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Real estate agents often use their well-trained communication skills to up their negotiation game, even if it means having to spew out simple fibs that could potentially fast-track the transactions.
Buyer’s advocate Cate Bakos, who has spent years in the real estate industry, shares some of her all-time favorite fibs from agents, as well as the best way for buyers to counteract their game:
1. “We’ve got another buyer on this property”
While this could be true sometimes, agents often say this only to fast-track a transaction, especially when they feel like a buyer is stalling on making a decision. The sense of urgency might be out of the need to alleviate the vendor’s anxiety about the lack of interest or offers, or the fear of the agent of losing their listing to another real estate agent as his exclusive authority period comes close to expiration.
Buyers should not dismiss this warning, but they can ask the agent if a contract has been signed and presented to the other buyer.
“While some agents may be willing to lie about this, it’s a direct question and it’s more unlikely that an agent would lie about something that a buyer could cross-check with the vendor’s solicitor. The vendor’s solicitor’s details are contained within the contract of sale,” according to buyer’s advocate Cate Bakos. “The buyer should also take note of the number of days that a property has been on the market. If the property has been on the market for 50-plus days, it’s likely that the exclusive authority is coming towards its end.”
2. “We’ve had an offer of X”
The goal of this negotiation tactic is often the same as the one above—to fast-track the closing of the deal—and the key to knowing whether it’s a fib or a fact is to ask the real estate agent if the offer is deemed formal through a binding contract.
“If the answer is no, it means that the offer was perhaps a verbal offer. Worse still, it could be an extrapolation of the truth… Many agents ask me when they farewell me at the door, “Cate, what would you pay for this property?” I am certain that my estimate has been used in the context of ‘an offer’ before,’ the buyer’s advocate said.
Once again, the simple solution to this is to ask a direct question—is the offer genuine or not?
Cate explained further: “Just because a buyer might suggest that they’d be willing to pay a certain price does not constitute an offer… As I say to everyone: ‘If it’s not on a contract, it’s not an offer. End of story.’ ”
3. “The vendor would like the contract closed out tonight”
After spending many years in the real estate industry, Cate knows for sure that “no vendor wants their contract closed out quicker than it allows for all competing buyers to have a fair go at putting in their offers.”
While some agents may argue that this tactic helps them achieve a higher price for their vendor, it would be unfair for interested buyers to be limited at a time horizon.
“You genuinely need time to complete your due diligence, put a clause into the contract, and make your offer firmly. Don’t let an agent push you away from making a fair offer,” she advised buyers. “Just be mindful that an unconditional offer without clauses at the same financial magnitude as yours will win over your offer every time. Vendors like sure-things.”
4. “We’ve got buyer interest in the vicinity of X-Y”
Real estate agents in auctions, where prices are typically underquoted, often pretend that the property is likely to sell for less than its true value. As a result, many prospective buyers spend lots of money for property inspection reports, hoping to score a bargain. Do counteract this game; investors must do their research and look at recent sales results in the area for similar houses.
According to Cate: “Don’t rely on the agents [because] they are committed to underquoting by any magnitude from 10 per cent to 20 per cent, with 15 per cent being quite normal in Melbourne’s inner and middle east.”
In order to get factual information from agents, buyers may ask the following:
- “What reserve are your vendors likely to set on the day of auction?”
- “What recent comparable sale would you say best matches this property?”
- “What figure did you quote on the sales authority?"
Being loud, intimidating, rude, and insensitive may only lead to an agent altering or withholding the truth even further, so make sure to show your genuine interest and you are more likely to be assisted with more facts.
5. “We don’t really know what the vendor’s expectation is yet. They haven’t told us”
Every good real estate agents know what the seller wants—after all, they are required to let their clients know the possible selling range of their property.
“You can ask the agent a direct question in this case: ‘If I am interested in buying this property on the day, and taking into account the other buyers who may be bidding, what sort of limit do you suggest I set to have a strong chance at buying the property?’ ” Cate said.
6. “We’re happy to present any offer to the vendor prior to auction”
Some sellers do prefer to accept a reasonable offer prior to auction for different reasons, including having a specific date that they need to settle the purchase by having a tough financial situation placing pressure on their time to sell. If you have not been made aware of any specific reason for such decision, don’t take the agent’s bait.
According to Cate, this is often their way of “testing” the buyers by encouraging them to present their offers early on so they could have a clearer idea of the sales range.
“It helps them prepare the vendor for setting their reserve on auction day,” Cate explained, “The worst thing that can happen is that an agent will get an insight into a generous and emotional buyer who could stretch beyond reasonable market value. In this case, they could deliberately set a super high reserve so that the property passes [to] this unsuspecting buyer and the agents then have the opportunity to negotiate an even higher price inside.”
As in any financial transactions, investors must be careful about making the big decision to purchase an asset. Do your research, speak to fellow investors and other property professionals, and never hesitate to ask the right questions.
After all, we’re talking about hundreds of thousands of dollars, maybe even millions—reduce your risks and make sure it will all be worth it in the long run.
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