Merry Silbaugh, ABR
Associate Broker   Cell 602-617-3245
No Gimmick Real Estate

The Inside Story on Deceptive Real Estate Marketing . . .

 

As of this writing (5/06), Arizona has 50,438 REALTORS, roughly18,000 in Maricopa County alone. And that doesn’t count another 30,000 real estate licensees that are not REALTORS. Each year, thousands of new licensees enter the business searching for their slice of the pie. And, incidently, at the same time thousands leave the business, having found the slice to be too small. In fact, 80% of new licensees leave the field within the first year and another 10% leave by year three. The practice of real estate is truly a fiercely competitive business.

 

Agents new to the business face a daunting challenge: How does one carve out a niche in a business in which clients want to be represented by experienced, knowledgeable agents who possess a verifiable track record of successful sales; a business where the agent’s reputation in the business is everything?

 

Most successful agents choose the high road, taking advantage of every opportunity to educate themselves, building their business one client at a time with honest advice and exemplary service resulting in referrals and repeat business.  

 

Some agents, however, try to “jump-start” their business with the aggressive marketing of what really amounts to sales “gimmicks”. Fortunately, these agents make up a very small minority within the industry. Unfortunately, their actions affect the public’s perception of us all.  Here are some of the most common tactics employed:

 

The “sound bite” offer or guarantee that will become a paragraph of fine print.

 

Examples:

 

“I’ll Sell Your Home in 45 Days or I’ll Buy It” may become “Of course, you have to have agreed to my listing price from the beginning of your listing; you have to have implemented every recommendation I made to prepare your home for showing; if I do buy your home it will be at a discounted price that will naturally be well below market value because, after all, how else could I afford to take the risk in doing  so; etc, etc.”  

 

“Cancel Your Listing At Any Time” may become “Of course, you have to notify me in writing and then I have 2 weeks to convince you not to cancel; if you do cancel you have to reimburse me for all of the expenses I have incurred marketing your home; if you do cancel you will have to re-list with an agent I recommend (that way he/she can pay me a referral fee); etc.,  etc.”

 

I think you get the idea. Remember, these offers are soooo intriguing precisely because they are what they are—TOO GOOD TO BE TRUE!

 

 

 Next, What I call “Bait & Switch” Sales Commission Arrangements.  

 

These can take a variety of forms, some propounding that you will net more money by paying lower sales commissions and some suggesting just the opposite, that you will actually make more money by paying higher sales commissions.

 

Example:

 

The “Bait”:     “We’ll Sell Your Home for $3000*” 

 

First of all, note the asterisk next to the price? That’s because that sales commission only applies to properties below a certain price, a price which (you guessed it) applies to only a very small percentage of the properties in the marketplace. The sales commission on the vast majority of more expensive properties (you guessed it again) is higher. Chances are your property is one of the more expensive ones, so you’ll be “switched.”

 

Next, are their any assurances about selling your home for the highest price and best terms? Probably not and here’s why. That $3000 or higher* sales commission does NOT place your property in the Multiple Listing Service. Now that’s a problem, because whether we like it or not, the Multiple Listing Service IS the market. Don’t let anybody tell you different.

 

All the research shows that the #1 source of information from which buyers first learn about the home they purchase is their real estate agent. If you’re not in the MLS those 18,000 agents we discussed earlier and their thousands of buyer clients don’t know your house is for sale!  What about the #2 source of information? It’s the Internet and REALTOR.com is by far the most visited site. If you’re NOT in the MLS, you’re NOT on REALTOR.com. and the tens of thousands of buyers that made REALTOR.com the number one real estate site don’t know your house is for sale either!  The #3 source of info? It’s the yard sign. Now that, you get for $3000 or higher*, but unfortunately, only 15% of buyers found their new home from a yard sign. And in case you think that doing a lot of open houses will make a difference, you should know that not even 1% of buyers say an open house was their first source of info about the home they purchased.

 

What does all of that MLS exposure result in? It results in homes with MLS exposure selling for an average sale price of 16% more than homes sold without MLS exposure. 16%!!!!  Unfortunately, proving that MLS exposure will get YOU a better price and terms for YOUR property is impossible. After all, you would have to be able to sell your home twice simultaneously, once with the use of the MLS and once without and then compare the results. But there is lots of anecdotal information from the Seller’s market of 2004-2005 in which properties without MLS exposure were bought and then immediately re-sold prior to closing with MLS exposure, with the first buyer reaping profits in the tens of thousands of dollars.

 

Proof, however, shouldn’t be necessary. Common sense makes it obvious. To believe that one could expect to get the highest price and best terms for their property without MLS exposure, one would have to reject the laws of supply and demand, to believe that competing buyers will NOT pay more for a property than just one non-competing buyer. One would have to reject the very foundation of our American economic system.  I’m smarter than that and so are you!

 

Make no mistake, the agents that use this type of sales commission “bait” are smart too. They know that in the current buyer’s market the chances of finding even one buyer for your property without MLS exposure, let alone competing buyers, are slim. That’s why, once they have your listing they will begin to “work on you” to get your listing into the MLS thereby “switching” you to a higher sales commission.  They may even include this “switch” in the original listing contract so that it happens automatically after a set period of time, say 30 days.

