This book is not a defence of the real estate industry nor is it an attack.
Survey after survey reveal real estate agents are some of the least respected professionals in the community. There is a reason for this lack of respect. It can be traced back to the industry’s sales strategies; these are the systems of traps and tricks that make the uninformed entrant to the real estate game significantly less wealthy.
In the following pages, those very strategies and their well-honed tactics will be explained in detail. After reading Real Estate Uncovered, I hope you will be confident in knowing exactly how to avoid the worst of the industry’s bottom-dwellers and able to seek assistance from one of the many professionals who do the right thing by their clients, not once in a while but every day, on principle.
Show MoreReal Estate Uncovered is not designed to inundate you with all the answers. There is already too much information confusing many people endeavouring to buy, sell and invest in real estate. This book is designed specifically to ensure you can ‘read the play’ when dealing with real estate agents.
Property sales is a highly competitive industry. Listings are the lifeblood of a real estate office. This is why there are more brochure found in letterboxes asking you to sell your home than these are brochures asking you to buy. Often when an agent gets a listing, they have either overpromised the selling price or the owner wants to sell above the market price.
To condition both buyers and sellers to accept the market price, the industry has devised a bag of tricks. These strategies and their often unsavoury tactics will be laid bare in the following pages. What you once viewed as a normal real estate practice before reading this book may now be viewed in an entirely new light.
The real estate industry is masterful at recreating its own message as news. Has there ever been a time when an agent told a buyer it is not the right time to buy?
This book is designed to help you cut through the hype in order to make an informed decision.
Linda and Ralph’s story
Linda and Ralph owned a very desirable home opposite a harbour-side park in Sydney. Friend and family assured them the sale of their home would be a certain success. After interviewing several real estate agents, they selected the highest profile agent – the one who `handled the top end’.
After speaking with many agents, the consensus was strong. Ralph and Linda were told they would be `mad not to auction’.
Auctioning their beautiful home was against their natural inclination. However, given the agents universally agreeing auction was the preferred selling method, they went with it anyway.
To kickstart the sales campaign, they provided their credit card details to pay for marketing upfront. The $7161 `investment’ would be deducted from their credit card a week before the auction.
The agent had quoted and expected selling price of $1.35 million to $1.45 million. Given the positive feedback from anyone who had ever inspected the home, the thought of the auction failing was never considered by Linda and Ralph. Spending more than $7000 on marketing was not deemed to be much of a risk.
As the property was released on the market, the agent told prospective buyers the property would attract bids of $1.2 million plus. The homeowners were assured by their `experienced’ agent this was merely a tactic to engage buyers. The property would achieve the originally quoted price of $1.35 to $1.45 million, the agent told them.
Again, Linda and Ralph went against their intuition.
The marketing campaign was rocketing along. The property was advertised in a multitude of magazines and newspapers, Neighbours had been given a `Just Listed’ card and the property was prominently displayed on the Internet. Hundreds of people poured through the open inspections.
However, the feedback from prospective buyers was surprisingly negative. The agent dutifully informed Linda and Ralph of the buyers’ multiple concerns. The bus route past the front of the house, the obvious renovation costs of updating the home and the market conditions were apparently uppermost in buyers’ minds. These were all concerns the agent failed to mention before listing the property.
As the auction day approached, the optimistic agent morphed into a concerned agent who has never quite seen a downturn like this one.
On auction day, bidding began at $1.1 million. A massive crowd had congregated to watch this well-publicised event. Linda and Ralph now realised their initial intuition about auctions was correct. As the bidding stalled at $1.215 million, the auctioneer and the lead agent gave them an ultimatum.
Drop the reserve price in order to sell to one of these buyers or risk losing the buyers and waste the marketing investment in the process, they told the homeowners.
Real estate industry strategists like the words `crack’ and `crunch’. The pressure of a scenario like this is specifically designed for sellers to `crack’ so they can be `crunched’ on price. You will never read these phrases in an agent’s brochure but rest assured they are keen terms used behind the industry wall.
