Eight Subtle Scams Real Estate Agents Can Commit

If you’ve tried to buy or sell a home, you’ve likely worked with a licensed real estate professional— there are more than 3 million of them in the U.S., and their advice and assistance is often invaluable. Real estate agents know the properties in their area and can help you find them (and weed out misleading listings ) and guide you through every step of the process. A good real estate agent who has your best interests at heart is worth the commission and then some.

But not everyone with a real estate license is a good agent or an ethical agent. Sometimes the red flags around an agent are big and obvious, but sometimes real estate professionals engage in subtle little scams that aren’t obvious at all. These sneaky tricks aren’t always illegal, but they are unethical and can cost you a lot of time when it comes to the biggest financial purchase of your life. If you’re looking for a real estate professional to help you find or sell a home, beware of these subtle scams.

Sketchy referrals

One of the most unethical things a real estate agent can do is give you questionable recommendations. It’s normal for an agent to help you find a mortgage broker, home inspector, or even a contractor who can help you figure out if a home is right for you. However, this crosses into unethical territory if they try to insist that you use their recommendations, or even push you to use them.

You can protect yourself from this by simply finding other professionals for any services you need, especially when it comes to mortgage brokers. Real estate agents sometimes have what are called ” preferred lenders ” and there may be benefits to using them (such as a smoother process), but you should never have to use them. Getting several other offers will help you figure out whether the person your agent is suggesting is doing the right thing for you.

Buying a listing

If you’re selling a home, you know that one of the most difficult aspects is choosing which real estate agent to work with . Agents know that there is competition for this commission, so there is always a commercial offer. One subtle little scam that some agents use is that they simply tell you what you want to hear: that your house will sell for a higher price than other real estate experts are telling you.

This is called “buying a listing.” They know that if they confidently assure you that your home will sell for significantly more, you will be tempted to sign a contract with them. And they know that when offers come in lower than promised, they can blame the discrepancy on the changing market or some aspect of the property—and you probably won’t want to turn down an offer, even if it’s not as expensive as you expected.

A good way to avoid this pitfall is to do your own research. Get multiple estimates of what your property could sell for and find comparable properties in your area that have recently sold. If an agent comes back with a price offer that is very different from the rest, be suspicious.

steering

If you’re working with a real estate agent and notice that he never shows you houses in certain areas or ignores your preferences and only shows you houses in certain areas, you may be a victim of ” steering .”

Steering is an attempt to steer you toward a specific neighborhood or neighborhood based entirely on some attribute such as race, religion, or gender. It can be very subtle: the houses you see are in your price range and fit your list of must-haves, they’re just always in the same area. Management isn’t always obvious either: if you’re single and your agent never shows you a big house in a family-friendly area despite your stated preference for that, they may be pushing you toward what they deem a more “suitable” property, your wishes be damned.

Some signs that you are being manipulated include your agent’s many personal opinions about who should live in certain properties, as well as a habit of ignoring your preferences regarding the size, type and location of the property.

Personal property

If your agent sweetens the deal by helping you reduce your future tax burden through a lower official home price, you may think you’ve found the brilliant real estate agent of your dreams. This is usually done by offering to list a portion of the sale price as payment for ” personal property ” rather than for the home itself. This lowers the effective price of the home, which in turn will reduce future tax payments.

It is true that it is not uncommon to purchase items such as furniture or appliances from a seller, and these items are usually considered personal property and must be sold separately. But lying about it is, of course, illegal and opens you up to a long list of potential consequences.

Weak marketing

When you hire an agent to help sell your home, they’re not just someone who stamps documents and attends open houses. They must market your home to potential buyers. When you sign a contract with a real estate agent, they should detail what they plan to do in that department, from advertising to online listings, staging, and even video brochures or virtual tours.

Some agents promise success by closing you as a client, but actually do very little from a marketing perspective that saves them time and money. Sure, they can still sell your house, but they won’t work as hard for that commission as you might expect. It is best to make the marketing plan part of the contract and then ensure that the plan is followed.

Lists of baits

If you contacted your current real estate agent because you spotted a listing for a home that was absolutely perfect and much cheaper than you expected, and you were told the house was already sold, you may have fallen victim to a decoy listing.

Decoy listings are sometimes old listings that have generated a lot of interest so the agent leaves them out to attract latecomers, but they can also be deceptive listings designed to attract interest. Once the agent arrives at your office or calls you on the phone, he will acknowledge that the listing is no longer available, but will assure you that he can find the right property for you anyway.

Off market

If your real estate agent tells you that your home is not in great condition and suggests you sell it on the over-the-counter market without listing it publicly on the Multiple Listing Service (MLS), he may be setting you up for a subtle scam involving a real estate investor with whom he already has a relationship. Once you agree to sell the house on the off-market market (because the agent has convinced you that it would be prohibitively expensive to fix the place up properly), an investor magically appears and offers to buy the place as-is. You end up selling at a discount, the investor does everything you could have done, and sells it for a profit—a profit that could have been yours.

Meanwhile, the agent may have gotten away with triple the commission: from you and the investor when your home is sold, and then later when the investor sells the home again. Always be skeptical of off-market offers and dive into how it will help you attract fewer potential buyers, as well as get your own estimates for renovations and improvements that will make your home more competitive.

Ghost Buyer

Unscrupulous real estate agents sometimes create phantom buyers when it suits their interests. There are usually two main scenarios:

• When you sell your home and are looking for an agent, they will contact you and let you know that they have an interested buyer or that your property meets the requirements of someone they know. They then insist that you hire them as your agent. That interested buyer will likely disappear – they were just a way to get an agent in your door.

• When you’re buying a home and have found a property you want to make an offer on, suddenly another interested buyer appears and you’re encouraged to improve your offer on the house to ensure you get the property. Of course, it’s entirely possible that there is another buyer, but this is also an effective (if unethical) way to get you to pay a higher price and a higher commission.

The best way to protect yourself from ghost buyers is to choose a listing agent based on your needs, not just because they called you out of the blue, and know from the start what you’re willing to pay for the house—and commit to sticking to it.

More…