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Unethical practices that affect buyers:   1  ●  3  ●  4   ●  5   ●  6   ●   7  ●  8   ●  9  ●  10 
Unethical practices that affect sellers:   1  ●  2  ●  3   ●  5   ●  6   ●   7  ●  8   ●  9 

Unethical Practice #4:  Buyers’ agents who urge their clients to bid high.

Agents hate it when their offers are rejected.  Before submitting them, agents must usually show several properties, read through disclosures, and then assemble an offer package filled with contracts, documentation, and a cover letter.  They get nothing for these efforts if their offers are rejected.

That's why profit-driven agents often encourage their clients to bid high.  This may not be a problem for a buyer who is in love with a house and wants to get it at any cost.  But most buyers don't just want a nice house, they also want a good deal--even if bidding low increases the risk of losing the house to a rival buyer.    

Here’s how some agents pressure their buyers to bid high:

Withholding useful information available only to agents

To help you decide on an offer price, a buyer's agent will normally show printouts of neighboring homes that have sold recently.  But the sales prices of these "comps" (short for comparables) often don't tell the whole story.  Many sellers, for example, offer buyers sales concessions in the form of credits for closing costs.  Indeed, it's common for buyers of FHA- or VA-financed starter homes to get 3% of the sales price credited to them at close of escrow to cover closing costs--and some get even more. 

As a buyer, you don't have easy access to this information, but your agent probably does.  MLSs often have confidential sections that are intended to be viewed only by agents and appraisers.  These confidential sections usually tell agents about seller concessions on sold listings, and also about sales commissions and special bonuses that are being offered to agents on active ones.

The MLSs in my area forbid agents from sharing agent printouts of MLS listings with non-agents, but your buyer's agent should share with you--at minimum--information about seller concessions so you have a good idea of what buyers of neighboring properties really paid for their homes.

Perpetuating the myth that a low offer will insult the seller

If you offer too little, buyers' agents sometimes say, you'll forever poison any chance of a getting an offer accepted.

I’m sure there are a few sellers out there who would refuse to deal with any buyer who’d had the audacity to insult them with a low offer.   But most sellers simply want to get the best deal possible.  If they refuse to respond to a low offer, it’s usually for strategic reasons.  When sellers counter offers, for example, they run the risk that other buyers and agents will learn more about how low they're willing to go.  A seller doesn't usually want to do that unless a buyer appears to be serious.

Low offers may make sense if the buyers' bargaining position is strong.  If the offer is rejected, the buyer can always come back with a higher offer, which often does wonders to soothe hurt feelings.


Giving buyers "The Look"


“You can’t be serious.  I just spent a whole afternoon showing you properties, and that’s all you’re going to offer?  There’s no way this offer will be accepted.

"You're obviously a lightweight who's out of your depth.  I can't believe I mistook you for someone of worth and importance."


Failing to do homework

I once had a listing that had been on the market for months with no price adjustment.  Then we got a full-price offer for it.  Both the seller and I were mystified.  We weren’t expecting any other offers, and the market had obviously spoken:  the home was overpriced. 

In order to get a good deal, agents should try to find out about the strength of the seller’s bargaining position.  Are there other offers?  If so, are they above asking?  How long has the property been on the market?  Are there similar homes on the market?  Why is the seller selling? 

The existing commission structure, though, doesn't reward agents for doing this kind of research.  Finding weaknesses in the other side's position only encourages a buyer to bid lower, which increases the likelihood that the offer will be rejected.

Offering bogus statistics

If a client is hesitant about offering too much, an agent will sometimes share rosy predictions about where the market is heading.  The National Association of Realtors is usually a good source of overly optimistic market forecasts.


The buyers' agents' perspective ...

A blog for real estate agents speaks volumes about agents' attitudes towards their clients.  In it, agents discuss a San Diego County couple who purchased a home in a subdivision, only to learn later that similar properties had earlier sold for as much as $175,000 less.  The couple then sued their agent for not telling them about the other comps.  Here are some of the agents' comments:
  • "People need to start taking responsibility for thier (sic) own actions and stop trying to sue their way out of their mistakes."
  • "What amazed me is they are talking about a $1.1 million dollar home and she is pissed about $100 grand!!! What am I missing here?"
  • "[T]his serves as a record to document, document, document." 


©Lori Alden, 2011.  All rights reserved.