Linda and Ralph instinctively knew this was not a unique experience. They realised they were being had. The couple was not happy to waste the `marketing investment’ (which promoted the agent more than the house) but they were certainly not doing to be bullied or fleeced.
Instead of dropping their reserve price to `meet the market’ on the day, they fired the agent.
When the couple spoke about their ordeal with their next agent, they were left in no doubt they had been subjected to a selling strategy that seems harmless on the outside but is rotten to the core.
How that system works will be explained in the full Real Estate Unconvered.
There were two bidders at Linda and Ralph’s auction. Both of these buyers spent money on checks and searches in the hope of securing the property. As the bidding reached $15,000 above the agent’s quoted price during the campaign, the buyers believed the property should have reached the reserve. When the property was passed in, the two bidders also became victims in this messy tale – a tale that is repeated Saturday after Saturday at auctions around Australia.
The real estate industry deems a 70 percent clearance rate as healthy. On these numbers, that would suggest 30 percent of auction sellers go through the same system Linda and Ralph did. Their story is true and it is not rare. I have heard this exact scenario so many times in 15 years that I can tell the story more clearly than the victim. Many auction victims are amazed when we talk for the first time and I can tell them in vivid detail what they have just been through.
That’s when it dawns on them they have been drawn into a brutal selling system.
This is a system that over-quotes sellers, conditions them into expecting less and crunches them on pricing, under-quotes to buyers, profits on needless advertising and eventually perfects a sales process that undersells the paying client’s major asset.
Selling or buying residential real estate will always be an emotional transaction. But it can be done in a much fairer and more effective way than industry strategists have made it in the past.
Linda and Ralph armed themselves with the right information when they re-listed their home. They had the second agent carry the advertising costs, they set a fair asking price and they sold for $1.325 million after four weeks of relisting.
The buyer did not come from a wealthier part of town nor did they magically fly in from Hong Kong or Shanghai to overpay for a piece of real estate. The buyer was having a picnic in the park across the road one Sunday and noticed the signboard at the front of the property.
The real estate game can be both as easy and as expensive as it was for Linda and Ralph.
Best wishes and good luck,
Peter O’Malley
“Peter is one of the few agents I trust when it comes to understanding what is happening with the housing market. His objectivity and professionalism have extended into great insights in this terrific book.”
Louis Christopher
CEO SQM Research
“Blowing wide the dirty tricks of the real estate industry won’t make Peter O’Malley any friends amongst real estate agents, but he’ll be a champion to buyers and sellers. If you’re a buyer, seller or are renovating for profit, don’t do a thing until you’ve read this book.”
Margaret Lomas
Television Host and Author of 7 Real Estate Books
“Don’t auction your home until you read this book.”
Scott Pape
The Barefoot Investor and Finance Columnist
“Useful information that I wish I’d has before I put my house on the market.
I found the information on the expense of print advertising very good.
I think the book is particularly useful for novice sellers, like myself.
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Jacqui Hope
“Thank you so much for sending me the book 'Real Estate Uncovered' by Peter O'Malley recently – I read it cover to cover and found It excellent – packed with realistic information which helped me to select a skilled real estate agent.
I used the information in the book to interview the agent and confidently outline what I was expecting from her; instead of being swept along by the process and not fully understanding what was happening. That occurred on my two previous real estate experiences when I
Felt pressure and out of control and was left feeling manipulated by agents. Many thanks again. ”
Juliet Besly
You've heard the spin, now get the facts!
Inside Real Estate pulls back the curtain on real estate transactions for everyone looking to buy & sell a property – from baby boomers who are ready to downsize in retirement to millennials buying their first home.
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PETER O'MALLEY is the bestselling author of Real Estate Uncovered, the principal of Sydney-based agency Harris Partners and the pioneer of the silent auction, an alternative to public auctions, now preferred by many agents throughout Australia and New Zealand.