Welcome to the third installment of my topic “The Top 20 Dirtiest, Illegal and Most Underhanded Tactics of Real Estate Agents”…
I’ve been truly over-whelmed with large amounts of e-mails from the past two editions of my newsletter regarding this topic and I hope I’ve helped provide you with some useful information that you’ll have at your disposal when talking to an agent about selling your home.
Today, we’ll discuss the marketing component of selling a property and how the agent’s advice on this matter can cost you tens of thousands of dollars…both through inexperience or plain dishonesty.
Let’s take a look…
- ‘Under Marketing A Home’ – I’m constantly amazed how many times I see a home that’s poorly marketed – both in terms of quality of marketing but also positioning. Here’s an example – if a home is ever placed as a standard listing on www.realestate.com.au , you have a significantly reduced chance of selling it and very little chance of selling it for a premium price. It might save a couple of hundred dollars for the agent and/or client but the net result could be tens of thousands of dollars less than what it could achieve with an investment that won’t cost a huge amount . These agents are usually poorly trained or simply too afraid to suggest that a client consider some advanced initiatives. You may ask why this is a Dirty Tactic? Quite simply, when an agent competes for business, they try to minimize the expenditure for the sellers and quote the lowest marketing figures just to win the business with the great white hope of selling it with a very limited campaign. This is a dangerous way for a home owner to lose huge sums of money and most of these type of agents couldn’t care less.
- ‘Over Marketing A Home’ – On the opposite end of the scale, we have agents who are more concerned about building their profile than they are about selling a home for a premium price. The thought behind every marketing initiative they recommend is simply about themselves – whether that be newspaper, internet or other marketing mediums. Any agency that uses generic signage is clearly in this category – they are more concerned about promoting themselves to your local area than they are about promoting your home. When I was first in real estate, I listed a beautiful inner city penthouse unit and I took the Principal with me to discuss marketing to learn from him. He convinced this seller to spend $30,000 on marketing the property through various mediums. Upon the expiration of this marketing, it became clear that the market feedback on this penthouse (in terms of price) was obviously 15-20% below what seller was hoping to achieve. We had another follow up meeting with the seller and this Principal proceeded to convince her to spend another $30,000 with exactly the same campaign again and little mention of price. After the meeting, I asked why he had done this and he informed me that a constant $30,000 profile in the State’s leading newspaper was the best way for an agency to build profile quickly. Ethically, I just couldn’t let this seller spend this amount of money again and I went back and discussed price feedback in more detail. At this point, she decided to withdraw the property from sale and save the extra $30,000 which was definitely the right decision at this time. Now don’t get me wrong – There are certainly instances where newspapers have an important place in real estate marketing but each home must be assessed on a ‘case by case’ basis with the owner’s best interests at the forefront of any recommendations.
- ‘The Marketing Profiteers’ – This is a very large breach of agency regulation but one that is disgracefully widespread. Quite simply, the agency will charge the client a certain figure for marketing initiatives but this marketing actually costs them a lot less than what they are charging you, the unsuspecting home seller. Often it is an agency that charges a set marketing figure upon the settlement of a home in addition to their commission. The ‘set price’ is usually not itemised and is ambiguous for what you’re actually receiving for your money. The agency knows that there’s a certain percentage of people that won’t pay this levy for various reasons, often due to the client being left angry at the constant persuasive heavy handed practice of regular recommended heavy price reductions (after all, they want their money back). To compensate for this loss of revenue, they simply over-charge the ones who do pay – very illegal and very dirty. I recently had a seller of mine provide me the details of what a particular agency was charging for marketing when they first discussed the selling of their home with several agents and of the $1995 fee, I calculated the real cost to the agency to be approximately $1200. An $800 profit on most transactions equals a very substantial revenue stream – even if they aren’t selling houses.
- ‘We Pay All Your Marketing Costs’ – This is an interesting one. Coupled with point number 12 (above), this is usually a path to selling your property for less than what it is really worth. Whilst this may seem like a generous undertaking from the agent, most agents who absorb all marketing costs vastly compromise on the quality and quantity of the marketing they provide. The marketing and promotion of a home is about portraying the home in its absolute best light and exposing it to the largest number of buyers as possible. Whilst still being tailored to a suitable budget, the aim is to provide a situation where we have multiple buyers wanting to purchase the property at the same time. This usually leads to a much better selling price. Time and time again, I see a seller list their property with an agent that offers ‘Free Marketing’ – only for the property to be showcased with low-budget alternatives where the quality is poor and the property is listed so low on most internet sites that buyers could never find it even if they tried looking for it. Many of these agents over-promise what they’ll offer in terms of marketing and often don’t deliver. Another way they’ll work with this tactic is to ‘stagger’ the marketing campaign so that they can try one initiative at a time hoping to sell it quickly so that they can minimise their spend. This is a sure-fire way to limit your chances of selling it for a premium price as the sellers have the most negotiating power when a property is first listed…not when a property has been on the market for several months. Almost always, these properties either don’t sell until listed with an agent who will promote it properly or alternatively, it will sit on the market for extreme lengths of time and end up selling for way less than the true current market value. The result is that the ‘Free Marketing’ may have just cost the seller $50,000…and this is not an exaggeration. I recently described a situation in my newsletter where I sold a home within 2 weeks for $500,000 that had been on the market for more than 2 years with three different agents that all offered ‘Free Marketing’ only for the last of these agents to firmly recommend the owners accept an offer of $450,000. The agent told the owners that they “would never do any better”. These sellers listed with us and did not spend ridiculous amounts of money to achieve this outcome – only around $1500 in total. Any agent who uses this tactic to obtain listings is placing their own needs ahead of the needs of the client and realistically prioritizes the minimization of their expenditure well ahead of the maximization of the final selling price. A dirty and underhanded tactic? You bet!
The moral of the story is to choose the right agent who has your best interests at heart.Whilst this may sound like an unashamed ‘Self Pitch’, the truth is our success is ensuring that we’re doing everything we can do to maximise the selling price for our clients. We’re in a market where the most agents are really struggling right now. The number of real estate transactions has halved over the past few years and with record numbers of agents in the industry today, many simply cannot survive. We believe our increasing success is due to our clients’ generous feedback and referrals. We’re constantly told by our clients that they felt very secure in knowing that we always do everything we can to put as much money in their pockets as possible and this truly motivates my team to greater heights.
On a final note, we’d like to take the time to send our love and support to the people of Manchester for the horrific acts of terrorism they’ve experienced over the past 24 hours. Whilst terrorist attacks are disturbingly all too common these days, an attack on children is particularly heinous and impossible to understand. Our thoughts and prayers go out to those affected by this disgusting act.
Until next week, Happy Listing & Happy Selling.