RIDICULOUS ADVERTISING RIP-OFFS
by Neil Jenman READING TIME: 5 mins apx If you are selling a home and an agent is asking you to pay money up-front for “marketing costs,” here’s a message…
by Neil Jenman
Reading Time: Apx 5.5 mins
The easiest thing in the world to do is agree to spend money. Saying yes is so simple. It makes you seem agreeable. And, of course, it often makes you popular – especially with the person to whom you are paying your money. They pat you on the back or shake your hand as they siphon bucks from your bank account. Feels good, doesn’t it?
But spending money is often not the smartest thing to do.
Saying no to spending money can be difficult – especially if you are bucking the trend. If you are told that everyone else is doing something or that “this is the way it’s done”, then it’s often hard to be the contrarian.
But if you care about your finances, you must be careful how you spend your money – especially when it comes to spending money you don’t need to spend.
Such as when you are selling your house.
And especially when dealing with real estate agents.
Most home sellers spend far too much money when selling their homes. The major reason for over-spending is simple: Sellers rarely see the money they are asked to spend.
The agents – who are the ones encouraging sellers to spend money – have become masters at making home selling costs near painless.
And it all begins with the one thing that all sellers can control – their signature.
Therefore, before you sign anything with any real estate agent, you must get an idea of exactly how much money you are going to be spending. And don’t think that because you are selling your home for hundreds of thousands of dollars that a few thousand dollars doesn’t matter.
Imagine you went to dinner with a friend. You chose the best restaurant in your area. You ate the most sumptuous dishes on the menu.
And then the bill came. And there it was in front of you – $5,000.
What would you do?
You’d be outraged, of course. You’d demand an explanation.
But the bottom line is this: You would refuse to pay.
But here’s the catch.
While five thousand dollars seems like a hugely excessive amount for buying a meal, it doesn’t seem as excessive when you are selling a house.
And yet it’s the same money. Five thousand dollars is five thousand dollars – no matter how or where you spend it.
So, here’s what you must do: Look at every cost you are asked to spend as if it was laid out before you in hundred-dollar notes. Five thousand dollars is fifty-hundred-dollar notes. Picture it sitting on the table in front of you. Now, you can take that money – those fifty-one-hundred-dollar notes – and put them in your pocket.
Or you can say, “Nah, I don’t want this money. I think I’ll give it to a member of the least trusted profession in Australia – a real estate agent.”
The first rule regarding the costs of selling a house, therefore, is this: Stop spending money that you don’t need to spend.
The second rule is don’t spend any money until you have received the service for which you are being asked to pay. And make sure that you remember the J word – justify. If the agent – or whoever is asking you for money – cannot justify you paying it (in other words, you are sure that you have got great value for money), don’t pay it.
And don’t agree to pay it – later.
This is another sneaky way that agents are now persuading home sellers to pay for things that they don’t need. The agents are telling the sellers they can “pay later”.
Now, while the words “pay later” may sound attractive, you need to be sure that you insist on another condition. You will not be required to pay unless you are happy. Yes, that’s right, if you don’t believe that you have received value for the money you are being asked to pay, then you do not have to pay it.
This is a condition, by the way (one of our eight protection points) that we at Jenman Support place upon agents before we put them in contact with any home sellers. The agents must agree that the sellers will not be required to pay any money until such time as their house has been sold. And should there be a dispute between the agent and the seller, then the agent has already agreed in writing to abide by the decision of Jenman Support.
There is one fair and simple proviso, of course: As the seller you must let the agent know if you are happy before you say yes to selling your home to a specific buyer. You can’t go to a restaurant and eat a meal and then lick your lips, burp and ask for a refund. Unless you are being overcharged, of course.
Just because something might be commonly done, it does not mean that something is necessarily right. Obviously, if a restaurant charged $5,000 for a dinner for two, you’d know instantly that you had been overcharged.
But how do you know what constitutes being ‘overcharged’ when selling your home?
There are four main costs involved with selling your house in Australia. All but one is often a massive rip-off. Ironically, the one cost that is not a rip-off is the one that usually has nothing to do with the agents.
