A new report has shown the perception of real estate agents as ‘unethical’ is slowly, and rightly, changing. With that in mind, we thought we’d put some ‘little white lies’ that real estate agents might be tempted to tell to top coach Claudio Encina, to see what agents can say or do differently to achieve the best results for themselves and their clients.
We’ve all heard the joke “how do you tell if a real estate agent is lying?”
The question is answered with some variation of “they’re talking,” or “their lips are moving”.
Cue lots of knee-slapping and robust chortling.
Over the years, it seems real estate agents, like journalists and politicians, have developed a bad reputation when it comes to the question of ethical behaviour.
When you consider agents are selling what is often someone’s most expensive asset that reputation, however unjust it may be, is cause for concern.
Of course, those in the industry know that the majority of agents are, in fact, ethical, honest, and hardworking, and it’s a few bad apples that have spoilt the crop – or more accurately, the public’s perception of the crop.
According to the newly released Governance Institute of Australia’s Ethics Index 2020, real estate is considered one of the least ethical occupations, with a net score of -2.
The ethics index measures and compares the views of Australians on the importance of ethics and the extent to which our society, and subgroups within it, act ethically.
The latest edition of the annual report lists real estate as the third least ethical occupation, with a net score of -2, which comes just above federal politicians (-3) and directors of foreign companies in Australia (-4).
Local (2) and state politicians (6) fared only slightly better.
The most ethical occupations were, as they nearly always are, fire services (82), general practitioners (80) and ambulance services (80).
But it wasn’t all bad news for real estate agents, with the industry rising from a net score of -21 in 2019 and -27 in 2016.
This year is the first time real estate, as an occupation, has achieved a score higher than -21.
Top coach Claudio Encina says real estate rising up the index was a positive step.
He says the industry has been working hard to do right by its clients as well as training its agents and support staff.
“Sales is leadership, and there is a level of responsibility by ultimately doing what’s best for the client,” he says.
Among the reasons real estate is still viewed as an unethical occupation is, largely, due to a minority of agents who epitomise the definition of the word ‘hustle’.
Overquoting, underquoting and delivering lines such as “we have other offers on this property”, to increasingly savvy vendors and buyers doesn’t make for a healthy relationship with potential clients.
Yet it’s easy to see why some agents may fall into this trap.
Most are not bad apples; they’re just apples that realise there’s a lot of fruit on the tree and, if they’re to be picked, they have to get deals done.
Real estate is a profession where no signatures on contracts mean no dollars in your pocket.
But rather than fall into the cliched version of the ‘hustling’ real estate agent, there are ways you can avoid the most common little white lies agents might tell to seal a deal, and still achieve the same, if not better, results.
Claudio says the key to all facets of real estate, from securing listings to getting the best result for your clients, is authenticity.
“The first thing you need to do is to understand and appreciate their world,” Claudio says.
“Creating an authentic connection is essential.”
Here, we examine the most common mistruths agents tell to secure a listing or get a result, with Claudio explaining a more authentic way to approach the same issues and generate a great outcome.
The lie: Overquoting. Agents tell potential vendors that their property is worth more than it is, to secure the listing.
Why it’s told: Real estate agents earnings are based on commissions. The more properties they list, the more they can earn.
They may get lucky and sell the property at the over-quoted price, but often they don’t, and they then use factors such as a change in ‘market conditions’ to justify a price drop to their owners.
Why it’s a bad idea: This tactic can lead to a disgruntled owner, which means they are unlikely to refer you to others. With so much data available to potential vendors today, it’s also possible they will have researched recent sales and have a good idea of how much their property is worth.
If you’re standing in their living room quoting an exorbitant price, they will be suspicious. With increasingly strict regulations on overquoting and underquoting, there’s also the potential for harsh legal ramifications and penalties.
Claudio says: Instead of overquoting to secure a listing, you need to demonstrate and articulate a strategy and blueprint to deliver top dollar for the potential client’s property.
Focus on having a clear framework to attract as many buyers as possible that will lead to healthy competition in the shortest amount of time, with the least amount of hassles, while getting the highest possible price.
Today, more than ever, buyers have access to recent sales and will automatically discount any overpriced property not in line with market expectations.
As Warren Buffet says, “It takes 20 years to build your reputation and five minutes to ruin it. If you think about that, you will do things differently.”
The lie: Underquoting. Some listing agents tell potential buyers, or advertise a property, for less than it’s worth.
Why it’s told: The motivation to underquote is usually to encourage interest from a greater number of buyers.
The hope is the buyers will either have a larger budget than they let on or help create competition (or perceived competition) and drive the price up.
Why it’s a bad idea: This little white lie can lead to a very upset buyer. Buyers can spend a lot of money on building and pest reports or legal fees in having contracts scrutinised in preparation for buying a property.
