The Five Mistakes HOME BUYERS Often Make When Dealing With Agents
It’s a common misconception that real estate agents are the enemy. Don’t get me wrong, I’ve met and worked with many an agent and there are a few who I’d sooner avoid. But I apply the eighty-twenty rule to people – INCLUDING real estate agents. Most people are good.
Buyers are often skeptical of agents, and let’s face it… we all know how some unfortunate negotiations can go. Buyers can be misled, properties can be under-quoted for auction, punters can be ‘gazumped’ and investors can be ripped off. The stories are vast and the magnitude of upset and suffering by some buyers can be frightening. But there are plenty of occasions where buyers get it wrong; and I’ve penned this article to spell out the five most common (and costly) mistakes.
The first mistake applies to the buyers who hit the ‘open for inspections’ without a plan (or even a vague idea of what they want), and expect the agents to jump into action to assist them. It’s vital to remember that the agents work on a commission model and will respond to a task when they feel that the likelihood of getting paid is high. An indecisive buyer (and worse still, an indecisive first-home-buyer) can represent wasted time, a broken-hearted vendor and a headache for the agent if they make a purchase decision and then rescind (change their mind and withdraw from the sale). And even if the first home buyer does proceed with the sale, they typically represent a higher risk in terms of having their finance approved, increased work flow for the agent (the “firsty” asks a lot more questions than the experienced buyer), and no chance of a sale as a result of the purchase (otherwise known as a “trade-in”; a term often applied to a buyer who has a home to sell once they “trade-up” with their new purchase). Some agents will avoid first home buyers altogether for these reasons.
It pays for the buyers to have a firm plan, a clear idea of what the property values within the area are, and a criteria list which is reasonable. If the agents feel that the buyer is realistic and serious, they will be more likely to help, be responsive, and introduce the buyer to new listings before other buyers are alerted.
The second mistake a buyer commonly makes with an agent is telling them too much. Agents are trained to piece together information to give their vendor an advantage once the negotiations start. The agents are often aware of the buyer’s maximum budget, how willing the buyers are to stretch their budget for the property (ie. how keen they are), and what settlement terms they require. Agents generally know what other auctions many buyers have previously attended and what sort of budget they bid to. It’s hard to keep secrets in a particular township, even between competing agencies. The best thing a buyer can do is to provide the agents with a brief of what they are looking for, but to leave it devoid of maximum budget and desired terms. Should the agents be familiar with past failed attempts to purchase, the buyers may be best advised to appoint a third-party negotiator.
The next mistake relates to buyers who treat the agents with contempt, skepticism or no respect. How can an agent possibly give a buyer any assistance if the buyer has treated them badly? It’s important to note that the agent works for the vendor. The agent is often the most INFLUENTIAL person in the chain; taking the buyer’s offer and the vendor’s position and managing a common-ground final position. I call the agent the ‘conduit’ between the buyer and the seller. The agent is paid to find the right buyer and to facilitate the transaction. Buyers should never underestimate the power and influence which the agent holds when it comes down to the final negotiation. If there are competing bidders (and if ONE of the buyers has offended the agent), it goes without saying that the agent will naturally favour the other buyer. It pays not to treat the agent with contempt. As a Buyer’s Advocate, I treasure my good agent relationships. it’s not unusual for the agent to introduce me to an alternative property after finding myself the unfortunate under bidder. Many times these ‘alternative properties’ are what we refer to as “off-markets”; properties which haven’t hit the market and haven’t been photographed. The advantage of off-market properties is that no other buyers have seen the property and I have an opportunity to bid for the property without competition.
The fourth mistake buyers make is to believe the price range quoted by agents. In regional towns and in some of our major cities in Australia, the quoted price ranges are usually genuine. But in some of our capital cities, the agents ‘bait’ the buyers with low quote ranges on auction properties. The idea behind the lower-than-market-price quote is to lure buyers to the property, and to then influence them (or place them in an emotional competitive situation) where they feel compelled to bid higher than their pre-determined limit in order to secure the property. The hard reality is that buyers owe it to themselves to familiarize themselves with the market prices being achieved for similar properties in their area BEFORE they attend auction to bid. Agents can’t be relied upon and while under-quoting is unfair, it’s rife, and it’s up to the buyer to be more educated in their marketplace.
The last (and sometimes most unfortunate) mistake applies to buyers who believe agents all bluff. Whenever I am mid-stream with a negotiation, I always gauge the agent’s feedback and updates. Sometimes they are negotiating through the night, while other times the negotiations can span days and run for over a week. I almost always KNOW when an agent is bluffing, but if I’m ever in doubt I never assume that the agent is bluffing when they tell me that the property I have pursued has an interested buyer (or a new offer) on it. The price I could pay for ignoring the ‘other buyer’ warning is to find that the other buyer was genuine and that the property has sold. Some agents conduct a transparent negotiation (eg. holding an open negotiation in the office boardroom), while others conduct the negotiation more privately. Whatever the circumstances, it pays to be prepared to bid to your limit because there is nothing worse than withdrawing from a competitive negotiating environment based on skepticism, only to find that the property sold for a lesser price than you were prepared to pay.
These five mistakes all have one thing in common; assuming agents are all dishonest or greedy. Real estate is a tough world and the dedicated ‘career-agents’ have been working for a long time; some for a number of decades. There are some wonderful agents out there and it’s a good idea to find them, meet them and build a strong enough relationship to enlist their support through your property purchasing adventure. You never know… you might just get surprised!