Monday, February 13, 2006

Caveat Emptor

Since we are heading into the Spring buying season it seems like it would be prudent to remind people of the ways in which sellers and realtors can be deceptive. Of course, that's not to say that all are deceptive, but enough are that it is a common point of discussion on the blogs and elsewhere. So what things should buyers keep a watchful eye out for? Here is a partial list. Feel free to add to it:
1. Relisting a house on the MLS. A house is placed in the MLS and it doesn't sell for whatever reason. The realtor takes it off the MLS for a couple weeks (and the seller possibly reduces the asking price a little) and then relists the house. It is suspected by some that this is done so that the house now looks like a new listing and all the stigma of sitting on the market is gone. Others argue that it is normal operating proceedure when the listing expires. Either way, one shouldn't draw the wrong conclusion. To combat this practice, search for the address using various tools like Google, Domania, etc. and find out what the listing and selling history of the house is.

2. "Price reduced" signs. These are suspected by some people to be used to give the buyer the impression that they are getting a deal on a house when in fact they are not. According to some people, what often happens is that a seller sets the asking price well above what they think the house will really sell for. The seller is hoping for a sucker to come along and pay that price. If no one makes an offer at that elevated price, the seller then reduces the asking price down to closer to what he thinks the house will really sell for and advertises that fact with a "price reduced" sign.

3. It has been claimed that sometimes a seller will deliberately set the asking price for their house below the market value in the hopes that a lot of buyers will then bid the price of the house above market value. This seems like a risky tactic and works best during speculative periods.

4. Sometimes, in order to fuel a sense of buying urgency, realtors tell potentials buyers that there are other people interested in the property, when in fact there are not or these 'potential buyers' were just casual browsers. (Submitted by Bubble Meter)

5. Giving misleading market statistics or flat out lie about market conditions. (Submitted by Bubble Meter)

6. Falsely validating the asking price for a house based on comps that are not fair comps. For example, the "comp" had spectacular views of the Bay whereas the house that the buyer is interested in has no such views. (Submitted by Bubble Meter)

7. Realtor hype. Some examples (gleaned from various sources):
"There is a lot of pent up demand."
"This may be your last chance to buy because interest rates are going up."
"Renting is equivalent to flushing your money down the toilet."
"I have to reschedule your appointment because it seems there is another couple looking at the house that day."
"Well, I live in this neighborhood."
"This is a former model home."
"This floorplan has been discontinued by the builder; there will be no more like this one."
"They're not making any more land."
"The schools in this area are top-notch."
"If you buy now we will throw in the following incentives; just our way of saying 'thank you'" (where the cost of the incentives is far less than the premium you are paying for the house).


Blogger fredtobik said...

After reading that I want to call my RE agent and say thanks. I find it amazing people fall for that stuff.

Feb 13, 2006, 8:06:00 PM  
Blogger Out at the peak said...

I got a new flyer from a local realtor that claims he'll sell your house in 30 days or you'll get $1000. There must be several get out of jail free clauses in his deal. I'm sure a magical offer will come in $100K below list on day 29, and if you don't take it, you forfeit the $1000.

Feb 13, 2006, 8:47:00 PM  
Blogger Downturn said...

This baby was only driven to church on Sundays by a little old lady!

Feb 14, 2006, 7:24:00 AM  
Blogger Marinite said...

This baby was only driven to church on Sundays by a little old lady!

Huh? Heh, I'm sure that made sense somewhere.

Feb 14, 2006, 8:47:00 AM  
Blogger Katy said...

This baby was only driven to church on Sundays by a little old lady!

Cliched used car description, he's drawing a parallel between undesireable used cars and undesireable homes...

Feb 14, 2006, 11:26:00 AM  
Anonymous Anonymous said...

One of my favorite things I heard from a lazy, sleazy Realtor was when touring a $3,000,000 house with a friend in Pacific Heights in San Francisco. The Realtor helpfully pointed out that my friend's children would be able to walk a block and a half to school. I asked her how familiar she was with the schools and she said she had been selling real estate for years and was very familiar with the neighborhood.

Well, I live in the neighborhood and knew that my friend's children would never be attending the school, the Newcomer School, which is for recent immigrant children with limited or no English skills who need remedial work to be integrated into the public schools. When I pointed out to the Realtor that few people buying $3,000,000 houses would fall into that catagory she made a nasty snide remark and went to talk to other people looking at the place.

Feb 14, 2006, 5:25:00 PM  
Anonymous Anonymous said...

You forgot the trick many realtors use to keep people calling them. Their BS code requires them to put a "Pending" sign on the yard when a bid has been accepted. They commonly just leave the sign out there so it looks like its still available. It's BS, you call them and they have a chance to get you for other types of business... What a sham that CAR and NAR is.

Feb 15, 2006, 9:27:00 AM  
Blogger BigDaddy63 said...

Real Estate salepeople are OBLIGATED to get the highest price they can fo rthe SELLER. If you use the same salesperson that is listing the house. it is an inherent conflict of interest. Even a "buyers" broker makes more money when the sale price is higher.

When was the last time you heard of a Real Estate salesperson being sued for misrepresentation, etc? Stockbrokers, CPA's, lawyers, etc are all licensed as well and have very stringent oversight. The NAR is IMHO a big PR firm to pimp for the industry.

I read an article sometime ago where the NAR made their annual predictions and each year they were DEAD WRONG.

Here is the best way to test your agents' loyalty. Find a home you like and tell your agent to offer 80% of the asking price( assuming it is worth that much). I believe by law they are required to convey any bonified offer to the seller. See if the agent says ," I am not going to to that. They will turn it down", or" that's a lowball offer. I am not going to insult them with that."

I went through several salespeople when I was buying houses before I came across one that was not;

2. sleezy
3. arrogant
4. solely concerned with how much their commission was going to be and not what was my best interests.
5. showing me houses that were $50,000 more than what I wanted to spend.

Caveat Emptor

Feb 15, 2006, 10:46:00 AM  

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