DANGEROUS REAL ESTATE
How NOT to lose hundreds of thousands of dollars.
by Neil Jenman
Reading time: 8.5 mins apx
Two homes on Sydney’s North Shore. Next door to each other. A combined worth of more than $10 million ($5 million each).
The first home sells for an extra $700,000.
The second home under-sells by $500,000.
How can this be? How can one owner get $700,000 more while the other owner gets half a million dollars less?
The first owner did some research, then made his decision based on his fresh understanding of the real estate world.
The second owner did what most sellers do: Called the local high-profile agent, listened to the standard ‘this-is-how-it’s-done’ spiel – then signed-up.
DANGER
The real estate world in 2024 has never been more financially dangerous. Inexperienced home sellers have an almost one hundred per cent chance of being ripped-off if they do what most home sellers do – call a few agents and sign-up with one they “like”.
Five of the most dangerous words in the real estate world are: “We really like this agent.”
You wouldn’t like most agents if you knew what they plan to do to you.
WHAT MOST AGENTS DO
The modern real estate industry is a swirling cesspool of deceit and greed. It is filled with sleazy and incompetent agents falling over one another in their zest to snare real estate’s greatest prize: A new listing (home for sale) with inexperienced and ideally, elderly, homeowners.
There is nothing so despicable as what most agents to do most elderly home sellers, the trusting yet naïve folk who blindly sign-up with today’s agents.
So, what exactly do most agents do to most (90%) of home sellers nowadays?
In short, here’s what happens.
Before the sellers sign-up with an agent, it’s smooch-and-promise time.
First, agents give an inflated estimate of the price of a home. This is to appeal to the oldest emotion in all of us – greed.
Second, agents suggest a selling method that, while it may seem efficient is, in truth, disastrous for sellers. Such as the public auction method.
Third, sellers sign-up with the agent. Little do most realise, however, that they have just signed a harsh legally binding contract.
Fourth, sellers are coerced into spending thousands of dollars on needless advertising in a scam known as VPA (Vendor Pays Advertising). Agents use the sellers’ advertising money to create more leads for the agency. Buyers are already known to agents. This means the sellers’ money is virtually stolen, especially by agents who demand that every seller “upgrades” to what’s known as a “premium ad”.
Fifth, the agents now commence a “conditioning process” on the sellers. This means feeding sellers a barrage of bad news and then blaming the market.
One agent, who calls himself Australia’s number one agent, is a master at this. The price of homes plunge after he lists them. By auction day, his sellers accept almost any price just to end the psychological torture. The agent then moves on to his next victim. He should be arrested for criminal fraud not lauded as a “legend” and a [bad] example to thousands of agents.
But this is rotten real estate in 2024.
Sixth, if sellers dare to complain (or try to sack the agent), they’ll discover they are caught like mice on sticky-pads. That “standard selling agreement” is filled with nasty clauses that give agents complete control over sellers. If they argue they can find themselves sued – and in some cases – wind up with a caveat on their homes. A caveat is like a legal wheel-clamp. If you don’t pay the agent you can’t sell your home to anyone. The agent effectively owns you.
CONTROLLED SELLERS
Few realise it, but when sellers sign-up with most agents, they are under the complete control of the agent. Agents refer to them as “controlled listings”.
No matter how the agent treats the sellers – no matter how much of their money is wasted or how much they are bombarded with negative feedback or ridiculously low offers – the sellers can’t escape from the agent (without the worry of costly legal action).
In thousands of cases, the stress of selling turns into the trauma of being controlled by an unethical agent. The sellers feel helpless. Freud got it right when he said: “The essence of a traumatic situation is a feeling of helplessness.”
HAPPILY UNAWARE
Some sellers think it reasonable to pay thousands of dollars for advertising. Having told the agent their lowest price, they are delighted that their home sold above their lowest price. What they don’t realise, of course, is that they didn’t need to fork out thousands of dollars for advertising. Worse, they unknowingly sold hundreds of thousands of dollars below the buyers’ highest price. This is what happened to the second seller at the start of this article.
HOW SELLERS CAN WIN
Here, in brief, are six points you must follow when selling your home:
Demand a Guarantee
Sellers must insist that the agent agrees to release them from the Listing Agreement (and all obligations – financial or otherwise) – if they are not happy with the agent’s service.
Decent agents always agree to release sellers (without penalty) from selling agreements. Why? Because decent agents know that their sellers are certain to be happy. Unethical agents, however, will refuse to offer any guarantee.
As one agent told this writer (when I was helping a homeowner): “They (the owners) have to trust us.” To which I replied: “You are asking two people from one of the most trusted professions [Police] to trust you, one of the least trusted professions.”
My stance on behalf of these sellers was simple: “No guarantee, no listing.”
Reject VPA
VPA (vendor pays advertising) is a rort. The agents already have buyers on their books. They should contact those buyers before even thinking of asking sellers for advertising money. There are plenty of ways to find the best buyers for a home without conning the sellers into paying thousands of dollars for needless advertising.
Don’t Sign Anything!
These three words – don’t sign anything! – have been the Jenman catch-cry for 25 years. Of course, eventually sellers sign something. What this creed means is: “Don’t Sign Anything until you are sure you are safe.” Such as having these six points covered.
Read the fine print.
Any home seller who signs-up with an agent without thoroughly reading the agent’s listing agreement is certain to be ripped-off. Tell the agent to leave their “contract” with you. Then delete the nasty clauses. And while you’re at it, add in nice clauses of your own. If you need help, email support@jenman.com.au.
Cancel Auction.
Homes sold at auction are regularly under-sold by hundreds of thousands of dollars – and often without the sellers even realising what’s happened to them. Some sellers – extremely naïve ones – even thank the agents (for ripping them off). It’s incredible.
- Get BHP
Agents are obsessed with knowing the sellers’ lowest price. But what about the buyers’ highest price? Unlike “reserve” which means the sellers’ lowest price, agents don’t even have a name for the buyers’ highest price.
But you do.
It’s called the BHP – Buyers’ Highest Price.
Never sell your home until you know, for sure, that the price you are offered is the absolute BHP.
And how do you discover the BHP when most agents know nothing about negotiation?
Go to page 336 of the book, Don’t Sign Anything! where you’ll find a copy of a “Buyers’ Price Declaration”. Instructions on how it works and how to use it can be found on page 47 – 48.
IN SUMMARY
This article began with the example of two homes side-by-side. One sold for $700,000 extra and the other sold for (at least) $500,000 less. The difference was that the first (and winning) owner followed all six points mentioned above. The second (and losing) owner just signed-up – virtually blindly – with the local high-profile agent.
It only takes a few minutes – often less than 20 minutes – to sign-up with the wrong agent and lose those hundreds of thousands of dollars that would take you 20 years to save. It’s nonsensical.
Please, for your sake, do some research into the right way to sell before you sell.
Read what many say is my best book – which reached Number One on a Business Best Seller Lists. It’s called Don’t Sign Anything! It retails for (I think) $29.95 – plus postage will take it to near $40.
But if you are a genuine home seller – and you promise not to re-sell it on eBay (!) – I will give you a copy of Don’t Sign Anything! (post included) with my compliments. Only today, February 27, 2024, because it’s my birthday. To receive a copy, click here.
And please take care. The real estate world truly is a dangerous place.
*******************
To comment on this article, please click here.
To contact us, please click here.
To follow Neil on Twitter, please click here.
To visit our Facebook page, please click here.
To read more Articles, please click here.
******************
