THE WORST MISTAKES SELLERS MAKE
(According to Neil Jenman)
1. SIGNING A STANDARD AGENCY AGREEMENT
Many sellers make the mistake of signing a "standard" selling agreement with an agent without realising what they are doing. Agents may say that their agreement is "standard", but it is designed to the agent's standards, not to your standards and it totally protects agents and barely protects you.
HOW TO AVOID IT: Don't sign any contract unless you are guaranteed that your basic rights are protected. Seek independent legal advice or use the Home Sellers' Protection Guarantee which has been designed in consultation with legal experts and consumer advocates. This Guarantee is available to all home-sellers at no charge and with no obligation. Despite what some agents may say, you can use it with any agent in any area. The Guarantee prevents the agent from hurting you. I f an agent does not want to sign it, do not hire the agent, no matter what you are told.
2. NOT TRUSTING THE AGENT
If you don't trust the agent, then don't hire the agent. The most important ingredient in any relationship, business or personal, is trust. Before you choose your agent, ask many questions, check references, insist on a Guarantee, test their negotiating skills and ask yourself a big question: Do I feel comfortable with this person handling the sale of my family home? If the answer is 'no', do not hire the agent.
HOW TO AVOID IT: Feeling good is not a good enough reason to trust the agent. You need proof that the agent deserves your trust. Just make sure that anything you are told verbally is Guaranteed in writing. When the agent says something that sounds good, just say "That sounds good, would you give that to me in writing?"
3. THE QUOTE TRAP
A common mistake made by sellers is believing the price the agent quotes for the sale of their home. Once you sign-up with the agent , if the selling price is less than the price you were quoted, too bad. There is nothing in the "standard" real estate agreements that compels agents to honour their quotes.
HOW TO AVOID IT: Insist on a written quote guarantee, just as you would with any business. You should only pay the agent if you get the price you were quoted - or more. Don't accept any excuses about "the market". Granted, no one can know exactly what any hone will sell for, but the agent can give you a price range - from a low point to a high point - and if your home sells below the lowest point of the price range, do not pay the agent. An agent who is telling the truth about the price of your home will have no qualms about giving you a written commitment that the words you hear are the truth.
4. CHOOSING AN AGENT BASED SOLELY ON A HIGH QUOTED PRICE AND A LOW COMMISSION RATE
Agents who offer low commissions can be poor negotiators. You are hiring an agent to negotiate the best market price for your home. Take the time to 'check out' the agent. Once you have signed up with an agent you may be horrified at the things the agent says and does when handling the sale of your home. Many agents openly encourage buyers to offer lower prices and even reveal confidential information about sellers, such as "These people are in trouble". If you have a pressing personal reason for selling, such as illness, divorce, financial commitments, the agent may tell buyers about your reason. This really weakens your position.
HOW TO AVOID IT: Treat the hiring of an agent like a job application. Ignore written references because you may only be shown the good ones. You must discover if the agent is honest and competent. You should 'Mystery Shop' the agent to make sure the agent is not going to say one thing to you and another thing to buyers. Call the agent's office and make enquiries about one or more of the homes they have for sale. Ask questions such as "Why is the home being sold?" and "What is the lowest price the owners will take for this home?" Mystery shopping will tell you if this is the agent you want to handle the sale of your home.
5. SIGNING-UP FOR TOO LONG
If you sign a 'standard' real estate agreement and, later, you are not happy with the agent, it is very hard to get out. Once you sign-up you are 'locked-up' for the time period you signed. This can be one of the most frustrating mistakes made by home-sellers.
HOW TO AVOID IT: Don't sign anything which locks you up for a long time. In some states, 90 days is the maximum time allowed by law. But even that may be too long because the longer the agent has your home, the more chance that you will be pressured to lower your price. The maximum time should be 7 weeks (49 days). Be careful, keep control and insist on a short selling agreement.
6. BECOMING A VICTIM OF CONDITIONING
Conditioning has one purpose: to convince sellers to lower their prices so that their homes can be easily sold, thus ensuring that the agents get paid. There are two classic symptoms of conditioning. The first is when the agent praises your home before you sign and then criticises your home after you sign. The second is when the price the agent quotes you becomes much less after you sign. Conditioning works in two stages. The first stage is the 'Activity' Stage. This is when the agent creates lots of activity - which causes your home to be sold for a lower price. The second stage of conditioning is the "Crunch". This is when pressure is applied to you to reduce your price. Conditioning is a common real estate trick which is taught in several real estate courses. Most sellers are no match for trained agents. They do not realise what is happening until it is too late.
