I started my real estate career selling new homes for Shapell Industries and S & S Construction. I hadn’t been on the job but 6 months when in a rare conversation with Mr. Nathan (Shapell), he says to me in his heavy Polish, Holocaust surviving accent, “Young man, it takes a lifetime to build a reputation…” (long silent nervous gulping pause) “And a minute to destroy it.” Whether it was the way he said it, the way he looked at me when he said it or his in general commanding authoritative demeanor, I took his very serious words to heart. Later that evening I concluded there was absolutely never going to be deal and client that could ever be worth sacrificing my reputation. As a licensed real estate broker, my licensure and thus my ability to work and feed my family was at stake. As a result, my reputation amongst the Realtors in my community is of the highest integrity, something I’m not ashamed to admit, I am very proud of. The reason I tell this story is that not every agent works this way. In no way am I suggesting that most or even many agents aren’t honest and of integrity – most agents actually are – rather it is to bring to bear a few things I’ve seen recently so that if you see them, as buyer or seller, you’ll will recognize them. A few bad apples can spoil the bunch…
Over promise and under deliver. As a rule, if something sounds too good to be true, it usually is. So, if an agent says to you, “I have a buyer for your home” or “list with me I have a buyer for your home,” be a little wary. For example, you are interviewing a couple of agents to possibly list your home for sale and one of the agents says they have a buyer and then, just sign here… let me suggest a couple things you should consider. Let’s start with what he is actually saying: I have a buyer prospect and if you list with me, I’ll sell your home right away. First, if true, note the word prospect. A buyer is someone who’s put ink to paper. Until that time they are just a prospective buyer for your home. Many Realtors use this “close” as a way to secure your listing. Should you find yourself in this scenario, instead of signing a full listing agreement, try “That’s great. Let’s do a Single Party Listing and I’ll pay a full commission and you can represent both sides.” A single party listing is just that, a listing for one specific buyer.
If the agent actually does have a buyer, they’ll agree and deliver that buyer since they “get the full commission and do both sides” which is clearly to their benefit. Whether or not that buyer offers on your home, you’ll learn if that agent was honest or just handing you a line to get your listing (Visit our website here!). Since trust is the most important characteristic to consider when hiring an agent, you’ll know you have a trustworthy agent. The second thing to consider in this statement is the question, do you actually want to sell off market to the first buyer brought through? In some circumstances, this is amazing and exactly what suits you best. What could be better than to have your home sold for market value without having to prepare the home, stage, declutter etc. and have a bunch of strangers through? This is especially true during the time of Covid. But will you get market value on an off-market sale? And how would you know? If you find yourself in this situation, make sure your agent goes over the comps so that you can see for yourself, if the price being brought to you is in line with the market comps. If it’s during the tight inventory market like we’ve had, the answer may be it’s not because when prices are rising, comps which by their very nature are backwards looking, may not reflect the reality of the market at that moment you’re selling and you may be leaving money on the table. That said, we always negotiate price and terms and if not having to prep your home for sale and show it to a bunch of people is important to you, you may conclude that leaving a little money on the table in exchange for ease of selling, is well worthwhile.
The bait and switch. Using the example above, some agents use a “shill” buyer to tie the property up and get the listing and then when that guy backs out and you’re disappointed and all, they’ll approach you with either another buyer or sometimes themselves, but they come with a substantially lower offer (Follow us on Facebook here!). For example, after the shill does a couple of inspections and backs out, an unscrupulous agent might say to you, “You know Ms. Seller, I like your home and I feel bad that Mr. Shill Buyer didn’t move forward. The only thing is, knowing what I know about the property, I can’t pay your asking price for the property. But I would be willing to pay “X” instead.” Now it’s possible that this all above board. It’s also possible that it’s not. In a situation like this, the first buyer could be legit but backed out for whatever reason and the agent really does feel badly about the guy pulling out and also the things wrong with your place really do knock down the value, on the other hand it could be a scam. When a seller has an offer only to lose it and then has to face starting over, they often just want to end the process as quickly as possible. Get rid of the pain as it were. This is what these vultures prey on and they drive the price down and then generously “take it off your hands” – at a below market price.
Tie you up to buy time. Just the other day I listed a terrific single-story home in Simi Valley, Ca (Click on the Photo Below!). On the first day of showing, I get an offer $10,000 over ask, 20% down, no loan, appraisal or investigation contingency! WOW! A perfect offer! In this situation the attraction is that the moment the deposit arrives, it is in play no matter what discovery reveals. Naturally, the seller took it right away. In my MLS, when a home goes under contract, the home must show as under contract, pending or contingent per our MLS rules. However, this was right before the first weekend. Per the contract the buyer had 3 days to deliver their 3% good faith or earnest money deposit. So, prior to making the deposit, they ask to go back to see the home again. Not an unreasonable request. So, what happened? Upon second visit, the buyer changed their mind and cancelled. OK, so that could happen, right? Yes it could but the reason it happened in this way I believe, was because the agent and buyer having lost out on several other bids, decided that if they could tie the place up, they could leisurely decide if was really the right place rather than get into a bidding war (Visit us on LinkedIn). So, they tied it up so they had more time to consider the purchase. Is this unethical? If intentional yes, but how could you ever prove it? You can’t, but it is a potential trick you should be aware of.
Request for repairs is time to renegotiate. In California the buyer has a period of time to investigate and inspect. Because we are in a competitive market, some agents advise their buyers to overbid to get the place and then use the repair request to renegotiate. Over the summer I had a deal where the buyer paid $130K over my client’s purchase price just the year before. They weren’t happy but after several counters, they agreed and we opened escrow. Then they had every inspection known to man and their conclusion was the place needed $75,000 worth of work. We just closed a year ago and had our own inspections which revealed no such need. They came with a repair request credit of $30,000. “Less than half of what it needed,” the agent said. Well you can imagine the seller’s response and after several somewhat heated discussions over the course of an evening with the other agent starting at $30K then dropping to $15K and then $7,500, the buyer finally asked for nothing. We see this a lot with things like roofs, sewer laterals and chimneys which are very expensive to repair and so the buyer will bring in “their” guy who of course makes money how? That’s right, by quoting a ton of work and getting some of it.
Look, these are just a few examples of things to be watchful of and I am by no means suggesting anything bad about Realtors in general since of course I am one (Email Me). As a rule, most experienced agents are experienced for a reason – they’re honest and to remain in business, stay that way. I am however suggesting that when money is involved, people can lose their moral compass and because in the case of real estate it’s often a lot of money, it can happen a little more easily and frequently than we care to admit.