Why You Can’t Trust Real Estate Agents When Selling A House

by Mike Holman

Check out the first part of this series “Why You Can’t Trust Real Estate Agents When Buying A House“.

Yesterday, we discussed how your agent and you will have similar goals when starting a house search but your interests will diverge the closer you get to a deal. When selling a house, the same phenomenon happens but usually a lot quicker.

In the beginning: buddies

Usually when you agree to list your house with an agent they will make you sign a contract with them which ensures that you don’t turn around and sell the house with another agent after they have done some work. In my experience, the agent will pull various comparable houses in the area and together you will figure out an asking price. Another step that normally takes place is for the agent to do a walk through and advise the client of possible improvements they can do to the house to make it sell easier.

The asking price is usually the first potential source of conflict – the seller wants a high price and is often unrealistic about what their house is worth. The agent knows that if the house is listed too high that it will sit for a while and any effort the agent makes to sell the house will be a waste of time. Agents make more money by selling more houses rather than getting a high price for each house so they want to make sure that the house is listed at a reasonable market value or lower. This is why pricing a house low for auction is so popular because it’s the best situation for the agent. Another situation is if a client wants to price the house high – then the agent has to bide their time and work on the client to lower their price so it will move.

Thinking about accepting an offer – Trust no one!

Things that your agent might say (and you should ignore) when you are selling a house:

  • “Since I get paid on commission – the more you get for your house, the more I get paid so we both want the same thing”. This is one of the biggest lies in real estate. Yes, mathematically an agent will get more commission if your house is sold for a higher price but the problem is the amount of time it might take to get that higher price is not worth the extra commission. For example if your house has a market value of $400,000 then your agent’s cut might be 2.5% or $10,000. If you are patient and wait for someone to come along who will pay $410,000 then the agent will make $10,250 for an extra $250. To get this $250 they might have to do several open houses and wait quite a while. Clearly they are better off just selling the house for $400k (or even less) and taking their $10,000. The problem is that the difference in selling price to the agent is pocket change but the difference to the homeowner is huge since we are talking about a $10k difference.

Negotiation – don’t listen to a word your agent has to say.

At this point you are potentially pretty close to selling your house. You want to sell the house at the highest price, the buyer wants to buy the house at the lowest price and your agent just wants you to sell the house and doesn’t care at all what price you sell it for because they just want the deal done right now. Since selling at a lower price will get the deal done quicker a lot of agents will encourage you to counter lower which basically means that you are negotiating against them as well as the seller.

Things that your agent might say (and you should ignore) when you are negotiating are:

  • “Don’t counter offer too high or the buyer might walk”. If the buyer has put in an offer then it’s up to the seller to accept the offer or reject it with a counter offer. It’s true that a high counter offer might scare off the buyer but isn’t that part of the negotiation?
  • “Your first offer is often the best offer”. Another way an agent might phrase this one is “We have an offer which means if I can get you to accept it by any means possible then I get paid very soon”.
  • “Dual-agency means there is no conflict of interest even though I represent both parties”. The “dual-agency” scam is where a selling party has a real estate agent and a buyer comes along who doesn’t have their own agent. The selling agent will offer to “act” as both the selling agent and buying agent and of course collect double the commission. Even though this is such an obvious scam, I actually don’t think this one is a big deal since real estate agents are basically working against you anyways at negotiation time so adding more conflicts probably doesn’t really matter.
  • “Are you willing to lose this deal for $2,000?” (or $5k, $8k) This is a tough one – on the one hand it seems silly to not close the deal and be only a half of a percent away from a deal but on the other hand shouldn’t your agent be asking this question to the buyer? Ie – “we are going to walk, do you really want to lose this deal for $2k?”
  • “Are you willing to lose this deal for $12 a month?” This is part two of the previous point which is applied if you don’t bite on the first attempt. It’s also a more useful gambit if the “separation” is a bit greater. If you and the buyer are $12,000 apart then that sounds pretty significant but what if you are only $75 a month apart (for 25 years) or even better what if you are only $63/month apart (over 40 years).

