by Neil Jenman
Reading time: Apx 9 mins
Every week inexperienced real estate consumers – home buyers, sellers, investors, tenants – make dreadful mistakes. Most mistakes are caused by two factors – the advice from agents (which is in the best interests of agents) and by the consumers’ naivety.
For most people, real estate is an unknown land. Without a reliable guide, people get lost. And then, when they find their way out, they discover they have lost a stack of money – they’ve paid too much or sold for too little.
This happens to most people.
Of course, many people – some would say the lucky ones – never realise what’s happened to them. Auction sellers, for example, shake the hands of the agents who have massively over-charged them and undersold their homes. That’s the story at most auctions.
In real estate, what you don’t know will hurt you. Ignorance is far more costly than commission.
But if you ask the agents, they’ll tell you – it’s not their fault. “All buyers are liars and all sellers are greedy,” is what they say.
The justification for unethical behaviour is commonplace. And, it could be argued, some justification is valid.
What do buyers do when they discover that most agents lie about likely selling prices?
And what do sellers do when they’ve signed up with an agent who’s now asking them to accept thousands of dollars below the price the agent quoted them?
And what do the agents do when they know that, if they tell the truth, most sellers would never sign-up with them and most buyers would desert them?
Being in real estate means you have to second-guess what everyone tells you.
It can be frustrating and depressing.
In today’s rapacious real estate world, it’s hard to know whom to trust.
There is one person, however, that you really should be able to trust – and that’s yourself.
No matter what you plan to do, you should want the best result for yourself.
That’s not greed, that’s financial prudence – or to be blunt, financial intelligence.
But to be intelligent about a subject you need knowledge on that subject.
Unfortunately, ignorance seems more powerful – and certainly more prevalent than either intelligence or knowledge.
In the course of a long real estate life, I have written millions of words to help consumers find a safe path through the real estate world. Thousands of articles and almost three million copies of my books published. But still thousands of consumers are ripped-off every month. That’s no exaggeration.
It makes me despair at times, it really does.
But then my family remind me of the many people we do help – how we save them thousands of dollars. It makes a difference, especially to the over-60s for whom every cent counts. When you get ripped-off or short-sold in your sixties, it’s harder to recover.
If I was compelled to distil all the real estate advice I have written into just four rules – my “best of”, so to speak – it would be these:
You can trust yourself to want to do the best for yourself.
But you cannot – and I repeat, you CANNOT – always trust yourself to do what’s best for you.
Lack of experience (naivety) is your biggest enemy – bigger than the worst agents you’ll ever face.
The most important fact you need to know therefore – one that can save you the equivalent of several years wages or savings – is this well-known proverb: Look Before Your Leap. Four words that mean: Never act until you have considered all the possible consequences and dangers.
Do not just focus on the best that can happen – focus on the worst that can happen. If you sign-up with most agents without much thought, you will be at great risk of being hurt, both financially and emotionally.
Sure, you may be quoted a tantalising price for your home. But if, once you sign-up, you get absurdly low offers and decide not to sell, how will you feel when you get a bill for thousands of dollars (ostensibly for advertising; in reality, for promoting the agent – yes, the one who enticed you with a whopper of a lie about the price)?!
Make sure, therefore, to ask yourself a risk-reducing question. It’s only eight words and here it is: What’s the worst that can happen to us?
There is one sentence that all salespeople in all industries fear (even hate): “We want to think about it before we sign anything.”
Now, be careful, all salespeople are trained in how to overcome the I-want-to-think-about-it objection. They have some powerful and persuasive lines to coerce you into signing-up today. To sign-without thinking.
Here’s something to realise and understand: Whatever deal a salesperson is offering you today, will still be there tomorrow. And the day after. And next week. If not, it’ll be a better deal.
Indeed, the longer you make a salesperson wait for your decision, the better the deal you are likely to get. In negotiation, this is known as the “sunk-cost syndrome”.
The more dogmatic you are about your think-about-it policy the more you will look after yourself.
So, trust yourself. Insist on thinking about it before you sign anything.
One of the best statements to make if a salesperson is pressuring you to sign-up is to firmly say: “In our family, we have two non-negotiable policies. First, we always give ourselves a few days to think about any major decision. Second, we never sign-up with any overly pushy salesperson.”
“So, we will call you when we have made a decision.”
As a Chinese Proverb states: “One moment of patience may ward off great disaster, but one moment of impatience may ruin a whole life.”
Look after your life. Be patient.
Or your wallet. Do not hand over – or agree to hand over – any money until your home is sold at the price you want.
Honest and competent agents do not ask sellers to pay money in advance of their homes being sold.
Dishonest agents know things you don’t know. Here’s a big one: The reason they want money up front while you are in a feel-good mood – even intoxicated with excitement over the [false] price they’ve quoted is this: When you discover (as you soon will) what this agent intends to do to you, you will never want to pay them.
That’s why so many agents want your money upfront. They know that, later, you will be so cheesed off with them that you won’t want to pay.
As you shouldn’t.
Think about this: Why else do agents have horrendous clauses (buried in the fine print) of their agreements that allow them to sue you if you don’t pay them?
