by Neil Jenman
Reading Time: Apx 7 mins
In the real estate world, a “tough nut” is a home seller who wants too much money.
To some degree, most sellers are “tough”; they want a great price. That’s okay, it’s just human nature. It doesn’t matter what we are selling – from a car to a home – we all want a good price.
Most of us, however, soon realise a great truth: Our possessions are usually worth less than we first believed. That doesn’t mean we can’t get a good price; indeed, the aim with selling anything should be to get the best possible price.
To achieve the best price, however, we must be pragmatic. We must listen to sound logic. As hard as it may be, we need the discipline to be objective, to see our possessions the way others – prospective buyers – see them. If not, we ruin our chances of selling at the best price.
And yes, most agents talk sellers down in price. Agents use a process called “conditioning” which means they constantly report bad news – like negative comments or low offers – to sellers. Eventually, worn down, most sellers ‘crack’. And under-sell their homes.
BE INFORMED AND UNDERSTAND.
These days, many sellers are well-informed. They know how agents condition sellers and they are ready for them. If sellers get too much negativity thrown at them – together with constant requests to lower their price (called “meet the market”) – many turn hostile.
When a home has been on the market for more than, say, a month, it’s common to find agents and sellers who barely communicate. The sellers have told the agent to “stop conditioning” them. They make statements such as: “Don’t bother me with negative comments,” or “We are going to wait for our price,” or the common brush-off, “We don’t have to sell.”
A stalemate ensues. The sellers don’t want to hear what the agents say (conditioning) and the agents don’t want to say anything to the sellers for fear of being condemned.
And so the home remains unsold.
Yes, conditioning exists. So does genuine feedback.
Some sellers – especially the stubborn tough nuts – become paranoid about negative comments from agents; they can’t spot the difference between contrived conditioning and genuine feedback.
So, while it’s good to be informed, it’s important to understand, as well.
You need to be careful not to condemn a hard-working decent agent because you don’t like what you are being told.
And yes, hard-working decent agents do exist. If you are fortunate enough to have found such an agent, be wise enough to keep them. Don’t sack the good agent as many stubborn tough nuts often do.
Here’s a common example:
TOUGH NUT FREDDY.
Freddy lived in a home worth around $2 million. In the hands of a good agent, the home should have sold for as much as $2.2 million, perhaps more.
But Freddy was the toughest of tough nuts. He wanted $3 million.
Like all “over-priced sellers”, Freddy had all his reasons why his home was better than other homes. Any agent who didn’t agree, look out. Freddy was ready to abuse “stupid agents”.
But Freddy’s agent wasn’t stupid. He was one of the rare hard-working ones. He was also decent enough not to charge anything – not even for advertising – until the home was sold.
Instead of appreciating this agent, Freddy took advantage of him. The agent worked his heart out for three months. He also spent several thousand dollars of his own money trying to help Freddy by covering advertising and staging costs.
In all the time that Freddy’s agent worked for him, most offers for the home came in at just under $2 million.
And then one day, the agent got a great offer – $2.2 million. After hours of herculean effort, the agent managed to get the buyers to increase their offer to $2.37 million.
Freddy still said no. He labeled the agent an “idiot”.
In hindsight, maybe Freddy was right. Maybe this decent agent was an idiot – an idiot for getting involved with Freddy.
Maybe this good agent should have left Freddy for the vultures.
Vulture agents are easy to recognise. If your home hasn’t sold within a few weeks of being on the market, these agents start hovering around. They’ll knock on your door, write letters or emails, or even send text messages.
The theme is similar: “Your home is beautiful. I am surprised it hasn’t sold. We have buyers looking for a home like yours.”
And the message with the theme is brutal: Your current agent is incompetent.
To stubborn tough nut sellers, like Freddy, vulture agents tell them what they love to hear. Beautiful home. Great price. Stupid agent.
The final message from vulture agents is transparently predictable – to an astute observer. But most stubborn sellers are not astute. In their eagerness to blame their first agent, they lose all objectivity (if they had any) and walk straight into the trap set by the vulture agent.
“Auction is what you need,” say the vulture agents.
Now, to be sure, Freddy knows – goodness, he’s been told enough – that auction is the worst way to sell a house. That’s any house, any time.
But these vulture agents are good – oh, my word, they are good. Good at getting homes sold, that is. Not good at getting good prices.
But Freddy – and stubborn tough nut sellers like him – knows nothing about the prices for which the vulture agent sells homes. All Freddy hears is that the vulture agent is a great success. Just look at all their reviews on Rate My Agent (where unsold unhappy sellers are banned from leaving reviews). Should be called Fake My Agent.
Look at their For Sale boards in the area – and sold stickers on them.
Oh yes, we are going to sell your home too. We will do what your first agent couldn’t do.
Yes, crack you, you recalcitrant tough nut.
And sell your home – at any price.
TOP AGENT DOES NOT MEAN TOP PRICE.
It’s one of the biggest secrets in the real estate world. Top agents do not mean top prices.
Just because an agent has a high “profile” it does not mean they get high prices. Indeed, these so-called “top” agents, these self-proclaimed “legends” are often only good at one thing: Cracking tough nut sellers.
And the best way to crack a tough nut seller is with the auction method.
