HOW TO STOP YOURSELF GETTING RIPPED-OFF
by Neil Jenman
Reading time: 7 mins apx
NOTICE: Following a deluge of complaints from distraught home sellers, most of whom are lovely people – who just made a stupid (but massive) mistake – I feel the strong need to use the word “stupid” in this article, especially the heading. All of us do stupid things at times. But when it comes time to sell or buy our family home, stupidity is costly. A financial mistake can easily be equivalent to a year or more in wages. Or years of savings. I can’t stand seeing good people lose money due to bad agents. Many such people feel like friends. They are kind, they are decent, they are trusting. Too trusting. I want to talk with them as if they are friends. Hence, I have written this article as if I was speaking to a mate. I hope you understand. Thank you.
What’s the matter with you, mate?
You want to sell your home, your biggest financial asset.
And what do you do?
Something incredibly stupid like sign-up with the first agent who tells you what you want to hear. That you’ve got a great home and this agent will get you a great price.
Sounded good at the time, didn’t it?
When you think about it – which you obviously didn’t – that’s a stupid thing to do.
And now, of course, it makes you angry when you think about what’s happened.
You should be most angry with yourself. For a smart person, you sure did something stupid.
LOOK WHAT YOU DID…
Your home is your biggest and most important asset.
And you must know, surely, that most agents are dodgy?
The Roy Morgan poll shows real estate agents to be near last of trusted professions. They have never been more distrusted.
95 per cent of people don’t trust agents.
And yet, when selling their homes, 95 per cent of people sign-up with dodgy agents. They give control of their biggest asset to the biggest rogues.
Why did you do it?
Why do so many home-sellers do it?
Don’t you think you should treat your home with the respect it deserves?
Consider this: Would you leave home without locking your door?
You don’t want your possessions stolen. You don’t want to be robbed – even though you’ve got insurance.
But when you sign-up with a typical agent, you can lose far more than in a burglary.
There is no insurance against stupidity.
You see, here’s a fact (that, to be fair, most sellers don’t realise): When you sign-up with a typical agent, you sign a legally binding contract that is legally designed to legally rob you.
Wow, that’s a big claim.
It’s also a big truth. Look closely at any agreement with any agent (even good ones) and you will discover several clauses that – when read in lay (not legal) terms – will horrify you.
Horrify you at their unfairness, their dishonesty, their greed, and their sheer chutzpah.
It beggars belief.
Seriously, no sellers in their right mind would sign a typical selling contract with a typical agent. If they read it in detail.
What happens to thousands of sellers?
Try some of these:
- If a close relative or best mate, buys your home, you are liable to pay the agent the full commission.
- If the agent fails to sell your home, you are liable to pay the agent thousands of dollars in “marketing costs” – marketing that’s of great benefit to the agent, zero to you.
- If the agent fails to sell your home – because of poor skill or neglect (any reason) – to a buyer who inspects the home and then, later, that buyer returns with another agent who is more skilled, you are still liable to pay the failed agent the full commission. This means you must pay two agents – the agent who failed to sell your home and the agent who succeeded at selling your home. This happens to many sellers.
- If the agent does something wrong – anything – you are responsible. Even though it clearly is agent’s fault, you must indemnify the agent.
- If you sell your home to anyone – for any price or any reason – during the time you are signed-up with an agent, you must pay the agent the full commission.
- If the agent does absolutely no work, has never met the buyers – even if the agent failed to return calls to buyers who enquire about your home – if those buyers buy your home, you must pay the agent the full commission.
- If the agent has a “continuing agency” clause, you are liable to pay the agent the full commission even if your home sells months after you dismiss the agent.
- If the agent upsets you – through unethical conduct, incompetence, or slackness, even rudeness – you cannot dismiss the agent. No, you are stuck with the agent for the term of the contract. Worse than a bad marriage. This is one relationship from which you can’t escape, no matter how badly you get treated.
- If the agent claims you owe them money – but you feel you should not have to pay (for whatever reason), the agent can sue you.
- The agent can place a caveat on your home. That means you cannot sell your home to anyone unless you obey (pay) the agent.
