Lately I have been blogging about the sneaky tricks business - about how businesses deceive people. The comments to my posts have been wonderful - with addenda and new ideas to add to my various lists. I was particularly thrilled when one comment suggested:
"This should be an ongoing column at Huff Po wherein reader's comments that seem reasonable and representative could be edited and perhaps consolidated to be included in the next issue of the blog. It would be a great service to readers and a great tool to mobilize efforts for consumer justice."
So, today's post is about real estate brokers. Here is my list of five sneakiest real estate broker tricks (please add to it as you see fit):
1. "Buying listings" - one of their worst tricks is telling a prospective seller just what he or she wants to hear. This generally means pricing a house too high. Why would an agent do that since he/she knows that there is no commission earned until a sale is made? Well the thinking goes "I will get the listing since I tell the seller he can get the highest price ... a month or so in, I will indicate that the market has softened and we need to lower the price." But that month or so can be critical because quick and dramatic price decreases can signal that further price drops are on the way if the house does not sell quickly. It is generally better to price a house correctly right from the start.
2. Conflicted referrals - suggesting that a prospective homebuyer use a particular mortgage broker, lender or house inspector who is likely to direct the homebuyer in ways that may not be in his or her best interest. Rarely, for example, will a house inspector who gets a lot of business from real estate agents have the courage to find deal-breaking problems with a house.
3. Misrepresenting marketing efforts - it seems that every real estate brokerage company "has the best marketing program in the area." But then once a listing is procured, all the promises and representations seem to be forgotten. When I negotiate a listing contract for a seller, I require that brokers identify with some specificity the kind of marketing program they are going to undertake and the dollars they will be spending.
4. Taking advantage of naive buyers - I go nuts when a young couple comes into town and, a little naive, takes their broker's advice at face value. Recently a couple down the street from me, just in another state, paid the listing price on a house that should have sold for about 25% less than listing. Trusting their agent, the couple was out about $250,000 in real estate value the day they closed.
5. Less than full disclosure - the classic example (an actual lawsuit) is a young couple who bought a house for what seemed like a "steal," until they found out that it had been the site of a triple homicide and was considered haunted. The poor couple could not sell three years later as it seemed they were the only ones who were not aware of the house's history. Legislation in most states has addressed this situation (now brokers have to disclose material events) but making sure that all brokers give full disclosure is not always easy to accomplish.
By the way, I am not suggesting that all brokers pull these tricks! In my experience, many are honest, forthright and desirous of helping their customers. But, like in any profession, there are some who play by a different set of rules.
Jim Randel is the founder of The Skinny On book series - entertaining, quick reads that speak to financial topics and chicanery.