The first cost is MARKETING. This is the most blatant and obscene rip-off. Most Australian real estate agents now ask home sellers to pay for the cost of advertising their homes in addition to the costs of the commission for “selling” those homes. This is the only country in the world where this blatant and needless rip-off is perpetrated upon home sellers. In all other countries, all costs – including advertising – is included in the agent’s commission. As it should be. And as it can be – if you, as the home seller, stand up for yourself.
Just say no.
No, you will not be liable for any marketing costs either before your home is sold or if your home should fail to sell.
All agents have already got buyers on their books. Many even boast about how many buyers they already know. For example, there is a real estate company in Melbourne that boasts that more than 9,000 buyers come through their ‘open homes’ every week.
They also claim to have more than two million “potential buyers” on their database. And yet, most of their sellers are persuaded to spend thousands of dollars on marketing costs – to find a buyer.
Seriously, when you think about it (which, sadly, most sellers don’t), it’s incredible that so many sellers fall for this most blatantly unnecessary expense.
What’s even worse, of course, is that agents often fail to sell homes. This means that the sellers have forked out thousands of dollars and got nothing in return. But, of course, the agents have got plenty in return. The agents have increased their profile (they call it “building their brand”) and got more leads. All thanks to the sellers who were too timid and too naïve to stand up to the agents and refuse to pay those needless costs.
The first cost, therefore, is a cost that does not need to be paid – at least not until your home is sold and only if you are happy to pay it.
The second cost, of course, is the COMMISSION.
Be careful with this one.
Many sellers make one of the biggest home selling mistakes. They choose the agent who offers the cheapest commission. In many cases, however, cheap agents get cheap prices. If an agent can’t negotiate a reasonable commission for themselves, they surely won’t negotiate a good price for your home.
The secret with commission is this: If the agent gets you a great price, then yes, they will be entitled (justified) to a higher commission (than cheapie agents).
Just remember, however, that all commission is negotiable until the point of sale. Focus on the net price you want – and be sure the agent’s commission is in addition to your net price. In other words, focus on how much goes into your pocket before you worry about the agent’s pocket.
The third cost of selling a home is usually the biggest cost of all. It’s also a cost that is truly hidden. Most sellers never realise how much they have lost with this cost of selling a house. It’s the amount by which their homes have been UNDER-SOLD.
Believe it or not, most homes are under-sold, sometimes by several hundred thousand dollars. Just because you, as the seller, might be happy with the selling price of your home, the question you must ask (which few sellers ever ask) is this: Is the final selling price, the best price that the buyers are willing to pay?
In most cases, the answer is no.
Quite simply, most agents are not good at negotiating. Their main skill (if you can call it a “skill”) is pushing sellers down in price.
Consider this real estate fact: Most homes get sold when the sellers agree to accept a price. Homes rarely get sold when the buyers have offered their best price.
The way to discover if the buyers have offered their best price is to make sure that the agent uses what’s called a “Buyers’ Price Declaration”. This is a simple document whereby the buyer attests that they are offering their best price, and they do not wish to be notified if another buyer offers a higher price. To view a sample copy of a Buyers’ Price Declaration, please click here.
The fourth and final cost of selling a home – and the one that usually has little to do with the agent (at least in receiving money) is the cost of ‘STAGING’. If your home is cluttered or your furniture looks old and tired, then ‘staging’ may well be worth considering. Be confident, of course, that the costs of staging are going to increase the selling price.
For years, I have been urging sellers – ‘DON’T SIGN ANYTHING!’. At least until you are sure that you are going to be safe when selling your house. But now, I wish to add another three words – that are equally as important – ‘DON’T PAY ANYTHING!’. At least not before your home is sold and you are happy with the price received and the service from the agent.
Many years ago, I wrote a book called ‘Don’t Sign Anything!’. It became a best seller (reaching number one in business books). It has often been called my best book on how to sell your home safely and for the highest price with the least expenses.
If you are thinking of selling your home – and you are a subscriber to our website (Jenman.com.au) – I will be pleased to mail you a copy of ‘Don’t Sign Anything!’ with my compliments. I trust that you will read it and that you will contact us at Jenman Support BEFORE you contact any agents. Take care.
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