The Golden Rule for Buying Real Estate
(Printed in Escapologist - Port Phillip Publishing)
By - Catherine Cashmore
Have you tried or considered buying a property recently? There’s a little more to it than property spruikers and mortgage brokers have you think.
They say it is more stressful than bankruptcy, divorce, and bereavement. And let’s face it – who enjoys dealing with real estate agents?
I thought not.
That’s because the real estate sales industry is full of traps, trickery and deceit. I should know – I’ve worked in it for over a decade.
As a buyer advocate, I negotiate on two to three properties a week - year in, year out. There’s not a sales trick in the manual I’ve not encountered.
When I first started out, I worked as a sales agent.
At the time, I could not understand why investors and homebuyers would employ an agent to purchase on their behalf. It seemed like a waste of money, and few people used one anyway.
I quickly learnt why.
Don’t Dive Alone into Shark-Infested Waters
By the end of my first year, I couldn’t understand why people did not employ a buyer advocate.
I saw many taken to the cleaners.
They frequently over-payed for poorly located housing they would inevitably want to offload no more than a year or so later.
Paying a buyer advocate fee would have saved them thousands of dollars and hours of heartache.
It didn’t take long before I switched sides professionally.
When it comes down to it, the sales sector of real estate is about little more than ‘churn and burn.’ It’s also highly competitive.
If an agent does not list and turnover enough properties to cover their retainer and bring the agency a sizeable profit, they will lose their job to the next agent that can.
Therefore, don’t expect them to be wholly transparent about their vendor’s expectation, current buyer interest – or anything else for that matter.
Rather, it is not unusual to be pitted against other buyers. You’ll be cajoled into wasting time, money and energy on under-quoted properties you have little chance of ever buying within budget.
Gazumping, dummy bidding, scare tactics, (such as 'white lies'' about other offers to get you to pay more)…the list goes on.
As a result, you’ll risk making an expensive mistake on the biggest purchase of your life.
So why use a buyer advocate?
The bottom line is that the sales agent is working for the vendor.
It is the sales agent’s job - by law - to get the highest possible price for their client.
They’ll be full of smiles and niceties when you attend the open home. However, they’re not there to assist you as a purchaser. They’re there to get you to pay more.
And when you’re competing with a skilled sales agent, you’re dealing with someone that has a good deal more knowledge of the industry than you.
With that knowledge, shrewd agents will lull you into a false sense of security.
If you find yourself signing contracts without a licenced conveyancer or solicitor checking them first, or being rushed into making a hasty decision, you know you have fallen into this trap.
Quite simply, the sooner the agent gets you to meet their vendor’s lofty expectations, the sooner they can pocket the commission and move onto the next listing.
By employing a good buyer’s advocate, you need never risk this or even talk to a real estate sales agent again.
They will do all the legwork when it comes to searching, assessing, and brokering a deal.
They will protect you from over paying and conduct all the necessary due diligence required. All you need to do is say ‘yes’ or ‘no’ when it comes to making a decision.
Of course, not all buyer advocates are the same. There is good and bad in every industry.
You need a buyers advocate to implement what I call the ‘golden rule’ for buying real estate…
Make Sure You Know This Golden Rule
The more information a buyer knows about the vendor’s circumstances and expectations, the easier it is to manipulate the deal to their own advantage.
Therefore, one thing a real estate sales agent will never, ever do, however, is allow you (the buyer) access to their vendor. The vendor has the single piece of information buyers can benefit from – their reserve price.
Instead the agent will be evasive about their vendor’s preferences – with comments such as “we’ve not yet set a reserve.” In reality, the agent knows the vendor’s ‘wish price’ from the onset.
This is why the most important key to successful negotiation is to place a buffer between you (the decision maker) and the real estate agent.
In the many articles and seminars I have undertaken on negotiation tactics, rarely – if ever - is this one golden rule mentioned.
If you show any emotional or physical reaction to a question or statement from the sales agent, you give away valuable information the agent will use to their benefit when brokering a deal.
It can be as subtle as a glance to your partner, a raise of the eyebrows or the tone of your voice.
This is one reason – as a buyer advocate - I gain a significant advantage when vendors attempt to sell their own property. Negotiating directly with a vendor enables me to unearth far more information than a well-seasoned estate agent would ever permit.
When I negotiate on behalf of buyers however, the sales agent is granted no such advantage.
For example, the question I want to know is what amount of money will buy the property “today?”
If the agent starts to grow attentive when I ask if his vendor will accept a certain amount – say, for example around $440,000, $450,000, $460,000 - it gives me a better assessment of the vendor’s likely reserve. And it does that without compromising or disclosing my client’s position.
The idea for you is to wrest control into your hands. There are numerous ways to do this. Negotiation is about more than price alone. Negotiating settlement dates, conditions on the contract, the deposit amount and so forth, are all useful tools to employ. However getting someone to negotiate on your behalf is the most powerful.
It’s the ‘Golden Rule’.
As the saying goes – “a man who is his own lawyer has a fool as a client.”
Don’t be that fool.