Conclusion (pretty much the same as yesterday)

The more you educate yourself about the real estate market you are looking in and how real estate agents operate then the better off you will be when selling a house. Real estate agents are quite useful when selling a house because most people won’t buy from a private seller and because they have access to MLS.

Whatever you do, never forget that they get paid when the deal gets done and only then. They don’t get paid for having extra open houses or walking away from close deals.

Do you have any good “lines” that you were told when selling a house?

Check out another perspective on real estate agents.

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{ 74 comments… read them below or add one }

51 Andrew

Wow, I must say that was aimed at raking every Realtor over the coals as if they are all one and the same like some kind of a brood of blood sucking vampires.

I’m a firm believer that each is entitled to their opinion in our society. I will say also that not every Realtor it that of what you are portraying. Personally I have gone on listing appointments to meet clients that wanted to sell their home due to financial stress and after a two or three hour conversation and a few phone calls, they were able to meet with lenders that got them back on track and kept them in their home where they wanted to be. I’ve actually done this on four occassions.

Not every Realtor is motivated by money. Some actually come from contribution and genuinely want to help their clients achieve their goals. Getting paid is merely a product of that. Kind of like a sports athlete making ridiculous amounts of money to do what they love. The average Realtor in Canada makes about $40K / year so that’s obviously not the case here.

If you or anyone else who reads this believe’s that Realtors don’t earn their income, then I would encourage you to take the courses, spend all the upfront time and money required to get your license. Then jump into the pond head first and see how long it takes you to catch a fish. Especially when you’re new, nobody knows you and you have zero credentials from experience. Not to mention blogs like this that really help to get the wind into our sails (pardon the pun).

There’s an interesting artice out there (you’ll have to look it up) about the big chief of For Sale By Owner in the States who couldn’t sell his own home and eventually had to hire a Realtor who got it done quickly for him.

I was just going to say that ‘everyone is a critic’ but I know that’s not the case.

Peace.

52 Jim H.

How I wish I had read this before selling my former house.

We got screwed big time.

Our agents seemed to take great delight in keeping us as much in the dark as possible, and moving our house as quickly as possible. They knew the speech about looking out for our interests as much as possible, by heart. Unfortunately their sincerity was obviously lacking. Now our lives are currently in complete shambles and we came out of the deal a great deal poorer because of it.

53 Melanie

I’m new to the game but, I have to say that I know that I am an honest person, Usually it’s me that is getting screwed over. I just had my first listing and we (the seller and I) came to the conclusion that we would take the house off the market and rent it instead. This ended up being me and another friend of mine. Not only am I going to take great care of her house, I also happen to be handy and are going to fix some thing here. I have helped clean the yard up and even done painting to this place before she put it on the market because she had no money to hire anyone. There are good and bad people in any profession. You need to go with your instincs just as you do with anything else in life.

54 Patie

This article is worthless. It might be interesting if it were dated but I have a hard time believing it was written in the last 5 years. There is no way someone would give this kind of advice in the market we have been through. I have repeatedly watched as uninformed sellers who think their home is special have chased a down market always staying 10-15% above market. I have watched as they have lost as much as $150,000, sometimes more. I have watched as this painful scenario has played out consecutively for them for 2-3 years. Then they blame it on the market. The reality is if your home is not priced at or below market, buyers are not interested. They have way too many choices. And if as this article states you feel the buyer should be scared about losing a deal over $2000 you are clueless. I am sure there are always a few scoundrals out there but I have worked in real estate for 20 years and I can say that the majority of the agents I work with, 90% are honest and good at what they do. It is not all about them. If it is they have no long term relationships and that is what builds a business with a strong and honorable reputation. So be smart. Don’t listen to lousy agents and don’t listen to lousy wannabe journalists who don’t know what they are talking about.

55 arrow

It’s not clear when this article was written, but it does appear to have kicked up a storm. I think a large part of being an informed adult is understanding the various principal-agent relationships that exist within the modern economy. It’s not just real estate agents who are supposed to work on your behalf but may act out of self interest (doctor, lawyer, dentist, financial advisor, auto mechanic, home repair, etc….).