There are many more “nasties” in every “standard” real estate agreement.
Of course, sometimes nothing goes wrong. Sometimes, when selling a home, sellers are happy. With the price, the service, even the agent. Sometimes.
Just as sometimes, if you leave your home unlocked you don’t get robbed. But would you leave your home unlocked? Of course not.
Well, why would you be so stupid as to sign a document that greatly disadvantages you, that allows an agent to treat you unfairly, unethically and, worst of all, to under-sell your home by thousands of dollars?
Pretty stupid, surely?
Imagine if builders or tradies quoted you a price, did the job, then demanded a higher price? You’d be outraged, surely.
But that’s what agents do all the time.
The agents quote a price. The sellers sign the agent’s contract (designed by lawyers to protect agents). Then the agent sells the home thousands of dollars under the quoted price.
And then the agent demands full payment. And gets it. Because that’s what the contract stated. The contract that most sellers don’t read properly.
So, what can you do when an agent asks you to sign their “standard selling agreement”?
Make changes to the agent’s contract. Of course.
Cross out the nasty clauses. Of course.
Take control for yourself. Don’t give control to the agent. Of course.
Sure, the law says you must “sign-up” to hire an agent. But the law does not insist you get ripped-off. The law does not stop you adjusting the “standard” contract.
The law does not prevent you adding your own conditions to the contract.
For example, if the agent wants you to sign-up for 120 days, you can make it 30 days. Even 7 days. Sometimes, when agents really do “have a buyer”, they agree to 24 hours.
If the agent’s contract includes the right to place a caveat on your home, delete that clause.
When you feel you have found the right agent, do not sign-up immediately. Ask them to leave their “agreement” with you.
Tell them you want time to read it carefully. On your own.
Remember this: Agents who appear the best are often the worst. Especially pushy ones.
These agents will say their agreement (“contract”!) is “standard” and everyone signs it. Well, you are not “everyone” and your standards are such that you never sign anything on first meeting any salesperson – especially one who’s not trusted by 95 per cent of the public.
Do not be timid. And do not be concerned about upsetting an agent just because you insist on changing their agreements to protect you and prevent them ripping you off.
In fact, suddenly you will have discovered a way to find the best agents – when “best” means “the best to look after you”. The best agents, the good ones, will not mind you removing nasty clauses. They are likely using an agreement given to them from the real estate institute or their franchise. Indeed, good agents respect sellers who insist on removing nasty clauses.
Russell Haddan, an agent from Castle Hill in Sydney tells sellers: “Never mind what’s in this ‘agreement’ if you are not happy with me, you can fire me anytime.” It makes sellers feel secure. I know because I have been one of Russell’s happy sellers.
DO NOT BE STUPID
There is no other way to say this: It is stupid to sign-up to sell your home with an agent who imposes rip-off conditions upon you.
Be a smart seller. Take care of your biggest asset. Remove nasty clauses in the agent’s agreement. Bad agents won’t agree. Good agents always agree.
Now, you know two things: How to keep yourself financially safe when you sell and how to find the best agents.
So, finally my normally smart friend, tell me this: Given a choice between signing-up to an agent’s agreement (“contract”) exactly how they designed it (which means you risk being ripped-off) or insisting that the agreement be amended to protect you from being ripped-off which means you may offend all dodgy agents, what will you do?
Avoid offending dodgy agents? Or protecting yourself?
Don’t be stupid, mate.
Look after yourself. That’s the smart move.
FOOTNOTE: If you need help to spot nasty clauses in an agent’s agreement, please email it to us at firstname.lastname@example.org. We will help you at no charge. Please note: WE ARE NOT LAWYERS – although we do get help, when needed from good lawyers. As well as contacting us, we advise you to get legal advice before you sign any document, especially one designed by one of the most distrusted businesspeople in Australia.
OFFER: Russell Haddan wrote a great little book on how sellers can get a good deal from agents. It’s called The Real Estate Book. It has been getting rave reviews from home sellers to whom it is available at no charge. To download a copy, please click here. Hard copies also available. Well worth reading.