by Neil Jenman
Reading time: Apx 6 minutes
When home-buyers attempt to buy a home, one of their greatest shocks is the crooked element of the real estate industry. It’s not only infuriating, it’s depressing. What is supposed to be one of life’s best experiences – buying a home – can be a living nightmare.
Rather than get angry or upset, you need to understand why agents lie to buyers. Once you know their motives you can understand their actions.
And maybe get a better deal for yourself. Especially at auctions.
One of the most truthful statements about the conduct of most agents – when they are dealing with buyers (and sellers) – is this: Most of what agents say is a pack of lies.
Your aim, however, is not to get dragged into this lying game. Stay removed from it and focus on the truth of what you want to achieve for yourself.
Take this email. It’s a typical example of what thousands of home-buyers endure:
“Dear Neil, my daughter is struggling to buy a home. Aside from agents who don’t get back to her, those who do are so dodgy. For example, she saw a home for “$310,000 – $340,000”. At a stretch, she can maybe afford $350,000. She loved this home. When she asked about the price, the agent said, “You need to offer at least $360,000.” When she mentioned the price in the advertisement, the agent said it was “just a guide”. This is so common. Every agent either lies about the price or refuses to answer a straight question or is vague and confusing. Aside from wasting money, she’s getting her heart broken by being attracted to homes she can’t afford. Why can’t agents be straight? What can she do?”
There is so much deception in real estate that, once buyers have been looking for a home for a few weeks, they start to wise-up to what’s going on. When an agent quotes a price, experienced buyers add-on at least 20 per cent.
For example, if a home is quoted at “around $1 million”, the buyers will expect the truthful price to be at least $1.2 million. Of course, on rare occasions when agents are truthful – and the price is accurate – many buyers make the mistake of thinking they can’t afford the home.
So, what do you do if you are trying to buy a home?
The first thing buyers should do is ignore prices quoted by agents. Instead of becoming fixated on lies, the buyers can focus on what they know is true – the amount they can pay.
If you are buying a family home (and not investing), then price, surely, is not the main factor. The main factor is how much you love the home. Of course, you need to afford the home, but you should not lower your price just because you don’t want to ‘over-pay’ in the current market.
As a buyer, ask yourself: What’s more important to us: Our money or our happiness?
Hopefully, it’s your happiness.
If you find a home you love in an area you love, and you intend to live in that home for many years – in other words, it’s your dream home – what does it matter if you pay more than its present value? You are only paying more today. In the future, today’s high price will be cheap.
In all my years in real estate, I have never seen people buy a home they love and hold it for many years and say they paid too much.
No, if you can afford it, and you love it, buy it – no matter what the local value may be or what price agents may be quoting.
Very few agents are smart enough to ‘qualify’ buyers. Therefore, many buyers buy homes well below their maximum price. They don’t deal in lies. Smart buyers work out how much they can afford – and then do their best to buy below their maximum price.
This is what Caroline, and her husband did. They found their dream. Luckily for them, it was scheduled for auction. The sellers, like thousands of sellers, had fallen for one of the biggest lies in real estate, one that costs thousands of sellers hundreds of millions of dollars each week. That lie is this: Auction is the best way to get the best price.
Wrong. Auction is the best way for buyers to buy below their maximum price. At auction, most homes are short-sold. Often, massively so.
For this home, the agent was quoting a price of “around $2.4 million to $2.6 million”.
Caroline said, “We could afford about $3.5 million. Of course, at that price we would have been paying way over current value. But so what? We are both in our thirties and this is the home where we plan to live forever; so that’s 40, 50, maybe even 60, years. Whatever price we pay in 2022 will look cheap in 2072. It may even look cheap in a year or two. Let’s see what happens at the auction. We are so excited.”
Sure enough. At the auction, there were plenty of bidders, all hoping to buy for $2.4 million – or maybe they added 20 per cent to compensate for the agent’s lies.
But Caroline was not dealing in lies. She had only two thoughts – and both were based on solid truths: She loved this home, and she could afford to pay up to $3.5 million.
She bought the home for $2.7 million, a massive $800,000 below the most she was prepared to pay. The reserve price (the sellers’ lowest price) was $2.6 million. At the end of the auction, as with most auctions, several buyers looked despondent, almost in tears. They had been caught by the agent’s price lies.
But not Caroline and her husband. They only dealt in truths. Their truths.
If you are trying to buy a home, take a lesson from Caroline and her husband.
Work out the most you can afford for a home. Start looking in an area you like – one within your price range. And then, when you find a home you love, ignore the agents’ quotes about the likely price. Work out what the home is worth to you.
