A real estate agent's 5 worst practices
In these desperate times, some real estate brokers are using dubious tactics to sell more homes. They can vary from rushing you into an agreement to overpromising on prices.
The upshot: It's buyer -- and seller-beware.
Frequently, brokers compete to get listings, explains Erica Ramus, a broker at Realty Executives in Pottsville, Pa. And some are doing things they wouldn't have done five years ago.
Brokers are supposed to be self-policing, she adds. But really, they're guided only by an ethics code. So naturally, some conflicts of interest can rear their ugly heads. For example, brokers may weed out homes that are priced lower and which don't pay high enough commissions.
"Black and white can bleed into gray," she says.
Ramus and other experts stress that most agents are honest and hardworking. For the rest, we got experts to spill the beans about a real estate agent's five worst practices.
Worst practice No. 1: Brokers may overpromise things to sellers
To snag your listing, brokers may tell you to list your home for a higher price than the market will bear. Or they may tell you there's a real buyer, when there isn't, says Sam DeBord, a broker at Coldwell Banker Danforth in Seattle. After you sign a broker's agreement, you may realize the selling price is too high -- or there's no buyer. But by that time, brokers have already locked up the listing.
Remedy: Ask your broker for proof of your home's worth, such as comparable sales from at least three homes. And know that you don't need to sign a listing agreement even if your broker does produce a buyer. "You can sign a single-buyer listing contract instead," DeBord adds. (A single-buyer listing contract is a listing agreement limited to just one named buyer. If the deal goes through, the agent gets to broker it. If the deal doesn't go through, the contract is over.)
Worst practice No. 2: Listing agents may sandbag a seller
This happens when listing agents actually have bagged a buyer, but delay adding the home to the MLS or putting up a "For Sale" sign. In such cases, the broker wants to get both the buy and sell commissions -- doubling their wages for the sale. The trouble is that the buyer's bid may not be high enough, says Ramus, and so it lowers the home's potential worth. "By competing for a home, sellers might get a better price," she adds.
Remedy: Go on the agency's website -- and other good local sites -- to see if your listing is included. "Know what's out there," she says.
Worst practice No. 3: Brokers may try to choose a seller's team
Brokers want to offer one-stop shopping, such as choosing your lawyer or inspector. But don't put all your trust in one agent, says William Decker, a home inspector in Skokie, Ill.
Remedy: Choose your own team. The most important player is the real estate attorney, Decker adds. "That's the first person to hire, because they understand fiduciary responsibility and can sue," he says. Sellers should also hire their own independent appraiser to get solid ballpark figures when selling a home. "The more objective information you have, the better off you are," he says.
Worst practice No. 4: Short-sale prices are unrealistically low
First-time homebuyers are most susceptible to being pulled in by too-low prices, says DeBord. They may spend six months trying to buy a short-sale home, he says, only to find that the bank won't sell it at that price. "But seeing these flashy prices is deceptive," he adds. "And the listing agent usually already knows the price is too low. But they want to get the contract process going because banks won't negotiate until they have an offer."
Also, short sales may take a long time to wrap up. Some can take two years since mortgage lenders are swamped, he says.
Remedy: Don't rush to buy, says DeBord. Take time to research all the short-sale angles. And work with brokers you trust, he says. Ideally, brokers should also live in areas you've targeted for buying.
Worst practice No. 5: Brokers may divulge crucial buyer information
Sometimes, brokers want to close a deal quickly. So, they'll reveal the buyer's lowest bid rather than negotiating even lower prices, says Ramus.
Remedy: You can't control your broker, but you can state your terms upfront. "Don't tell brokers the bottom line price you're willing to pay until you know how they operate," says Ramus. You've got to protect yourself, she adds.
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Constance Gustke is a New York-based journalist who writes about business topics. She was a Fortune reporter, Forbes.com contributor and Worth features editor. Gustke is also a regular contributor to CNBC.
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