some real estate agents play and you will be the loser every time.  I am going to let you into the secrets that many real estate agents use to enrich themselves at your expense and you always end up losing money.

1. They persuade you to sell your property for under the market value.  They tell you that the market is "bad", "down", "at the bottom" so that you will agree to a lower selling price. This means they can get a quick sale and earn their commission. They use historic data to prove their point without taking into account the actual property cycle. In other words, is the property in the "Rapid Growth", "Correction" or "Stabilisation" phase. This is as important as historic data because it will provide you with the information on the best time to sell.  What happens you sell your property and a few months later the property market in the area goes up and then you regret having sold your property/ies. How many times I have heard vendors say "If I only held onto the property for another year I would have made double the amount of money".  Too late now because you did not get the right advise from your real estate agents who are more interested in a quick sale than the profit in your pocket. The truth is many agents can only sell property because they tell the buyer on the quite that they can get them a discount because they know what the purchaser will accept because you are now desperate to sell after months of trying. Having spent your hard earned money on advertising . The fact is that the real estate agency simply cannot act in the best interest of both the "buyer" and the "seller".  It is impossible because he is after a commission on a successful sale and one party is going to lose and the other gain.

2. They give you an unrealistic high price for what your property is worth. Let's face it most people do have unrealistic expectations of what their property is worth. However, some real estate agents need to justify their jobs by getting listings at all costs so they can fill their advertising space with your money. You give them money for advertising and they keep their job.  Should the property not be sold within the month, because they will most likely get very few inquiries, especially if the price is set unrealistically, and you will be asked for additional advertising fees.

We must acknowledge that buyers today are internet savvy and they do their research these days.  Agents can no longer "pull the wool over their eyes".  Just before the expiry date of your sole agency or exclusive agency agreement (more about this below) the agent tries to convinces you to lower your price and more often than not say you now have to spend more money on advertising. You do not want to throw away the money you have already spent on advertising so you agree to spend more of your hard earned money. Sellers get  suckered in once again. Think about it - what a way for the agent and the Real Estate agency to increase their advertising exposure with your money?

3. They persuade you to give them a "sole" agency. They justify this by saying that they are going to do so much for you (mostly over-promising and under-delivering) and for that the agency deserves to have the sole right to sell the property. What you have done is exclude the other agencies in the area from selling your property! Of course, they tell you they will conjunct with other agents but the reality is the agent is not about to give away half of his commission to another agent.  So if another agent has property in the area they do the same and what they are doing is restricting choice and disadvantaging you as the vendor as well as the buyers.

And, why sell a property when the seller is paying for their advertising space. They are more inclined to push properties where the advertising money is exhausted and those where the sole agency is about to expire. Vendors are seldom inclined to give another sole mandate if the property is not sold within the allotted time-frame. Agents in the area are well aware when these sole mandates are about to expire and they will be knocking on your door spruiking their ability to sell your property.  More advertising money is needed of course -and you are paying and the loser.

This unethical behaviour is going to change because Revalu8 is here. This platform allows you to list your property on a national database and other agents and buyers get an incentive because Revalu8 gives the buyer part of the commission the agency would have earned.

4. They are torn between the income from property management and giving you advice on selling your property.  The value of a real estate agency is in the "Rent Role". Think about it - they can't sell their salespeople, the furniture is not worth much and the shop / offices are usually rented or leased.  The Rent Role is the core of their potential profit and what they can sell to an interested party. Property sales are the cream on the top for them - they are more interested in their rent role than in your goal to sell the property. If there is a long term tenant in your property they may persuade you not to sell and you could lose out on the best time in the Property Cycle to sell your property. Or, they can put your property on the "back burner" and make an effort to market it only when they have a long term tenant in place so they do not lose out on revenue.

5. They limit you to people looking for a home to live in rather than market to investors. Agents who sell homes do not have the research that many other direct property professionals have. Therefore these agents can only try and build a story around your property if they have an investor who is interested. Unfortunately for them Investors today are Internet smart and they go onto the numerous property sites that are available and do their research. They soon find out that many of agents "stories" are fabrications and therefore you have limited your market to home seekers only. Australia Hot Property has properties for investors as well as home seekers. Please click >>>. HERE for more information.

As mentioned above there are ethical and profession Real Estate Agencies that do not resort to the above tactics to con you out of your hard earned money. At Australia Hot Property  we create a WIN / WIN for both buyer and seller and makes no apologies.  Everybody wins this way and commissions are fair and competitive in the market place and these are disclosed - no secrets, no games - just looking after the interest of the buyer and the seller.

James Cagney of Australia Hot Property is a member of the Property Investment Professionals of Australia (PIPA) and must abide by the strict Code of Ethics of the Organisation.  James will give you a realistic price and time-frame based on sound research and his knowledge of the Actual Property Cycle. He will advise when the best time is for you to sell your property. It is about "Time in the market" and "Timing the market".  The Property Cycles for your area and location of your property is paramount if you want to sell for the best price. James will take both of these into account in his Property Appraisal.  For more information on the Actual Property Cycle:  click >>>>> HERE.

Many sales people working for property marketers are no better than the real estate agents you find in the local real estate agency. The marketing costs involved in seminars, home visits, property exhibitions, hotel accommodation, airfares, wages and commissions are prohibitive. Therefore, the profit margins on the properties they sell have to be high to cover these costs. In many cases the price of the property you have purchased is inflated and it will take more time in the market for the value to increase to above what your purchase price.

As for the builders - many of them are fair weather business people and escape artists. Once hard times hit the area (property follows a cycle which I explain in a Strategy 8) you can't find them. Never mind the builder guarantees they promised you. They are gone and you are left high and dry.

The answer is do your research and due diligence on the marketing company and / or real estate agency and the builder. Ask for a number of testimonials from each of them and call these people. Make sure some of these referees have been dealing with the company for a few years or they have owned their property for five years or more.  Look up the Internet to see if there are adverse reports about the company. Unfortunately there are computer experts that remove these bad reports these days so call other real estate agencies in the area to ask about the builder. Do not tell that agency that you are buying from another agent. Bad mouthing in the industry is the norm so be discerning with your questions and the response you get. Unfortunately, many people in the industry are such poor sales and business people that bad-mouthing other people is the only way they think they can get business.

The Investment Property Network (AIPN) is a group of investors who have the benefit of sharing their experiences and feedback and advice is readily available from investors themselves.  For more information about joining the AIPN click >>>> HERE .

Author: James Cagney
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