It’s useful to know what the agent’s economic interest is, and what they would be expected to say if they were taking care of themselves, and not you. In an efficient market, agents will be able to communicate their honesty, and untrustworthy ones will not be hired. This is not the case in the real world, there is always a degree of ambiguity.

I would hope that almost everyone knows that Realtors profit off of volume (and sale speed) more than maximizing their client’s economic situation, especially if the client leaves the transaction happy, not knowing what their opportunity cost was. It’s the result from basic economic incentives, it’s the famous empirical result published in Freakonomics, and it should be the basis for skepticism that Realtors must overcome in order to earn your business.

56 The Dude

I was feeling frustrated with my agent tonight and googled this article. It pretty much sums up what I’ve been feeling. I’ve had a great relationship with this agent for about 5 years. She sold my last house in a great market and I was happy with her services. I’ve sent her numerous clients. However, I was quite insulted when I recieved an offer of $30K less than asking (asking price is significantly lower than what I paid for it, but I do understand the market) and my realtor refers to it as a “GREAT OFFER!!!!!!!!!!”. Even the sellers agent said she advised her client on a more aggressive entry offer and was scared that it may be insulting. (Note to realtors reading this, don’t send your client the email chain if you want to negotiate against your client.) The house has only been on the market for 2 weeks, tons of activity so I know I’m in a decent price point.

57 Beppy

I am currently having huge problems with my realtor. First of all we are moving out of “lost in time” America. The realtor, we just found out, does not list on MLS, anywhere. He says because our town is so small and there are only 3 realtors, so they all pretty much have each others backs. Let’s just forget about the rest of the world then shall we?!

We have a beautiful old farmhouse that is 100 + years and looks like a Thomas Kincaid picture. The only thing is that it has 2 bedrooms and 1 bath, although the house has 1600 + roomy square feet. So we decided to add a 3rd bedroom to raise the value. The realtor with his cronie appraiser (the only one in town) said that it would increase interest in the house, but not the value. Funny thing is they told us at the beginning that it was valued so low because it only had 2 bedrooms!

So, we go ahead and list it for 79,500. Immediatly we get an offer, at 72,500. We wondered why someone would come in so low and found out that they were told we were selling it for 75,000. Which by the way was what the realtor said it was worth and that we should counter for 75,000. We ignored him.

Then we looked at the web site and guess what. It was listed for 75,000!!!! He said he saw the mistake a few days before and was going to get it fixed, it has now been 6 days and still no change.

To top everything off this interesting thing happened yesterday. I am getting out of the shower and my 9 year old son comes in and says some people just walked in the door and he doesn’t know who they are. I told him to tell them to wait outside and I would be out in a moment. It was another realtor that was told by my realtor that I was out of town and that they should just go on in! To top off that embarrassment I had to correct them on the price!! They thought it was $75k. and up to that point the couple was very interested and excited about the house. I haven’t heard back from them.

What can I do? Can I get out of my contract?

58 MO Gal

Today is 9/12/12. Last night I accepted an offer on the place I have for sale. I bought it 5 years ago at $255K. The final offer last night was $215K. I big loss. This will leave me so cash strapped that I will not be able to afford any more money repairs on the house. Inspections are still pending.

My agent told me to put in new carpet, paint (not bad walls to start with) a new front door and have the house staged – this cost me well over $8K. She initially listed it at $239,900 and told me this is what the comps showed. After 5 weeks I finally got a set of comps out of her.

I worked my butt off to get this place in showroom condition. I am also a single mom and work full time. I am Mrs. Clean and Perfect personality type.

I have already purchased another home and am ready to move.

Last night I was talking to another agent. They told me that my area is equalizing and it won’t long be a buyers market.

I can easily afford both homes. I can rent out the one I just got the offer on. Demand for rentals is very high in my area. The house I just got a contract on to sell is very nice and in very good condition. It has many upgrades that I paid for over the years and came with a brand new, professional kitchen in 2007 when I bought it.

