Often times, if a relationship sours between a consumer and a real estate agent in Silicon Valley, it’s not because of an intentional deceit on the part of the licensee, but rather an oversight, a blunder, or a mistake.

Sometimes, though, there are things done by the real estate licensee which are more calculated and truly are not in the buyer’s or seller’s best interest. (This runs both ways, of course – sometimes consumers pull bad stuff on Realtors, too.)  Those are the things we’ll discuss today. Sometimes the consumer never realizes that these occurances were more than unhelpful. Other times, the buyer or seller catches on – but by then, it’s too late.

First, a short list of a few real estate tricks and traps that buyers should recognize as red flags. We’ll look at each of these in detail below the list.

• 1-long listing or buyer broker contract commitments
• 2-Would-be listing agents telling sellers a higher price than is likely to happen in order to secure the listing.  We call this “buying the listing”.
• 3-trying to sell listing off market to double end it – marketing a listed home, holding open houses prior to the property being on the multiple listing service
• 4-no lockbox & all appointments through the listing agent only
• 5-bad terms in the “other terms and agreements” section of the listing or buyers’ contract that create more restrictions on the buyer or seller

#1 – How long of a listing time frame is too long? If homes that do sell are selling in an average of 60-75 days (which is often the case in some of Silicon Valley markets right now), then a 90 or 120 day listing agreement is not excessive. A six month listing could be  a little long. A one-year listing agreement is unconscionable unless the property is a luxury home or distressed property with a very long “months of inventory”.

Ditto that with buyer-broker contracts.  Often 6 months is more than enough.  Be careful if your agent wants a longer term than that.

#2 – Inflated market value presented. Perhaps the oldest trick in the book is telling homeowners what they want to hear about the likely market value of their home rather than the truth.  Sellers may be led to believe that although the other 2-3 agents quoted a lower probable sales price, this one agent values the home more and therefore will get the higher price.  Or “this real estate salesperson really likes my house more”.

Don’t be lulled into what we call “buying the listing“!  I have lost listings many times by telling the truth, only to see another agent price it too high and later gradually reduce it until it has a reasonable enough price to get an offer.  (Once in awhile a seller can get lucky and get a really high price – but then the buyer has overpaid.  Every seller would like that to happen but the odds are very much against it, and when we do see it, it’s a fluke. Buyers are generally too smart for that.)

For buyers, it could be the other way around – perhaps other Realtors have told you that it is unrealistic to expect to get a certain size, condition and location of a house for your budget, but another agent tells you differently and locks you into a buyer broker agreement.  Careful there!  Some agents may hope that over time, they can wear you down (just like with the sellers).  Perhaps it’s best to make sure your expectations are in line with the market realities.

A small footnote: many sellers will want to hire the licensee who seems most excited about the house, or who seems to “like” their home the most.  Some agents are warm and enthusiastic and others are more unemotional (they would argue business-like).  It’s a nice plus if your agent actually seems to like your house but enthusiasm by itself is not a market plan (and in fact can be seen in spades in brand new licensees), nor does it necessarily mean that the agent knows what he or she is doing.

When sellers look too much for affirmation that their home’s great, they may unintentionally send the signal that the agent better not say anything negative about the house (or about the seller’s desired price).  Consumers are best served when Realtors have permission to be honest with you, telling you what you need to hear (not what you want to hear).

#3 – Selling “off market”. One of the most commonly seen tricks in the Saratoga, Monte Sereno, Los Gatos, and Almaden Valley real estate markets is the “let me market your home before the general public sees it” approach. This usually benefits the agent far, far more than it benefits the seller. Why? First, because it sets the listing agent up for dual agency, which if often not in the consumer’s best interest, and secondly, if an offer were procured from this non-mls marketing effort, it may not be the highest and best offer since there was not a huge amount of qualified traffic coming through. A seller’s best price and highest net will result from the most exposure, and skipping the MLS is skipping 98% of the possible exposure. Don’t be talked into it unless you have a very exceptional situation which precludes you from wanting the most qualified traffic possible.