So, the third trust rule is never pay (or agree to pay) any money to any agent until your home is sold and you are satisfied with both the price and the service.
Now, of course, agents will argue: Well, what if we do a great job and the sellers rip us off by refusing to pay?
Well, what do you know? What a turnaround, eh?
Instead of you having to trust the agent the agent has to trust you.
And consider something else: Research shows that 95 per cent of people do not trust real estate agents (99% if you exclude their mates and relatives), so why do you have to be one of the one per cent to trust them?
How trusted are you by the public? If the trust level of your profession is higher than the trust level of the real estate profession, it’s only fair they should trust you.
One of the golden rules to assessing the merits of anyone (person or company) is by looking at what they do, not listening to what they say they will do.
It doesn’t matter if it’s the ancient biblical rule: “By their deeds you will know them”. Or the street rule: “If you talk the talk, you’d better walk the walk.”
Someone once said, “When all is said and done, there’s far more said than done.”
It’s so true. How many times do we hear about agents not doing what they said they will do? How many times do we hear about agents underquoting the selling price to buyers after overquoting the selling price to sellers? Thousands upon thousands.
Granted, agents can’t please everyone (high price for sellers and low price for buyers). But that doesn’t justify lying to everyone.
Don’t believe it?
Then try this test of an agent’s (or any person’s) sincerity: An agent assures you that they can do a great job for you – sell your home for a wonderful price and give you great service.
Then you need to reply: “When you have achieved that aim, we will pay you well.”
The agent will then request (even demand) that you pay advertising costs. Your reply should be: “What? So you can promote yourself at my expense? To attract more leads for you?”
If the agent insists that several thousand dollars needs to be paid in order to find a buyer for your home, then the agent does not understand marketing or advertising.
A senior executive with one of the nation’s largest real estate websites was selling her home in a ritzy Melbourne suburb. The agent asked her to pay $6,000 for a “premium” advertisement, just as this agent – like most agents – tells all sellers to do the same.
But with inside knowledge not available to most sellers, this person replied: “You can forget about me paying $6,000. I work for the web company, and I know that an ad costing a couple of hundred dollars is often more effective than an ad costing thousands.”
You see, home buyers type in their preferences for the home they seek. And whether a seller has paid ten thousand dollars or one hundred dollars for an ad, buyers will find the home. The right buyers, of course. Oh sure, you may not get so many ‘hits’ or so many ‘lookers’ with a less expensive ad. But you’ll get all the qualified buyers you need.
BEWARE: Stupid and ignorant agents say: “If you don’t pay (or agree to pay) several thousand dollars in advertising costs, we won’t list your home.”
You must reject such agents. Do not be bluffed.
Consider this – and it happens thousands of times: An agent refuses to accept a listing for a home where the commission may be as much as $50,000 all because the sellers refuse to pay (be conned out of) another $5,000 for needless advertising.
And get this: The agents often admit that the $5,000 doesn’t go to them, it goes to the website company (the one majorly owned by the Murdochs.) And yet, these agents are willing to walk-away from a potential $50,000 (or even twenty or thirty thousand dollars) in commission all because the sellers refuse to pay upfront marketing costs.
What sort of agent makes such a nose-cutting stupid decision? A stupid agent, that’s who.
And believe it, you are better off without a stupid agent – especially the type that consider their profile more important than the sale of your home.
So, when you follow Trust Rule 4, look at what an agent does – not what they promise. If they give you a big promise and then, before delivering on that promise, they ask you for a big amount of money, you are dealing with an agent who is certainly a big fool – or a big crook. No other reason is possible.
Always remember what the movie star, Marilyn Monroe, said: “Promises are often worse than lies especially when promises are not fulfilled.” She could have been talking about many of today’s real estate agents.
A promise needs to be supported by deeds, not demands. When an agent promises to sell your home for a great price, tell them to go do it. If they ask you for money in advance, tell them to go away. Find another agent.
IN SUMMARY.
From the millions of words I have written to help home sellers, if they only remembered and followed these four ‘trust rules’ they would be safe:
These four trust rules will also get you a much better price for your home.
**********************************
FOOTNOTE: If these words have been helpful to you and you are considering selling your property soon – and you’d like to acquire even more knowledge – I’d like to offer you a complimentary copy of my book called ‘DON’T SIGN ANYTHING!’ It is often described as my best book. It’s certainly the most comprehensive with 12 chapters packed with ideas and tips. And, of course, warnings. In all, it’s 420 pages which means it will take about 420 minutes to read. That’s seven hours. An hour a day. Well worth your time investment, especially with what you’ll learn and how much you will save in expenses and the extra you will receive on your sale price. There is no obligation. All we ask, however, is that, when you do decide to sell, you contact us before you contact an agent. Allow us the chance to support you – at no charge. If that sound fair enough, please click here and we will post you a copy of ‘DON’T SIGN ANYTHING!’
******************
To comment on this article, please click here.
To contact us, please click here.
To follow Neil on Twitter, please click here.
To visit our Facebook page, please click here.
To read more Articles, please click here.
******************
Greg Porter says:
Hi Neil, another very informative article. Thank you.