How to avoid dodgy tactics from real estate agents

Buyers, sellers and anyone else thinking of entering the real estate market need to be aware of the possible shonky goings on and how not to fall victim.

Recent news coverage of unethical practices of the real estate industry prompted a significant response from consumers and industry folks, namely agents.

I have been swamped by agents and the public asking for my view. So here is my explainer, as someone with over 30 years of industry experience, of the key issues under scrutiny including what buyers/sellers can do to protect themselves.

1. CONDITIONING AND OVERPRICING

This is the practice where an agent lists a property at a higher price than the market value, then over a period of weeks pushes the owner to reduce the price. This practice does take place and is caused by one of two reasons:

1. The agent inflates the price of the property to get the listing;

2. The vendor wants an unrealistic figure for their property.

If you’re a vendor, I suggest that you ask the agent to produce comparable sales to support their view of the value of a property.

Tom Panos in his role as auctioneer. Picture: John Appleyard

Another option which is not often used as much as it should be, is to get an independent valuation by a registered valuer. While this costs a few hundred dollars, it’s worthwhile as there are legal ramifications for the valuer if this figure is not accurate.

As for the practice of “conditioning”, a word I do not like. I think “vendor education” is far a better term to reflect this process. During the marketing campaign an agent will obtain feedback from buyers on likes and dislikes, and their opinion on value. This feedback will help adjust the price of the property if it is, in fact, overpriced.

2. UNDERQUOTING

This is where an agent misleads buyers by suggesting they will be able to purchase a property at an auction at a much lower figure that it will really sell for.

This practice is used by agents to collect lots of bidders to come to the auction with the view that through competition, they get emotional and pay higher than what they were prepared to.

Let’s be clear, this practice does happen and while there are laws in place to stop this, they don’t seem to have much of an effect.

If you are a buyer, I suggest you don’t just rely on what an agent says, but do your own due diligence on recent sales to come up with your own view. You can also ask an agent, “What price on a contract will enable me to buy this property today?”

The answer to this question will really tell you what a vendor is expecting to get.

Most agents do the right thing. But the reputation of the industry keeps being tarnished by the behaviour of a minority who don’t stick to the rules.

This is the reason why real estate agents are perceived to be one of the least trusted professions in the world.

* Tom Panos is an auctioneer, real estate coach and trainer.

Originally published as How to avoid dodgy tactics from real estate agents