INVESTOR MAKES $100,000 PROFIT FOR 3 HOURS ‘WORK’

At expense of sellers who sell with wrong agent!

by Neil Jenman

READING TIME: 8 mins apx

Tony is a coffee shop owner. He ‘dabbles’ in real estate on the side. In March this year (2022), he noticed a home for sale in a regional centre.

At $420,000, it seemed cheap.

After an hour or so of research, Tony bought the home. He then arranged for it to be given a fresh coat of paint plus get the lawns mowed and do some work in the garden.

The total cost of what he called a “spruce-up” was about $7,000.

He then put the home back on the market – with a different agent from whom he bought the home – for $549,000.

Last Saturday, during the election, Tony received an offer of $535,000. The agent thinks the buyers will pay more, so negotiations are continuing.

Tony’s aim is to make a profit, after costs (and before tax), of $100,000. From the feedback so far, he’ll go close.

Tony has never physically seen this home. He just saw it on-line. He has never been to the city where the home is located. By the time the home is bought, spruced-up and re-sold, Tony will have spent less than three hours on this project.

“I’d have to sell a few cups of coffee to make a hundred thousand dollars,” laughed Tony.

But what about the previous owners? They can’t be laughing, surely? After all, Tony’s profit of $100,000 is their loss of the same amount.

It turns out that the property was a deceased estate.

Well, what about the original agent, the one from whom Tony bought the home – aren’t they embarrassed? Or maybe ashamed? How about angry?

Nope.

A SALE AT ANY PRICE

To quote several local agents – “They don’t care.” They made a sale and that was it.

This is the attitude of many agents – as homes get sold well below the amount for which they could be sold – especially when markets are volatile, as in many areas now.

But what about an agent’s fiduciary duty to always act in the best interests of their client? Well, most agents can’t even spell ‘fiduciary,’ let alone abide by it.

For many agents, a sale is a sale. The price is irrelevant to these agents. They just want a sale – at any price.

Savvy investors like Tony can easily pick up huge profits by purchasing properties below their true value. It happens all the time. Indeed, this example, of Tony making a profit of $100,000, is a small example. There are ‘investors’ buying properties and re-selling them (it’s called ‘flipping’) for hundreds of thousands of dollars profit.

With “bad news” circulating about the property market – interest rates rising and auction clearance rates plunging – many sellers are now being coerced into under-selling their homes – more so than ever before.

SLOW DOES NOT MEAN LOW

Sure, the market may be slower but the word “slower” just means “longer” it does not have to mean “lower.”

If sellers resist the pressure from agents to lower their prices many of them only need to wait a bit longer and the right buyer will appear. Especially on quality homes in sought-after areas.

It is not my intention, in writing this article, to show people how to buy properties on the cheap and flip them again for profits of upwards of $100,000. In my latest book, 88 Reasons Why You Must Never Sell Your Home at Auction, I reveal seven reasons to buy at auction. I explain how, years ago, I often bought homes for as much as half their true value (normally deceased estate or government auctions) and re-sold them immediately – or, like Tony did, after a quick spruce up, for massive profits.

BUY AND SELL WITH DIFFERENT AGENTS

One of the biggest secrets of success in selling or buying real estate is this: The best agent to sell with is rarely the best agent to buy with – if price is important to you.

When I hear people say they are going to sell their home with the agent from whom they bought the home because they were “really nice,” I ask them to define “really nice.”

“Oh, they helped us get it much lower than we were willing to pay.”

Well then, do not go back to the same agent.

A good agent to buy from at a cheap price is not a good agent to sell with.

The choice of agent to sell your home can make a difference of hundreds of thousands of dollars.

“BEST AGENTS” – BEST FOR WHOM?

The “best agent” to sell with is the agent who gets the best result for the sellers.

This point was raised with me recently in a message I got from a long-established agent in Sydney’s west. He informed me that an agent who’s currently hailed as “the best” in a recent ranking of agents is, allegedly, selling homes well below their true value – meaning the amount the buyers are willing to pay (or other buyers would have paid).

He’s a ‘churn-em-and-burn-em’ agent. Turnover is what’s important. You can pick these agents because they often boast about the short time homes are on the market.

Well, fast sales often mean cheap sales – as has been shown in respected research.

Beware sellers, when an agent says, “I am the top selling agent in this area.”

Such a statement does not mean the agent is selling homes for top prices. Far from it. “Top selling” means selling the most homes. Even basic research will soon reveal a horrifying fact about so-called “best” or “top” agents. Some are under-selling homes by as much as hundreds of thousands of dollars.

WAIT FOR THE RIGHT BUYER

Recently, I was arguing with an agent (as we often do) about the price of a home. I was supporting the owners who believed they should have been able to sell for more than the price being offered through this agent.

The agent was saying “The buyers won’t pay any more.”

It’s a common line for agents to say that buyers making an offer won’t pay any more. But my reply is almost always to say, “Well, these are the wrong buyers. Find the right buyers.”

Some agents get annoyed with me.

But then I ask them this question: “If the sellers accept the offer from these buyers and then, in a few weeks from now, these buyers ‘flip’ the property – and sell it for the price the current sellers are urging you to get – which is $250,000 more – how will you feel?”

The agent will usually pause. Some admit they would “feel bad.”

Others will say something like, “But that’s not going to happen.”

To which I then say, “Will you give the sellers a guarantee that if the current buyers ‘flip’ the property immediately and re-sell it for a massive profit – which means, let’s face it, that you massively under-sold their property – you will reimburse your sellers the amount by which the property was on-sold?”

In Tony’s case, this would mean (at least) an extra $115,000 (the gross difference between $420,000 and $535,000).

Of course, agents all say no. They are much more careful when it’s their money, their risk.

When Shirley was selling her home in Melbourne’s inner-suburbs recently, she was quoted prices from $4.1 million to $5.2 million. A difference of $1.1 million.

And here’s the catch for many sellers – the huge trap especially in what agents are calling a “down market”: The agent who quoted her $4.1 million was right. And so was the agent who quoted $5.2 million.

“Right” in as much as both agents believed their quoted price was right. The home sold for $4.7 million which, I am sure, was the absolute best price. It took nine weeks to make the sale during which time Shirley had to resist the pressure of offers as low as $4 million.

She waited, she hung-on, she got a great price.

But without good advice and support, without taking the time to research not just prices but agents, Shirley could easily have sold for $4.1 million. The buyer could have then done what Shirley did – and what Tony is doing – and waited for the right buyer to come along and pay $4.7 million.

That would mean a $600,000 gross profit for the buyer.

Waiting is a strategy that many agents won’t like.

But, as happened for Shirley, waiting can pay off big-time. It means you get the right buyer at the right price.

UGLY AGENTS WITH UGLY STRATEGY

Be careful sellers. Sure, the property market is softening. But don’t let agents soften you up. If you have a good quality home in a sought-after (“tightly held”) area, be careful you are not too quick to accept low offers.

On the Central Coast of New South Wales, Gordon and Lisa have just fired their agent who kept trying to talk them down in price and who kept giving them low offers.

The agent had likely been trained by a [foul-mouthed] sales trainer who urges agents to “give them hope” and then get the sellers signed up. And then, the minute the sellers have signed-up – yes, before leaving their homes – the agents “set them up” to reduce the price in a couple of weeks time. He calls it “GOING UGLY EARLY.”

It’s an ugly and unethical tactic. If it happens to you, sellers, you have chosen the wrong agent. If you can manage it, snatch the paperwork back and tell the agent (nicely) to leave your home.

GREAT PRICES CAN STILL BE ACHIEVED

Yes, it may be harder than it has been for months to sell for a great price. But, in many cases, it’s possible to still get a great price, especially if you have a great property.

Don’t succumb to the tactics of agents whose aim is to make sales at any price. Find agents who are dedicated to getting you the best price – not those who quote you a great price before you sign up and, within seconds of you signing-up, they are trying to lower your price (which is often the price they quoted you!!).

Sellers are being assailed on many fronts right now. If they are not careful, today’s sellers will simply become profit sources for savvy investors who know which agents are great to buy from and which agents are great to sell with.

Buy cheap from one agent who doesn’t care about getting a great price. And then sell high with an agent who’s skilled at the art of real estate negotiation.

And beware of the multi-offer technique being used by some investors. They inspect, say, 30 properties and make “insultingly low offers” on 20 properties and hope at least one seller will “crack”.

And then they buy the home and flip it again by using a decent agent, an agent who understands and respects the importance of “fiduciary duty.”

Coercive control is not just reserved for domestic abuse. It’s also used by agents who use high pressure and manipulative tactics to persuade sellers to sell – at any price.

Sure, there are times when sellers must accept a lower price when the market is tougher. But that should only happen after the agent has exhausted every possible method of getting the best price possible.

Unfortunately, these days – with years of booms – many agents have either forgotten how to sell or have never learned to sell.

All they know is how to coerce sellers into accepting lower prices.

NEGOTIATORS

Most real estate agents are hopeless at negotiation. As mentioned, they are only ‘good’ at getting sellers down in price. And yet these same agents who expect you to lower your price and accept the huge discount demanded by buyers refuse to discount their commission.

As the late John F Kennedy famously said: “You cannot negotiate with people who say what’s mine is mine and what’s yours is negotiable.”

That’s a description of many agents.

If you are selling your home, you need an agent who genuinely knows the art of negotiation – and that means persuading buyers to pay a great price for your great home, not talk you down in price.

Back in 2015, I wrote and presented a real estate negotiation course for agents. I wrote a booklet with 42 RULES for agents to get the best price for their sellers. If you are a seller and you’d like a copy of this booklet (to check or monitor the skill level of any agent), please click here to download a copy now.

And remember, your home is your valuable asset. Do not allow anyone to profit due to the incompetence or lack of care of your agent.

Find the right agent and get the right price.

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If you need help or support to find a good agent or to support and monitor your current agent, please email us on support@jenman.com.au or call 1800 1800 18.

To purchase my latest book on auctions, please click here. Nurses and paramedics, no charge.

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