I could have easily afforded to make payments on both houses, absorb the increase in homeowners insurance on the empty place, and let my principle fall on the house I am selling. It is a 10 yr conventional loan and the principle is dropping like a rock.

I told my listing agent all this. She wanted to sell the house anyway – to her advantage and not mine.

I have known this agent for five years also and always had a good relationship with her. I also referred sellers to her in the past. No more. I will not deal with her again.

59 T

Beppy, get a new realtor. And read your contract carefully – does it say it will be listed on the MLS? Is the price clearly on the contract? If there are things in the contract that aren’t happening, he could be in breach and you may have a way out. I’d recommend you speak to a lawyer. This infuriates me – I’m a realtor and people like this give those of us who actually try to do right by our clients a bad name. I must say, there are more of the good kind than the kind this author is talking about.

60 Cory

I’m a realtor, and I have to say, I don’t trust many of them either. It’s really, really sad, although I don’t believe most agents say those things above, I wholly agree with some.
Re: Commission. Price isn’t a big deal to us, but getting your home sold is, and the higher the better. We thrive on referrals, so the better you do, the better chance we have of getting a referral. I actually ask about your savings, etc, so I know that you’ll be OK after closing costs. But, it’s our job to SHOW you facts & figures. Same goes with buyers. Ask for figures up front & you won’t be put in a position to believe everything your agent says, like Mike apparently did. Now you know, Mike.

“Don’t counter offer too high or the buyer might walk”
This sounds, well, stupid. It’s not our job to tell you what to do, it’s our job to give you the options you have, and what could happen with each, and you decide. It’s your sale.

“Your first offer is often the best offer” – – No agent would say this. Often, the first couple of offers are low ball offers.

“Dual-agency means there is no conflict of interest even though I represent both parties” – – I don’t trust dual agents either. there’s no way you can represent both parties fully. How do you save one side money, while trying to get the most money for the other? Unless you’re constantly have 3-way conversations, it’s a huge conflict of interest.

“Are you willing to lose this deal for $2,000?” – – There are more graceful ways of approaching this, like, “Three things can happen, they can counter back, they can walk, or they can agree.” It’s up to YOU to make that decision, it’s your sale.
“Are you willing to lose this deal for $12 a month?” – – Again, very stupid, I think you made this up, or researched agents, and still got the worst one possible, or you didn’t research agents at all maybe?

61 Joyce bean

My realtor said the best offer is the best . Lol.

62 linda read

To whom it may regard, I am a Realtor and in my profession, I rarely find professionals that consider their commission before the financial well being of their clients. It’s unfortunate that you should be so ill informed about our motivation. All to often we run across buyers and sellings who are willing to compromise our commission while we work endless hours for their benefit. I am disappointed in your representation of our profession.

63 Maria

This article is aimed at ALL Realtors/Agents with ZERO respect for the ones who are, like myself, very hard-working, ethical, honest, compassionate, and just plain good people. This rather told me a lot about the ignorance, spitefulness and just out-right lies that this writer is feeding people! As someone else pointed out, this could be true for some doctors, lawyers, financial advisers.. and the list goes on. Just because this writer of this thing perhaps had a bad experience with a realtor, does not mean we are all bad people. What a shame! As a realtor, I am here to tell you ALL that thank god, most of us are good agents who are looking out for our clients’ best interest first! I know I am! To ALL, just know that there are great people/agents out there and there are also bad people with ill intentions like in ALL other professions.

64 Terry

I have had dealings with four realtors in my lifetime. Each one of them were deceitful and misled me. Anyone reading this, do your homework. Your realtor’s goal is to get a commission. Don’t think for one second the realtor is looking out for your best interests.