HOW TO AVOID IT: If you are being pressured to reduce your price or the agent is using methods which can cause you to get a lower price, you should have the right to dismiss the agent. It is your home, you probably worked hard to buy it and you should protect its value. You must insist on the right to dismiss an agent if you are subjected to 'conditioning'.
7. AN AGENT WHO TREATS BUYERS BADLY
Agents who treat buyers badly will also treat sellers badly. Buyers like to deal with agents who will listen to them, but thousands of buyers complain at the lack of courtesy from agents - especially when it comes to returning phone calls or keeping in touch. Many agents advertise constantly rather than keeping in touch with buyers who enquire to their offices - this is inefficient, incompetent and lazy. If the agent does not treat buyers well, it means the agent is losing the people you need. Stay away from such agents.
HOW TO AVOID IT: Just as buyers go to agents and say "What homes do you have?" you, as a seller, should say to an agent "What buyers do you have?" The best agents keep in contact with buyers and they keep accurate records. They know who is buying, what they are looking for and how much they can pay. They treat buyers with respect and courtesy. This means that the best and most efficient agents have immediate access to the best buyers. Don't judge agents by their advertisements, judge them on how they treat buyers.
8. AN AGENT WHO IS A POOR NEGOTIATOR
There is a big difference between what a buyer pays for your home and what a buyer would have paid. Most agents do not know how to obtain the best market price. Just ask anyone who has bought a home what was the price they paid and what was the price they would have paid. Thousands of buyers are able to buy homes below their maximum price because so many agents are such poor negotiators, it is astounding.
HOW TO AVOID IT: You don't need a slick salesperson, you need a good negotiator. A good negotiator can easily mean an extra ten percent on your selling price. To discover if an agent is a skilled negotiator, ask the agent to teach you something about negotiation. If you are not impressed with what you hear, if you do not learn something worthwhile, do not hire the agent. Insist on an agent who is a skilled negotiator.
9. AUCTION - THE REAL ESTATE INDUSTRY'S GREATEST FRAUD
The greatest myth with auctions is that they are "the best way to sell". This is not true. Auctions are one of the worst ways to sell your home, no matter what area you are in or no matter what the market conditions are like. Auctions get lower prices. One of the greatest tricks is the "reserve" price. Agents will say that homes often sell above reserve, but the reserve is your lowest price, it is the minimum you will accept, under pressure. Auction involves extreme pressure to sellers, "crunching" them to accept whatever price is offered at the auction. Agents are taught to use auctions to "condition sellers". The Real Estate Institute of Australia published a book describing auctions as "the fastest and best conditioning method".
HOW TO AVOID IT: The best advice is don't auction. However, if you can't resist the sales spiel, at least insist that you pay nothing unless your home is sold at the price you want. Also, do not fall for the "vendor bidding" trick. Agents may say that vendor bidding helps you to get the price up and that it is only done below the reserve price. However, if agents started the bidding at the reserve price, then there would be no need for vendor bidding. The reason bidding starts below your reserve price is that many agents intend to "crunch" you under extreme pressure to lower your reserve price.
10. BAIT PRICING
Never allow an agent to use a false low price to attract buyers to your home. This highly deceptive form of selling may be sold to you as a "new way of selling" - By Negotiation, Offers Above, Price Guide, Set Sale. But, whatever they call it, it's just bait pricing. These methods are now illegal in some states. Agents are required to provide a reasonable estimate of the selling price of a property and to show evidence to the seller of how their estimate was calculated. The agent may say that offering a lower price "attracts more buyers", but it attracts buyers who only want to pay a lower price. The lowest price they see is the highest price they will want to pay. Bait pricing also severely devalues your home because it creates the impression that your home is worthless. Even buyers who could afford to pay more for your home will still want to pay the lowest price mentioned.
HOW TO AVOID IT: If agents cheat buyers, they will cheat sellers too. You should not even contact an agent who is using bait pricing. Avoid them completely. If you want the best price for your home, the first thing you need is buyers who can afford to pay the best price for your home.