#4 – The hard-to-see-home. Another not-infrequent trick utilized by some agents to benefits themselves more than the agents is the listed house with no lockbox and where each showing must be with the listing agent present. Again, the lack of a lockbox dramatically cuts down the good traffic and exposure, it virtually always creates a far longer time on the market prior to the home selling, and also ensures a higher likelihood that the listing agent will “double end” the transaction – that is, that the listing agent will represent both buyer and seller.

Why do sellers take this advice to skip the lockbox? Cunning and unscrupulous agents convince them that the lockbox is too risky and inconvenient, and that the agent will give them more personalized attention by being present for all showings. It sounds like good insurance, doesn’t it? But it’s not. It’s just a way for that agent to increase her or his odds of making more money – at the seller’s expense. I have even seen this tactic used on vacant homes. Realtors in the area all see the pattern and know what’s happening, but the public is unaware. Hence this post!

#5 – Watch out for “other terms” in the listing agreement. Finally, there are some creative agents who use the “other terms” section of the purchase agreement to better their own position. Always read this section carefully (read the entire contract carefully, but especially this part) and if it is unclear to you what the words mean, either don’t sign, cross them out, or take the agreement to a real estate attorney before deciding what to do. The “other terms” section can be used in many ways, such as omitting certain people from the agreement (“if neighbor B buys this home in the next 5 days, no commission will be owed to the Realtor/Broker”) or to include an “easy exit” clause for the seller, but it also can be used to create problems for the seller. So read carefully and be clear on the meaning before you agree to it in writing.

On the other hand….  Some agents (myself included) will add a clause to the “other terms” section of the contract which allows for an easy cancellation of the agreement – this is sometimes called an “easy exit listing agreement” and I have found that many sellers in Silicon Valley are thrilled and relieved when I explain that it’s part of every listing I take. It is definitely a plus if you find an agent who will agree to this in writing. Most will not, though.

There are other, more benign things to watch out for with agents too, such as being asked to sign any paperwork during the listing presentation. The agency disclosure may be signed at any time “as soon as practicable” by sellers and agents, and it does not necessarily tie the consumer to the brokerage. But the idea here is to get you used to saying yes, to get you used to signing things. Sign here, sign here, sign here – oh, and here’s the listing agreement. . . . The agent wants you “on a roll” of saying yes.

Watch out, also, for changes in the boilerplate section of the agreement that may favor the real estate firm. If they have an automatic 90 day “protection clause”, some agents may change it to 120, 180 or 360. Watch for it.

There’s also the issue of which listing agreement is used. There are two sets of realty forms in the San Jose – Los Gatos area, the PRDS and the CAR forms. Each one has pros and cons but do be aware that one may favor your position more than the other. You may wish to review both, and consider changes to either form if your own situation warrants it.

One of the best ways to avoid tricks and traps by unscrupulous agents in Silicon Valley (luckily, there are not a lot of them!) is to hire an agent you know, like and trust and not just assume that all Realtors are the same. Ask for referances if you don’t know the agent or were not referred to him or her by satisfied clients. Google the agent’s name and see what you find out. Check the Department of Real Estate’s website to see if there are any huge issues in the agent’s history.

If you’d like more information on how to hire a Silicon Valley Realtor, please call or email me for a private consultation, and at our meeting, I’ll give you a copy of my book, “Get The Best Deal When Selling Your Home In Silicon Valley”. An entire chapter of that book is dedicated to the issue of hiring an agent!

You can also find the book online at Amazon.com, or at local bookstores in Silicon Valley such as Borders or Barnes & Noble. (If they are out, ask them to reorder it!)

Tags: Seller Tips, Selling a home, silicon valley

This entry was posted on Saturday, May 21st, 2011 at 1:52 am and is filed under Buying Tips, Selling Tips, Working in real estate. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.