 

            Moral of the story: You Get What You Pay For!

 

            Example:

 

The “Bait”:                 “We’ll sell your home quicker and for more money because we’ll entice agents to show it by offering a much higher than expected commission in the MLS, but we’ll offset it by raising the asking price of your home. As the Seller, your net will be the same!!”

 

The “Switch:           “And if the buyer won’t pay  

                                   that much for your home,

                                   we’ll force the agent to give up

                                   the inflated commission in the

                                   contract negotiation.”

 

This is one of the most cynical gimmicks out there,

designed to manipulate everyone. The only thing it lack is

the smoke and mirrors. For it to work the following

assumptions must be made:

 

                        Assumption! #1

 

                        --There is no such thing as market value and there is no risk in pricing your home above market value. If so, rather than doing the above, wouldn’t the Seller be better off listing at the higher price, but continuing to offer the lower, expected, commission? Yes!!!  But market value is real and there are numerous well-documented risks that are regularly experienced by the owners of over-priced listings. Any buyer who is active in the marketplace is going to see that the home is over-priced & won’t pay that for it anyway. And if the home isn’t going to be seen as over-priced, then why didn’t the agent price it at the higher price to begin with?

 

                       

 

Assumption #2

 

--Real estate agents are greedy, so they’ll try a lot harder to show & sell your home, even if it’s over-priced, if they think they’ll get paid more than they would on another home. Is there a grain of truth in this? Probably! Who doesn’t like to make more money? But here’s the catch—if this home fits the buyer’s criteria, the agent will be showing it anyway. As long as an agent will receive what he/she feels is a fair commission, that agent will not risk losing the buyer by letting them see the house through someone else. And if the home doesn’t fit the buyer’s criteria, why would the agent risk losing credibility with the buyer by wasting their time showing them an inappropriate house. And why would the seller want agents tromping through their home with buyers when their home isn’t going to meet that buyer’s needs?

 

                        Assumption #3

 

                        --Buyers won’t know about the higher sales commission so the agent won’t have to worry about explaining it.  But, of course, the buyer will know (the offer is splashed all over the customer MLS listing & will be on the settlement sheet at closing). The agent knows that the buyer will know and there isn’t an agent alive that wants to have that conversation with a buyer! If you were an agent, would you want to have to explain to a buyer that the house that you have been encouraging them to buy just, by coincidence, happens to have a sales commission that is, say 60% to 130% higher than what is typically seen in the marketplace? Of course you wouldn’t! And neither would I!

 

This listing tactic creates such a convoluted mess, that

agents with integrity may be tempted to avoid such

properties altogether, thereby avoiding any appearance

of impropriety.

 

 

            And Finally, “Stealth Marketing”

 

Consumer research shows that when people want information about something related to real estate, many want to be able to get that information without having to talk to a real estate agent. Enter the concept of “Stealth Marketing” which has been made possible by advances in online and telephone technology.

 

Agents using this deceptive technique use technology to obtain the contact info of prospective clients (email addresses, phone numbers, addresses, etc.) without their knowledge. This is accomplished by running ads offering all types of free information at innocuous web addresses or 800 numbers, without clearly showing that a real estate agent is making the offer. When someone goes to the website or calls the 800 number, the contact information provided is “captured” and placed in the agent’s data base. This “capture” will even include un-listed phone numbers & since you originated the call, the prohibitions of the Do Not Call list probably no longer apply. You will, of course, hear from that agent in one way or another, exactly what you were trying to avoid. Although this tactic is deceptive and misleading, at least it does initially provide members of the public with information that may be of value to them.

 

This type of marketing will continue until the public simply understands and accepts the fact that reliable information about local real estate is going to come from local real estate agents because it’s their job to possess that information! It doesn’t matter how many buffers or middle men are placed in the line of communication, reliable information will ultimately come from the agents in the local community. Even your request for info from big national websites like homevalues.com or justlisted.com results in your being contacted by a local real estate agent (those sites “capture” your contact info too and refer it to local agents, taking a percentage of any resulting sales commission in the process).

 

Rather than being manipulated in your quest for info, wouldn’t you rather simply contact the local expert of your choice? That professional will honor your request to not be pestered and you will be in control to re-contact that professional if you so desire.

 

So, what's the bottom line? THE BUYING AND

SELLING OIF REAL ESTATE IS WHAT IT

IS! No matter how much somebody tries to twist

            and turn it - - no matter how many marketing gurus and

            sales trainers try to spin it - - no matter how many times

            ones tries to re-invent the wheel - - IT IS WHAT IT IS!

 

            Clients of the industry are always best served by

            agents who demonstrate the highest ideals of honesty

            and integrity, valuing their good reputation in the

            business above all else and placing their clients' needs

ahead of their own!


ScottsdaleFountain Hills Arizona


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RE/MAX Sun Properties
16704 Ave. of the Fountains 101 • Fountain Hills, AZ 85268
Associate Broker • Cell 602-617-3245