How to spot real estate agents’ tricks
When you’re looking to buy or sell a property, it’s easy to be overwhelmed by the whole process. It’s important to be aware of the tricks at play that could cost you money.
You may work with a real estate agent, broker, or realtor when buying or selling a home. While all are licensed to help buy and sell homes, they offer different expertise levels.
Real estate agents: They are licensed to help people buy and sell real estate. They work on commission and can represent either the buyer or the seller.
Real estate brokers: They help people buy and sell real estate but are licensed independently and may employ agents. They work on commission and get a portion of their agents' commission.
Realtors: They are members of the National Association of Realtors (NAR) and may be agents or brokers.
As all three professions focus highly on commissions, it is unsurprising that they often employ tactics to boost how much money they can make.
It’s not that you shouldn’t trust real estate agents. Ultimately, they do an important job, but as a buyer or a seller, you need a good idea of how far you can trust them.
You can benefit from their undoubted expertise by getting to know some of the tricks they use to boost their business.
The following tips will help you stand your ground with any real estate professional.
Real estate agent tricks: tips for homebuyers
Homebuyers should tread carefully around real estate agents and take their words with a pinch of salt.
The real estate professional works for the seller (as well as their own business), so they will put those interests first.
Here are some of the traps to watch out for.
1. Getting you to talk too much
Real estate agents are famously chatty – by putting you at ease, they may get useful information, such as how much money you can spend or how badly you need to move. Even trivial information can be useful. By being friendly, they can make you feel as if they are on your side and make you a ‘softer touch’ when making offers.
Be pleasant and polite while giving nothing away that might relate to your own circumstances.
2. Revising the initial guide price up or down
This is not exactly a 'trick' and more of a tactic, but it's still worth being aware of this practice.
An real estate agent may initially post a property at a higher-than-realistic guide price to see what appetite there is for it. If the first offers are too low, they may cut the guide price to attract more bids, pushing the actual price back up to the original guide price – or even higher.
Conversely, if there are many early bids, the real estate agent might raise the guide price to see how high new bidders will go. Again, there's nothing underhanded about this, but it can make life tricky when you're trying to get an offer accepted.
Pitch your initial offer below the guide price but not so far below it that it looks insulting. This will encourage the seller to think you are 'on the hook' and worth negotiating with. At the same time, make sure there are lots to recommend you as a potential buyer. There is more to being accepted as a buyer than just making a good offer.
3. Encouraging a bidding war
It is the real estate agent’s job to try and get the highest price possible for a property. There are various tactics they might use to achieve this, and not all of them are fair. One trick might be to exaggerate the offers from rival buyers to encourage you to bid higher – or, doing the reverse, to get the rival buyer to raise their offer.
A non-deceitful variant may be to invite sealed bids only, which prompts buyers to pitch in with their highest possible offer.
Keep your cool if you suspect you are being sucked into a bidding war. Have a maximum upper limit (a mortgage broker can help you set this), and don’t cross it. Also, try to have an advantage other than the size of your offer, such as being a cash buyer or selling a chain-free property.
4. Inventing rival offers
Even more serious than playing buyers off against each other is the practice of making up non-existent offers to try and persuade you to raise your bid. This isn’t common practice, but it does happen occasionally. It can be particularly damaging if it happens after your offer has been accepted and you have already spent money.
If an offer sounds fishy, ask to see the evidence. This usually means a formal letter confirming they are willing to offer this amount.
To save you from losing money if you are trumped by a higher offer at a late stage, ask if your real estate agent operates good faith money. This is an arrangement where the buyer and seller put down a refundable deposit when an offer is agreed upon. If either party pulls out, the other side keeps their deposit. This prevents sellers from continually accepting higher offers.
You could also ask about a lock-out agreement or exclusivity agreement. This prevents the seller from negotiating with any other potential buyers for a limited period (usually a few weeks). This can enable you to make enough progress with the purchase to convince the seller to stick with you as a safe bet.
5. Giving false reassurance about surveys
If viewing an older house, you must conduct a full building survey to identify any potential problems. The results of such a survey may reveal the need for costly renovations, which may put you off buying the property. The real estate agent knows this – particularly if past buyers have pulled out for this reason.
An unscrupulous real estate agent may tell you that recent surveys have revealed no major problems and that a cheaper condition report or homebuyer survey should be enough. Such a comment could be a passing remark, never in writing, so they can deny they ever said it.
Never take anyone’s word on the condition of a property other than that of a surveyor – and for older properties, always choose a building survey.
Real estate agent tricks: tips for sellers
An real estate agent is less likely to ‘pull a fast one’ on a seller since they technically work for them (and their fee will be paid from the sale of your property).
But bear in mind that they may not always prioritize your best interests.
Here are a few things to watch out for.
1. Overpriced estimates on your home
When choosing an real estate agent, you’ll probably contact several to view your property. After a discussion, each will tell you what asking price they’re prepared to place on it.
This price may vary between real estate agents, sometimes by tens of thousands of dollars. It’s tempting to go for the highest estimate, but some real estate agents may deliberately over-value your home to get you on their books. You may then have to wait for offers, only to have to lower your price – by which time your property has been on the market for a while, which can put off buyers.
Do your own research into similar local properties, and see what they are selling for (i.e., their final price). Choose the asking price a little higher than this, so you can reduce the price if necessary.
2. Is your property unusual for them?
Sometimes an real estate agent will specialize in a particular kind of property, e.g., high-end family homes. This may not make them ideal for you if you are selling a flat or a small house. An real estate agent may take you on but then sideline your property and not give it their full attention.
Research the real estate agent’s usual property types and ensure yours is in keeping with their general list. If yours seems out of character, ask them if this might be a problem.
3. Have they tried selling you more advertising?
If your property has been on the market for a while without attracting good offers, your real estate agent might suggest wider advertising for an additional fee. This isn’t good practice; they should always do their best to sell your home.
If your real estate agent starts trying to get more money from you, your best option is usually to part company with them and find a new real estate agent.
4. Look out for yourself
Whether you’re a buyer or a seller, remember that the real estate agent will put their interests first. That’s fine, of course – just so long as you remember to do so too.
Don’t distrust your real estate agent, but don’t place absolute faith in them, either.
Make every decision carefully, seek out unbiased information, and you and the real estate agent should achieve a happy outcome.
*This piece was originally written by Nick Green.
Senior Content Writer
Lisa-Marie Voneshen is a Senior Content Writer at Unbiased. She is an award-winning journalist with nearly a decade of experience writing and editing content across various areas, including personal finance and investing.