Thankfully for buyers, agents rarely know their highest price. Most agents focus on one factor only – the lowest price sellers will accept. Once that price is reached, agents know they can make a sale. And get paid.
And that’s the main motive of every agent – to make a sale at any price. That’s one of the great truths of real estate.
So, why then, do agents deliberately lie to buyers about prices?
Well, two reasons: First, agents figure that the lower the price quoted, the more buyers they attract. This is true. Lower prices attract buyers – at lower prices. Agents then say to sellers, “This is what the market says your home is worth, therefore you should sell at this price.”
The agents make two stupid mistakes with bait pricing.
First, they attract buyers from the lower price brackets and, second, they have not bothered to discover the highest price the buyers will pay. Especially at auctions.
Before each auction, agents meet with the sellers to discover the absolute lowest price the sellers will accept.
Of course, if agents were interested in selling homes for the highest price, they would not meet with sellers to discuss their lowest price, they would meet with buyers to discuss the highest price the buyers were willing to pay.
But intelligence, like honesty, is rare among agents.
What happened with Caroline can happen to all buyers who focus on the truth of their own situation. They work out the highest price they can pay – in this case, $3.5 million – and that became their focus.
Caroline admitted that she laughed at how the agents were quoting the likely selling price at $2.4 million because this would attract buyers at this lower price. In addition, it would have “conditioned” the sellers into focusing on $2.4 million.
So, of course, when the home sold for $2.7 million, the sellers were happy. Their lowest price was $2.6 million. But what the sellers did not know was the biggest truth of all – that rather than getting $100,000 extra for their home, they had short-sold it by $800,000.
All because the agent was focused on what most agents focus upon – a sale at any price.
This is something buyers should be excited about. The lies of agents hurt sellers more than buyers. This is why so many buyers buy homes below the prices they are willing to pay.
Aside from lying about the price, there are many other lies agents tell buyers. One of the most common is the “other buyers lie”. Every time you find a home you love – no matter how it’s being sold –agents will say, “We’ve got some other buyers interested.” Yea, sure.
Here’s what experienced buyers say to agents who use the ‘other buyers’ lie. “Gee, those other buyers follow me around everywhere. Every home I look at, they are also looking at.”
To be resilient to the lies of agents, you must not let their lies affect your decision.
So what if other buyers are interested?
If you offer your best price, then if another buyer offers more, let them have it. The only problem for you, as a buyer, is if you want to play the game of lies.
Sometimes, all buyers need to do is ask agents: “What price will buy this home?” The agent’s answer is often well below the price the buyers are willing to pay.
Because most agents are such poor negotiators, they fall into this simple trap. Of course, if they were any good at negotiation, they would never reveal their sellers’ lowest price. But it can’t be over-stated. Agents want sales – at any price. If you understand this truth, then, as a buyer you can often buy your dream home at a dream price.
But be careful. Too many buyers make an offer and tell agents that this offer is the most they will pay. And then the agent sells the home to other buyers who offer a little bit more, but the first buyers then admit they would have paid a lot more.
If you are still worried that the agents, for whatever reason (and there are plenty of nefarious motives in the real estate world) may sell the home to a buyer who has offered less than you are offering, put your offer in writing and make sure the sellers see it. Either send the sellers (or their legal firm) the details of your offer.
Or, if you want to be clever, you can say, in writing (to the agents and the sellers): “We have made an offer but if you should get a higher offer, we will try and find extra money to increase our offer, so please be sure to let us know before you make your final decision.”
If you are serious about buying and you love a home, the best way to give yourself the best chance of buying the home is to do something most agents never do – tell the truth.
There is nothing worse than finding out that your dream home sold to other buyers for less than you were willing to pay. Remember, agents don’t care about getting the best price for the owners, they only care abut getting the property sold.
So, if you don’t want to get hurt by the lies of the price games, do not participate in these lying games. Hopefully, if the home you love is being auctioned, you will never need to reveal your truth. That’s something you keep to yourself. Just like Caroline did.
Just fold your arms, nod at the auctioneer, and hope the bidding stops below your best price – as happens to the highest bidders who buy at most auctions.
This is how thousands of buyers buy homes at auction at lower prices. They ignore the lies and focus on their own truths. In Caroline’s case, that saved her $800,000. The same happens to many buyers.
It can also happen to you. Ignore the agents’ lies, focus on your truth. And save thousands of dollars when you buy your home.
FOOTNOTE: If you have seen a home you love and you’d like support and more tips on how to buy well, you are welcome to contact Jenman Support. There is no charge for this service.
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