12. SETTING YOUR PRICE
A price which is too high can make buyers ignore your home and it can quickly become 'stale' if it is not sold in a few weeks. Stale homes get lower prices because buyers wonder why others rejected it. Your home must never be seen as a reject. But if you price your home too low, you might sell it too low.
HOW TO AVOID IT: You should set a starting price high enough to protect you from selling too low and appealing enough to attract the best buyers. The buyers are told that the price you ask is the price you will accept if that price is the best price you are offered. Be careful as some agents say that when you put a price on a home the price can only go down. This shows that these agents are poor negotiators. The starting price for your home can go up or down. It depends on how many buyers are interested and the skill of your agent at negotiating. If two or more buyers are interested, the agent will ask each buyer to offer their best price in confidence. You take the best offer. It's fair and it's simple. Unlike bait pricing or auctions, buyers are told the truth from the start. This attracts buyers, there is no gazumping, no deception and you get the best market price.
13. OPEN INSPECTIONS
There are two big dangers with open inspections. First, they are a security risk and second, they can easily damage the value of your home. Despite the warnings and the overwhelming evidence, many agents continue to allow hordes of strangers to wander through family homes. Most people who visit open inspections are lookers, not buyers. Thieves also visit open inspections and check the home for a future break-in. Your home is probably not insured from theft caused by an open inspection. But the purpose of an open inspection is not to sell the home, it is to create the impression of activity and "condition" sellers to lower their prices. Sellers believe that the people looking at their home are "buyers". This makes them easy to persuade to reduce their prices. Sure, some of the people at the open inspections will be buyers, but the agents rarely know who is a real buyer and who is a looker. The agents then say to the sellers "See, it didn't sell. They all think the price is too high". As with typical advertising, one of the reasons the home does not sell is because the real buyers wonder what's wrong with it. Hence the value is damaged and the price has to be lowered. Open inspections are also used by agents to find sellers of other homes in the area. This is one of the most common behind-the-scenes tricks in real estate.
HOW TO AVOID IT: Insist on your security. The best agents interview buyers before bringing them into your home. This is called "Qualifying", and that's all you want - genuine qualified buyers. These buyers should be able to inspect your home at any time (within reason). You hire an agent to sell your home for the best market price, not to wave people through your home. You could do that yourself and not have to pay an agent. If the agent says there is no security risk, ask the agent to accept responsibility.
14. REJECTING THE EARLY BUYERS
Many sellers have discovered, from bitter experience, that the buyers they rejected when their home was first placed for sale were the buyers prepared to pay the highest price. An efficient agent will have a bank of buyers waiting. The agent will select the best buyers and bring them to your home. This can be your best chance to get the best price. If your home does not sell to any of the buyers in the bank, you will have to wait for new buyers to enter the market. The number of buyers for your home will get lower, not higher, as time goes on, and your price will often get lower too. Agents who say it may take many weeks to find a buyer are admitting that they are inefficient, or they are failing to tell you the truth about the value of your home. They know your home is priced too high and they have to "condition" you down in price. How many times do you hear of sellers having their homes for sale for a long time and getting a higher price? Almost never. High prices come early. Low prices come late.
HOW TO AVOID IT: Carefully consider the early offers you receive as you may even get the full asking price (or more) in the first few days. If the early price enables you to achieve your goals, you should strongly consider selling sooner rather than later at a price which is likely to be much lower.
Dull homes get dull prices, but a home which sparkles and has the right feeling always sells for a higher price. Be careful what you spend on improvements to your home, as what suits you may not suit every buyer. You rarely get back more than half the cost of your improvements when you sell. Do not spend large sums on home improvement immediately prior to selling your home. Pay attention to the little things which create a big impression.
HOW TO AVOID IT: Make the atmosphere natural and relaxed, even if it means changing your living habits. Nothing turns people off more than bad smells, so be sure your home is fresh. Buyers are aware of gimmicks such as a coffee pot brewing, a cake in the oven or classical music playing softly in the background. False attempts to add appeal often have the reverse effect. Genuine appeal wins the buyers - a radio or a TV (never too loud) is a natural part of home life, well-made beds with warm quilts, lots of pillows and the ultimate mood enhancer - the teddy bear, really make a home feel like a home. Home truly is 'where the heart is' and anything which increases the emotional feeling of comfort is something we all love. If buyers fall in love with your home, they will pay their best price to own it.