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An Introvert Buys Property: Finding A Property Agent To Trust (Part 2)

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Dan

Dan is a diehard introvert, freelance writer, first-time property owner, and backseat interior designer. He posts pictures of his home and writes about an odd combination of interior design, lifestyle, and self-development on his Instagram channel @stayingonthehill.

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Dy Francisco III
Dy Francisco III
2 years ago

When employing licensed real estate agents property sellers and buyers should be aware of the following:

1) Section 2.1 of CEA’s Code of Ethics for Professional Client Care (CEPCC) that licensed real estate agents have to follow. This states, inter-alia, that licensed agents are NOT allowed to give advice on valuation issues like “fair price”, “fair value”, market price vs fair price, valuation methodologies, etc. Clients are likely to be misled by agents by keeping silent on this issue.

2) Agents are “transaction-driven” – no sale, no commission. As a result, there is an inherent conflict of interest for property sellers. It is obviously easier to convince a seller to lower his asking price than to convince the buyer to agree to a higher price. Why? Because the former will often just make less money but is still making a profit. The latter may have limited funds and/or borrowing capacity and cannot come up with more money even if he/she wanted to.

3) Note that in the private property market it is the market practice that only the seller pays a commission. The agent can be trying to lower the price to help the buyer to get the deal done but the seller is the one paying his/her commission.

SOLUTION:

1) Property seller should do their own “homework” and not rely solely on a licensed agent on price issues. A lot of relevant info is available online. The role of the agent is really just “handholding” – arranging for online advertising and following up on the paperwork if the property is sold.

2) Property sellers should NOT give “exclusive” mandates to agents. Competition between agents is ALWAYS good.

3) Property agents should only rely on agents to market their property and find potential buyers. Property owners should negotiate DIRECTLY with the buyer. Do NOT let the agent stand between the seller and buyer when the price is discussed. The agent appointed by the seller can observe the direct negotiation between seller and buyer but should not participate because of the conflict mentioned above. The agent can follow up with documentation AFTER the seller and buyer agree on the price.

Stacked Homes
Admin
2 years ago

Thanks for sharing your detailed thoughts on this!
On point 1 – sellers should do their homework no doubt, but should also make use of the agent’s resources that are paid for. There are databases out there that only paying users can access. As such, to leave the agent out of this completely would not be the most efficient use of available resources – particularly since it’s free.
On point 2 – This is something we would have to disagree with. Competition may seem good, but because the agent knows others can clinch the deal before them, they could be motivated to pressure the seller into accepting a lower price. The agent would also not be as defensive about the price, and simply relay the price to the seller. If the agent knows the seller has many other agents too, some may end up using the unit as a show flat to psychologically affect other buyers into picking a better flat. Buyers who see that the same listing is available on portals would also reach out to all the agents and push them to get the lowest deal e.g. “I know this unit is not exclusive, I will talk to you only but you must get me this price”. As such, we believe there are pros and cons to this matter which should be best thought through and discussed with any other stakeholders in the transaction.
On point 3 – The reason why negotiations don’t happen between direct buyers and sellers is that the seller could easily cut the buyer out. Of course, this would not work because if there is proof that the agent brought the buyer to the seller, they are entitled to their commissions and the seller can be taken to court. However, many times, the seller doesn’t want to get caught up dealing with the emotions of talking directly to the buyer. A middle person can help ease this tension. Moreover, some experienced seller agents are capable of pressing the buyers into raising their prices as they know what to say. As such, it’s not so clear cut that buyers should always directly negotiate with the buyer.

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