65 It's true

Hey, I feel the same, I have been using the same agent for years, as my family also did, referred her many times, to start out with, she stated 90% she would sell my home so the commission would be 2.5%, then we had a full offer , cash deal, off course fell threw, the next day a realtor wanted to buy, came and looked, wanted to come back following day, stayed an hour, he knew we had a clean inspection already, then it was war, they where against me, my realator did not have my back, I stayed firm, but can’t tell you the stress, to topit all off, with listed, took her a week to get it on MLS, 2 weeks to get a sign for my community( she knew ahead I was listing) listed me to be contact on MLS to set up apps so I didn’t mind, I confronted her early on, how can you sell it if you have no sign up, no advers with your name, many realtors where showing I tod her I could not pay to commissions , she stated if you don’t want to pay me anything you don’t have to, and we will talk about it after we get a contract, she hadno intentions on giving in on the commission !
I tell you it’s a ickening thing, I had put 30,000 in my home updating it, she wanted to lst it lower than we did, then she said, we need to relist it at a higher price after this, I stuck to my guns and much surprise at her actions, with the buyer being a realator, he wanted to bid me low, and get his commission , neither one did a damn thing, it was only after I sent her a email that I wanted her to get the papers together that I wanted to cancel my listing with her, then I got a call they both would reduce their commission to get to my price( take home amount) we will see ? I go in to look at contract tomorrow, I will be looking very hard for number games, I hate feeling I can’t trust someone, I am too trusting, my advice, it’s your house be careful, no one is looking out for you when it coes to money but you, and yours, be careful! Definetly will not be using her to buy my ew hoe as we planned.
Disalusioned

66 Cathy Baumbusch

Give me a break.

Anybody who is anybody knows that Open Houses are for the agents, not the seller. Homes are sold through Open Houses only 1-2% of the time. The fact that you suggest that an agent “has” to do more Open Houses to sell the home shows how little you know about the industry.

Homes sell because they are priced competitively (not low, not high), they are in good condition (don’t have to be perfect), and buyers are willing to pay their hard-earned money for it. The listing price is a suggested price. True market value is what someone is willing to pay for it.

Clients who are upset with their REALTOR are upset because of a conflict in expectations. The two parties didn’t effectively communicate what their expectations were and now somebody is mad.

Pay attention to what they say and whether or not what they said is reflected in the WRITTEN listing agreement (it is an agreement, not a contract). You can fire an agent at any time if they are not performing.

I love it when a client has a whole list of things that went wrong in their transaction from the get go, but at no time did they ever confront the agent for their poor performance, and they have a million excuses as to why they didn’t take them to task.

I work by referral. And dissatisfied clients don’t refer bad agents to their friends, family or co-workers…Satisfied clients on the other hand never write blogs about how great their agent was. It’s boring.

67 Believe It!

We are about to get rid of our 3rd realtor in 2 years. 2 different agencies. They all encouraged us to list low. The 2nd realtor gave us bogus comparables and was so sure she could push us to accept $15000 for our $40000 home based on the facts she gave my daughter, that our listing agreement was only for 3 months! Offered us verbal $15000 telling us that’s all we could get with 2 week close and no contingency to find a place to stay!

We are african-american women with disabilities not real estate agents but we are forced to research to figure all this out.

We complained to the broker who assigned us our current agent. Our contract ends in 4 weeks. New deal $22000 4 week close. No deal especially now that we know what our house is worth.

I think it’s criminal what realtors are allowed to get away with. No wonder there are so many laws to regulate them but if the are not enforced or loopholed…what is the point?

68 Analyse

In a bad market I was told by a Top 1% agent I could expect $220,000 for my house. I sold it Privately for $270,000 plus $25,000 of interest on a $50,000 second mortgage! How did this work. I took back a second mortgage at 10% for five years. The buyer, a lawyer, got in for no money down. A little riskier deal but for $75,000!!! more, well worth it. Agents are massively overpaid house “flippers”. Five years later he paid off the second mortgage.

69 kyle

It’s nice to have this information (which I already figured all of this out myself years ago), but it doesn’t do you any good. You are at their mercy mostly because you can’t talk to the buyers or even the buyers agent yourself. My parents always said that real estate people are one step above car dealers and it’s a very small step.