If they discover they were never even in the running, they won’t trust the agent again, and buyers become potential future vendors. With increasingly strict regulations on overquoting and underquoting, there’s also the potential for harsh legal ramifications and penalties.
Claudio says: Instead of underquoting to attract buyers and create more competition, learn how to coach the buyers to purchase a home. Coaching a buyer to purchase a home begins from the initial buyer inquiry via email or phone call.
Have some effective questions ready to help you understand the buyer’s motivation, desires, needs, and wants. This will allow you to build three vital things with the buyer:
Once you have established their motivation to buy, begin to educate the buyer by offering a ‘destination report’. The destination report should have a list of sales in the past six to 12 months of similar properties to the one you are selling.
Also, include an insight into the neighbourhood’s lifestyle, such as the top three cafes in the area and where the local schools are. For the buyers who request a contract, you should offer a private inspection at the property outside the usual open times to gain the highest level of influence, or ‘sense of acuity’.
Be connected to their wants, desires, needs, fears, situation, and motivation. Come from a place of wanting to help rather than wanting to sell.
The lie: Cold calling potential vendors and telling them “We have a buyer for your home”.
Why it’s told: Agents need listings and one way to potentially generate them when their pipeline is dry is to cold call or door knock in their area.
Why it’s a bad idea: Homeowners can see straight through this line. They know it’s a little white lie and that you’re just trying to secure more business.
It leaves a bad taste in their mouth. When they are ready to sell, it won’t be you they call.
Claudio says: The best approach if you’re looking to secure more market appraisals is to have a much more genuine and softer approach than saying “we have a buyer for your home”.
Instead, reach out to people following a sale in their street or neighbourhood and ask them a ‘permission question’. A permission question is exactly what it sounds like – asking them for permission to do something. In this instance, it’s to secure a market appraisal.
This way allows the prospect to feel as though they are in control of the situation, but you’re controlling the conversation’s direction with the question you ask.
For example: “My name is John Smith, the local real estate agent in the area. I’m reaching out to some of the neighbours today after the recent sale of Number XX in your street on Saturday.
“A few of your neighbours are curious about what their home is worth based on the recent sale, and I was wondering if you would like me to pop you on the list for a quick 10-minute market update?”
Once you have permission to do a market appraisal, you can ask some deeper questions at the appointment including:
- “If I did have a buyer for your home, would you be a seller today?”
A softer and more genuine approach will help you get your foot in more doors than the hard-nosed “we have a buyer”, which often proves enticing a seller to be like finding a needle in a haystack.
The lie: Telling buyers “there are other offers”.
Why it’s told: Sometimes this claim is true and there may be multiple offers on the property. However, occasionally an agent may use this line to push a hesitant buyer to make, or increase, an offer.
Why it’s a bad idea: Even though this line may be the truth, buyers are immediately suspicious of it. Remember, a few bad apples have spoilt the crop and today’s buyers are increasingly sceptical, so even if it’s the truth, they’re unlikely to believe you.
Claudio says: Instead of using this line, it’s better to say there is a strong interest and a few buyers have indicated they will make an offer. Then ask the buyer if they want you to continue discussions with them and include them in the negotiations.
If they say yes and there are multiple offers, you can explain to the buyer that you will call for best and final offers with a deadline. This allows the buyer to do their due diligence.
Your aim should always be to have a transparent way for buyers to make an offer.
They should never feel you are trying to bait them into making an offer.
The lie: My commission is not negotiable.
Why it’s told: As we all know, agents earn their living based on their commission. No one wants to work for less.
Why it’s a bad idea: Using this line could immediately spell disaster. No agent wants to lower their commission, but it could be the difference between securing a listing and not.
Jumping on the front foot with such a strong statement can, and does, rub potential sellers up the wrong way. Their sceptical nature immediately leads them to the idea that you’re trying to wring money out of them.
Claudio says: It’s best to show value for money rather than stomp your foot and demand a certain fee. If a potential client challenges you on commission, what they are really saying is they don’t see enough value to justify your price.
Many agents then fall into having a shallow conversation with the prospect rather than having a much deeper, richer and more meaningful talk about a framework that enables you to have ‘incontestable value’.
Incontestable value is having a proven process you can articulate to the client – a step-by-step account that leaves the prospect with no doubt about why you and your brand are right for them.
If you don’t know your incontestable value, the potential client believes all agents are the same, and your offer is transactional value, which is the lowest type of value.
One way to demonstrate incontestable value is to show the client the last 10 sales you negotiated using a negotiation index.
The negotiation index shows how you negotiated the sale from the first offer up to the sold price.
Then you can use dialogue to ensure the prospect that, “I don’t show you these sales to impress you, but rather to impress upon you that we have a proven system to achieve top dollar for your home”.
If you would like to work with Claudio on an exciting coaching program that’s designed to take agents to a new professional level, check out our Sales Caffeine program. It’s designed for agents who consistently want to add a minimum of 2-3 listings per month, and you can learn more here.