Fraudulent Behavior and Unethical Scams in Real Estate
Don’t fall victim to these ploys and swindles!
Please trust that I am not writing this to be unnecessarily provocative or to scare folks. My intent is to shine some light on three widely executed scams in real estate occurring today in our area, with the goal of helping you avoid falling victim to them. Read on to learn more below.
The First Scam- “I’ve got a buyer for your house!”
Some of the big real estate brokerages (not mine) teach realtors hungry for business to go door knocking in certain neighborhoods, telling the homeowners that they have a buyer for their house when in reality they don’t. This ploy is to get the agent inside the homeowner’s door, with the agent then employing their “sales pitch” to get the homeowner to list their house with them. This tactic, taught by certain real estate coaches, is sleazy, unethical, and based in a lie—but is considered acceptable by too many real estate agents.
Last year a good friend and client of mine, whose house we hadn’t listed yet, was approached by this tactic last spring by a handsome, charismatic young male agent. The agent informed my friend that he had a buyer for her house! My friend informed him of our relationship and that I would be getting in contact with him to talk about a possible deal.
I made half a dozen calls to this agent over the next few days, leaving voice mails, text messages, and e-mails letting him know I was excited to work with him on selling my friend’s home. He never returned them because he was scamming my friend. This was the tactic in action, taught by one of the unethical big brokerages in town, being played out in the North Knoxville community.
In real estate there is a whole industry of people who make money off agents as their business “coach.” Most of what they teach agents to do is to cold call, door knock, and harass people to do business with them. I can hear the real estate coaches now: “Go door to door, promise you have a buyer, and get that listing! It doesn’t matter if you do or not, get in that door and make the sale!”
Now the agent may have been the greatest salesman in the area- but to base the foundation of what you are doing as a lie in my opinion calls into question EVERYTHING the agent does after that.
The Second Scam- “The Guaranteed Home Sale Program, or I’ll buy your home!”
One of the biggest salespeople in the Knoxville area uses the tactic that she’ll buy your house from you if she can’t sell it. Following that big fancy claim on all her marketing and TV commercials (not going to say directly who this is, but her commercials show up on Friday nights during Shark Tank) is the big, fat asterisk. This asterisk links to the paragraph that contains all the many restrictions, stipulations, and other rigmarole that benefits the realtor so she in fact will never have to buy your home, but get you as a lead, earn the commission, and do you the disservice.
Studying these trends I discovered that the “Guaranteed Home Sale Program” is a classic bait and switch promoted by agents across the country. Some of the stipulations and the fine print involve requiring the seller to buy a house from that agent’s own listings instead of choosing the house they want, as well as listing the house at 90 percent of market value with corresponding price drops every certain number of days. In the end, the agent gets a nice big commission while the seller loses tens of thousands of their hard-earned dollars.
The agent mentioned above even has the legendary Barbara Corcoran of Shark Tank carrying her water, saying said agent was the best in Knoxville and will buy your home. Corcoran may or may not know this agent, but I do know that Corcoran sells her endorsement- so beware of celebrity endorsements from folks who have never stepped foot in our area and question, question, question—- and run for the mountains when the promises smell too good to be true. In real estate, remember- if it smells like a duck, quacks like a duck, then darn it is a duck!
This is classic bait and switch advertising- which in many industries is outlawed but is unfortunately legal in real estate.
Again, the thing I would point out is if an agent is willing to mislead you or promote bait and switch advertising promises, what else would they lie to you about?
The Third Scam- “I have thousands of buyers ready to buy your home” (as heard on the radio)
Another claim heard on the radio is XXXXXX realtor has “thousands of potential buyers waiting to buy your home.” It is amazing that the realtor board continues to let such misleading advertisements continue. The agent in question and his team, while having a large marketing budget to get new clients with misleading radio ads, in no way has thousands of buyers. I did a search of the homes from April 26, 2016 until April 26, 2017 that, according to the Multiple Listing Service (MLS) said agent’s team had sold only 36 homes representing the “buyer’s side! Not a bad number, but a far cry from “thousands of buyers.”
It is the Wild Wild West in Real estate. Other economic institutions like banking and finance following the 2008 crash faced new laws and regulations designed to prevent another crash and to reign in bad behavior. Whether these laws and regulations did that is a subject for another article.
In real estate, daily unethical breaches as well as false and bait and switch advertising, are a daily occurrences, yet somehow it hasn’t reached the critical mass that would mean taking away enforcement of ethics regulations from the National Association of Realtors to our democratically elected governing state or federal bodies. Maybe it is time for that kind of change. Higher enforcement is needed to govern one of the most important purchases and investments we can make in our lifetime.
In the meantime, when choosing your agent steer clear of those that promise the moon or any of the three scams mentioned above. Simply put, it’s the best way to protect yourself from possible shenanigans down the road!
Some examples of local misleading ads: