THE TRUTH ABOUT FALSE QUOTES
How real estate agents lie to survive.
by Neil Jenman
Reading time: Apx 5 mins
False quoting is rampant in real estate. Most agents (about 90%) participate in false quoting. If they don’t, they will struggle to survive. Without false quoting, these agents would struggle to find houses to sell, and they would struggle to find buyers for those houses.
Even the most honest agents get snared in the nefarious practice of false quoting. It’s built into the systems and methods that most agents feel they are forced (or instructed) to use. They way they see it, they have no choice. Quote honestly and lose. Quote falsely and win. Lie or die. That’s the reality for real estate for agents in the 2020s.
False quoting has become so common in real estate that, rather than complaining about it, sellers and buyers need to learn the truth about it.
There are two types of false quotes.
1. FALSE OVER-QUOTING TO SELLERS – WHY AND HOW.
Finding homes for sale (listings) is the major focus of all agents. Without good listings, agents can’t make sales. But the competition to win listings is fierce.
Most agents know that, generally, the agent who quotes the highest estimate of the value of a home is the agent who wins the listing. Quite simply, most sellers reward agents for lying to them.
Yes, the biggest liars get the job. The biggest (and best) liars therefore list the most homes.
But, once agents list homes, their next challenge is to sell these homes.
And because they have over-quoted the likely selling price, their major focus is n\how to get the owner to reduce the price.
Of course, after they win listings, agents can’t say to the sellers: “We lied to you about the likely selling price of your home. We did this so that we could sign you up and tie you up for four months. And now we start to talk you down in price. In the industry, it’s called “conditioning. So, brace yourself for what’s about to come.”
No, agents need to be more subtle if they intend to turn those listings into sales.
Enter the great alibi of dodgy agents – “the market”.
From now on, the most common words the sellers will hear are “the market”.
“We will take the property to the market.”
“We will market your property to the market.”
“We will see how the market responds.”
“We will give you market feedback.”
“The market is getting tough.”
“You need to listen to the market.”
“The market says your property is only worth…”
Can you see what’s happening? The agents tell the lies. The market becomes their alibi.
Let’s use a specific example. Say a home is genuinely worth about $2,000,000. To win the rights to sell that home – get the listing – agents over-quote the likely selling price. The home will probably come on the market with the owners expecting as much as $2.4 million.
But now the agent must attract buyers to a home that’s over-quoted by at least $400,000. If the agent promotes the property at the price quoted to the sellers – $2.4 million – there will be little or no interest.
It’s time to start under quoting to the buyers. Time to draw in a crowd. Time to “take the property to the market”.
2. FALSE UNDER-QUOTING TO BUYERS – WHY AND HOW.
To sell a home, it is necessary to find a buyer. That’s obvious. So, the agent now tells the sellers that, to attract buyers, it will be necessary to promote the home at a lower price.
If the sellers baulk, the agent will say that, at $2.4 million, there won’t be any buyers. “We need to get lots of buyers. When they fall in love with the home, we get them to compete. We talk them up in price.”
If the sellers still seem sceptical, the agent may say, with great sincerity, “Trust me, I have been doing this a long time. I know how it works. This is how we get you the best price.”
Even though the sellers may have reservations, most go along. They allow the agents to market their home at a lower price – usually within a price range.
In this case the agents may say $1.7 million to $1.87 million.
Now, when the crunch comes, the owners may agree to accept $2,000,000 (the real value) or less – especially after they have been subjected to weeks of conditioning.
The agents say they are complying with the law (which requires them to quote within a range of 10% of what they have told the owners). So, while they may verbally have said $2.4 million, when it comes to writing the price on their Listing Agreement, they adjust it down. It’s a strategy to get the home sold (at any price).
It’s amazing how many sellers swallow this sophistry.
Buyers’ Response.
Ask any experienced home buyers – those who’ve been in the market for more than a few weeks – how they deal with the ubiquity of false quotes.
The typical buyers’ response to this false quoting epidemic creates another dilemma which makes it near impossible for even well-meaning agents to remain honest.
To protect themselves from disappointment and needless costs, most buyers add between 10% and 20% to the price they see quoted for a property.
So, if an honest agent – who’s truthfully told the owners that their home is worth around $2 million (and the owners believe the honest agent) – promotes the home for $2 million, the buyers (who have become conditioned to being deceived) will believe the owners want between $2.2 million (10% more) and $2.4 million (20% more).
And what will happen then?
The home will likely be ignored. The buyers won’t believe they are seeing a truthful quote. The home will soon become stale – even turned into a lemon.
The honest agent will be punished for not under-quoting – because most buyers know that most agents do under-quote.
So, if the honest agent wants to sell a home for the genuine price of $2 million (or maybe a bit more), the agent will have no choice. They must compete in a dishonest market where most (at least 90%) of homes are under-quoted. If they are to get any enquiry for the home – assuming of course, that they first do what all good agents do and make a concerted attempt to speak with buyers known to them – they must underquote the home.
This is real estate industry in Australia in the 2020s. Agents must over over-quote the selling price to win sellers and then must underquote the selling price to attract buyers.
Honest agents truly despair.
As does the author of this article.
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Jenny Drayton
October 30, 2024 @ 9:08 am
Thank you I,ve seen it so many times and two houses around me now for sale. However locals are pushing me to go with this agent.