70 kyle

Also, I don’t know how many times me and my girlfriend walked into an open house and the selling agent ‘working’ there asked if we had an agent and basically told us that they had other better houses available than the one they were showing. How disgusting is that? It’s disgraceful. A couple of times I questioned their ethics on this and they just talked in circles as they usually do. There really is no need for real estate agents in today’s world. Most people spend more than a half years salary just to sell their house. EG: a person that makes $50,000 a yr and lives in a $500,000 house will spend $30,000 just on the agents 6%.

71 kyle

I live in southern California, so that’s why I came up with the highly inflated number of ten times your yearly income. That’s basically what it is on my street and in my neighborhood. And that’s net income. After taxes.

72 Dawn

You people have no clue about the amount of unpaid work an agent does for unrealistic clients who think their house is the most precious thing in the area. Who compare on their own, their tiny little apples to oranges and expect the same big bucks. No but we are the crooks. No amount of marketing and work an agent does will sell an overpriced home. We spend hours traveling and are independent contractors who have a code of ethics who invest hundreds of dollars of our own money getting our time wasted by clients every frickin day. We are worth every penny for the amount of work we have to do behind the scenes while also dealing with clients personal problems like we are counselors. Yeah, but it’s not in our best interests to sell your home for the best possible price. Get real! After time and expenses, we make peanuts.

73 Ava

My home is a total rennovation initially listed for 257,500K. I am now in my 3rd month and reduced the price to 249,900K to be in comp w/other similar homes that lowered their price. My first offer was a low-ball @227K and the buyer also wanted me to buy a home owners warranty and pay all of the title/transfer fees. My realtor wanted me to accept their offer and we got into a heated argument, esp when he started “crunching” the numbers and throwing insults to me when I told him he was wasting my time w/low-ball BS offers. I told him I was willing to pay half of title/transfer fees and a warranty if the buyer offered 250K. The buyer countered w/235K and my realtor did not inform me at all of a counter offer. This further infuriated me especially since I asked them to lower the price to 249,900K. I have the right to change my mind on counter-offers but was left in the dark. I would have countered w/245 or even 240K depending on the deal. I also have about 8K in conveyances (antiques) that go w/the house. I have asked this realtor 3 times to put fliers in my info box. I have seen people get out of the car to get fliers only to walk away empty handed. Now, my realtor has listed my neighbors house who came to my open house and just put their sign up in their yard and listed their house for 149K (a fixer upper). I feel like I am in a losing situation and that my realtor is lacking in their fiduciary duties. I wish now I had gone to “Mr. Lister”. My house is clean and immaculate for showing. Yet here I sit in the 3rd month. I guess I will have to ride out the other 3 months. I am not happy at all w/this realtor.

74 Kim

I signed papers with an agent last week – (Wednesday) she never even saw my place. We met at our neighbor’s..she said it would be 2.5 commission – she said she would work with me – didn’t have my glasses and she convientantly had her arm covering the part of what percentage would be – after a day or so I looked at it and found out I had signed at 5%. On Friday, she had finally put the house on MLS and had a sign in the front yard. Still had not seen the house or taken pics. To my surprise on the Monday she had been saying since 9 am she was on her way to take pics – she didn’t get there til 5pm to do this. She wasted and entire day getting there. A friend of ours came and advised me of the numbers game to which my agent had left out of any conversation and my friend took her to task and she kept saying I will work with her but by the end of the night and after issue with the commission percentage, listing without seeing the place, no pics, not reliable or punctual and what confused me more was her boyfriend was listed as the agent on MLS but I had signed with her and the front lawn sign had her name – several neighbor’s came to me asked me about name difference I had told the listing agent to put my sale on hold and let it fall off the market. I cant sign with a new agent right now which is fine – I think for some reason this agent thought I HAD to sell for financial reason. What she never knew what that I just WANTED to sell so I was in control and not her. She started crying at the door which I thought was unprofessional and kept thinking to myself ‘she must of been counting on this commission’ because she did let it out that the reason she couldn’t come on Saturday or Sunday was because she was the casino. She was a friend of my neighbor’s mother who was out of town when this all happened and when she came back and she said – I would have never referred you to her…

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