Even More Reasons Not To Trust Your Real Estate Agent

by Mike Holman

That’s right – after completing two posts on why you should not trust your real estate agent when you are buying a house and when you are selling a house, several more reasons have surfaced from various sources and I felt it was worth another post on the topic.

Underestimate potential costs for renovations and repairs

This is pretty common – a buyer looks at a house but is concerned with the potential costs of renovations and maintenance items like a new furnace. Most real estate agents are only too happy to give the buyer an idea of what the items will cost. The problem is that it’s in the best interest of the agent to downplay the costs since that will encourage the buyer to make the purchase and the commission will be paid. This happened to both Mr. Cheap and myself on previous real estate deals so we’ve learned this lesson the hard way.

The fact is that estimating renovation costs (not an simple skill) doesn’t necessarily have anything to do with buying and selling real estate. Your real estate agent might be a former contractor or might have a lot of experience with renovations…or they might have absolutely zero experience with renovations and are just taking numbers from something they might have read in the past.

Push for maximum purchase

In the case where someone is looking to buy a house but isn’t using anywhere near their maximum available credit, it’s possible for the agent to push the buyer to raise their price level which will increase the potential commission for the agent. For a price difference of $10k or $20k it’s not going to make a big difference to the agent but if they can get the buyer to increase their limit by $100,000 or more then it will significantly increase their payday.

Pinyo from Moolanomy left a comment indicating how his agent told him that he could afford $4,000 per month in payments when in actual fact he finds that a $1400 mortgage payment is more than enough.

The lesson here if you are a buyer is to know your own budget and don’t let anyone else tell you what you can or can’t afford.

Agent is probably getting paid for referrals

Most agents make extra money by referring their clients to various people who will give them referral fees. Mortgage brokers, contractors, tradesmen, home stagers, lawyers – you name it and your agent can probably give you a name.

This isn’t to say that a person referred to you buy your real estate agent isn’t going to be competent – it’s just important to know that they might be getting a fee for doing the referral.

Round number – odd number trick

As mentioned in the comments of the previous post, agents will often try to get you to lower your selling price or raise your bid by telling you to “make it a round number” or “make it an odd” number depending on the situation. If your bid is an odd number ie $250,500 they might suggest that $251,000 is a better bid because it’s an even number. As the Financial Blogger suggested – in this case $250,000 is also a round number which might work better for the buyer.

Over estimating the value of your house

Typically if you are selling a house then an agent wants to you to list with them. They are often very tempted to exaggerate the value of your house so that you will hire them as your agent. Once you sign with them and the house doesn’t sell, then they will start working on you to lower the house.

The inflated value doesn’t always originate from the agent, most sellers have an inflated estimation of their house worth so an agent might ‘go along’ to get the listing.

“Free” real estate evaluation

Most home owners have received material in their mail box offering a “free” house evaluation by a real estate agent. These are just marketing, plain and simple. If the home owner has no idea what the house is worth then it might not hurt to find out what the rough estimated value is but keep in mind the previous point about agents giving exaggerated house estimations.

Take a look at another perspective on real estate agents that Mr. Cheap wrote.

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