Buy a house? Beware of these real estate agent tricks

This is the second in a series of three articles warning home buyers and sellers about the top tricks realtors use to get their money. These articles are intended to help you avoid being fleeced by your real estate agent.

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While we all know that agents act for sellers, many are experts at befriending buyers and making them feel like they’re on our side, working to help us get the best property for the best price. If you’re buying a property, you need to be on your guard against several sales traps, including blocking, stock swapping, price gouging, spider web, and sealed offer scam.

1. The block

Of all the realtor 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 stopping 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 hack and grab for themselves or one of their contacts and therefore don’t want us to interrupt their plans by buying at a higher price than they offer. Another reason may be that the broker has a buyer who is also taking out a mortgage through that broker or an associated mortgage broker. The agent can 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 our offers to a seller or, if passed on, 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 estate agents, only two were passed on to sellers.

2. Stock change

Buyers may be looking for their dream home, but agents can only sell properties they have on their books. In addition, 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 fit buyers’ requirements, the only way they can get their monthly bonus is by convincing buyers to take whatever they have to sell. So the art of a successful agent is influencing buyers to commit and take what’s available instead of waiting for their dream property.

There are several ways to engage buyers. The easiest thing is to use fear to push you to make an offer. An agent may tell you that he has the perfect property, which has just come 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 a little color, the agent may also say that one of the ghost buyers is a cash buyer and therefore in a much better position than you. 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 not suitable 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 their requirements and makes them more open to being scammed into something reasonably close to what they were looking for.

3. The price bomb

Research has repeatedly shown that around 70% of buyers spend an average of 20% more on their homes than they originally anticipated. So regardless of what a buyer tells an agent about their price cap, the agent already knows from experience that the vast majority of buyers can be pushed well above their price cap if they are shown a property that suits them. 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 juicy offer. Or, an agent can use stacking: 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 the property go to someone else. Another tactic is to show him a house that is way over his financial limit. By comparison, any subsequent property will appear to be reasonably priced. Or the agent might use taunting: drive him to an expensive property and then suggest that it’s too bad 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 persuades 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 available loan deals, and therefore, whether they want it or not, the agent does an appointment for you to meet with a mortgage broker with business connections to the agency.

Similarly, an agent will usually get generous kickbacks if he transfers buyers to lawyers and adjusters he works with regularly. An added advantage of using lawyers and appraisers known to the agent is that they will tend to overlook problems with the properties to allow sales to proceed. In any town or even parts 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 their attorney and surveyor represent their interests, the attorney and surveyor are likely to be more sensitive about ensuring a good relationship with the real estate agent rather than worrying about the interests of a buyer who probably never try again. When I began 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 real estate agent had been rocky, and thus they were anxious to avoid any possibly embarrassing explanations. Any buyer caught in the web of the agent’s business partners can find the experience very costly.

5. Sealed offer scams

If there are multiple buyers pursuing a property, the seller and agent may ask all prospective buyers to submit their “final and best” offer in an 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 as the competitive nature of buyers can cloud your common sense. But the sealed bid 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 opened, the agent can easily go back to the bidder with the deepest pockets and suggest that if he raises his bid 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 the property for themselves, a developer, a family member, or a friend, then an agent can hold back some offers.