It works like this:
Tell the tough nut sellers what they want to hear. Flatter them, make them feel good.
Then sign ‘em up. Which also means “stitch ‘em up”.
Once the tough nut sellers have signed up, hit them hard and hit them fast.
Be sure to make plenty of noise. Get the sellers out of the house during inspection times.
Be enthusiastic that their home is “going to sell”. Keep repeating that positive point. Do not mention price.
Just tell the sellers that the market sets the price – on the day.
Yes “on the day” – those three words which the tough nut sellers take to mean “the day of the auction” but which could more rightly be known as “the day of your financial execution”.
AUCTION – FINANCIAL EXECUTION – DAY.
The vulture agent and his pals from the office could not wipe the smiles from their faces.
They sold Freddy’s house – the same way they sell most houses. At auction. On the day.
For whatever price they could get.
And crunched the sellers with any of a dozen tricks from their bag of auction tricks.
Freddy, the seller who knocked back an offer of $2.37 million from the agent he described as an “idiot”.
Freddy, who was constantly told by his good agent that the true value of his home was “around $2 million”.
And now, Freddy is in the hands of the vulture agent. After four weeks of intensive advertising and lots of inspections – including neighbours, auction hounds, and sticky-beaks from miles around. With the big crowd at the front of the home.
The auctioneer with the hammer in his hand yelling, “We are here to sell!”
And Freddy who had been told “the reserve will protect you from selling too low,” doesn’t realise that no one – and that means no one! – will protect him from the vulture agent.
Freddy has set his reserve price at $2 million – after being led to believe (don’t you just love those words “led to believe) that his home may (another great word – “may”) sell for more than his reserve.
Maybe that $3 million was ridiculous, Freddy – and sellers like him – now concede.
But not this. This can’t be happening. Surely not. Not with everyone watching.
The bidding for Freddy’s house stalled at $1.5 million.
Like crows on roadkill, the vulture agents closed on Freddy.
And poor Freddy – that stubborn tough nut seller – who once boasted that his home was “worth $3 million. Who was recently offered $2.37 million with the former agent. Poor Freddy walks straight into one of the most deadly auction scams. It’s the “Stimulate Scam” (Reason 39 from the book, “88 Reasons Why You Should Never Sell Your Home at Auction’).
Freddy’s home sold for $1.5 million.
That’s almost $900,000 less than the price he was offered a few weeks back.
But it gets much worse.
As often happens, the buyer who paid $1.5 million at the auction was the same buyer who had offered Freddy $2.37 million through the first agent.
That means, of course, that Freddy is now liable to pay two commissions.
THE PRICE OF DECENCY AND HONESTY.
The honest and decent agent, the one who had worked and tried so hard for Freddy, the one who literally got $900,000 more than the auction price, he did not sue Freddy for commission.
No, the first agent, the good one, got nothing.
The second agent, the vulture agent, got the big commission.
Because the second agent got the sale, that’s why.
And, in real estate, for most agents, it’s not about getting lots of money for sellers, it’s about getting lots of sales for agents.
As the real estate institute teaches agents, “Auction is the fastest and best conditioning method.”
So what does the honest and decent agent do? For some agents, it’s a matter of survival. As so many agents think: “If we need to eat, we need to cheat.”
Two choices face nearly all agents. Do the right thing by sellers, work hard, and watch as the dodgy vulture agents come in and crack those stubborn tough nuts.
Or become a vulture agent themselves.
It’s a tough choice. And it’s one that many agents refuse to make. Instead they leave the industry and choose another profession, one where they are not forced to use the tactics used by most top producers in the real estate world.
There is a third choice, however. Agents can choose to remain honest and true to their ethical values no matter what the circumstances.
Such agents are rare. It’s tough being honest especially when you’re surrounded by dishonest agents who steal your clients with false promises. It’s even tougher watching homes you could have sold for much higher prices being sold by vulture agents at low prices.
But that’s real estate for you.
Among agents, it’s not about price, it’s about sales.
And vulture agents sure know how to get sales.
PLEASE NOTE: The example of Freddy in this story is just that – an example. There are, however, hundreds of such cases happening constantly in the real estate world. I see them. And they so frustrate and upset me. A recent specific case was a home in Melbourne that sold for just over $5 million. The agent was a vulture agent, and the sale was by auction. The first agent could easily have sold the same home for at least a million dollars more. But no, the tough nut owner – one of the rudest and meanest men you’d ever meet – wanted $8 million or more. He even suggested $10 million many times. Like a lot of arrogant people, he had a secret, financial problems.
The vulture agent got him to accept close to half what he once boasted his home was worth. As this vulture agent told me – and this is what many agents have told me many times over many years: “Neil, there is no way this seller would have accepted less than $7 million other than under auction conditions (Oh, those awful words “under auction conditions”); so can’t you see how we need to do auctions, especially for the tough nut sellers?”
Sure, I can see it.
But nothing could make me condone what vulture agents do. To my great frustration, I have seen so many agents cross to the “dark side” in real estate. They say it’s a matter of survival. They say I am “commercially unrealistic”.
Yet, when I introduce a good and decent home seller to a good and decent agent and the home sells for the best price and the sellers are grateful and happy and the good agent gets well paid – and pays us a support fee – that’s one of the best feelings, a sense of true pride.