The Real Estate Shell Game

By Peter C. Fyler with editorial input from Jon Boyd, 2007 President, National Association of Exclusive Buyer’s Agents
© 2007 SplitRock Real Estate, LLC

I’m an exclusive buyer agent on Martha’s Vineyard and my job is representing buyers; that’s it plain and simple. I have no allegiance or responsibility to sellers beyond the rules of courtesy and common decency set forth in my REALTOR® and NAEBA Association Code of Ethics.

You’re a Buyer looking for your dream home, and if you do what most buyers do today, you start looking for that dream home on the Internet. You may go from one real estate company’s website to another plowing through their listings looking for that perfect property. You must be aware the listing company and all its agents represent the seller, not you. With that said, let’s take a look at the real estate shell game.

Shell #1 - Loss Leader: You see what you think is your dream home listed by company A. Excitedly, you call company A and you ask the listing agent answering the phone about the property you saw on their website. You are told apologetically, that it’s under contract to be sold or already SOLD! The agent says they were about to change the status or remove it from the website, and then they immediately suggest other properties in their inventory. Most likely this was not an accident or oversight on the part of the real estate company. In general commerce, they call this kind of advertising ‘loss leader’ or ‘bait and switch’.

Our Martha’s Vineyard Listing Information Network (LINK) provides a system of codes designed to keep information current, but LINK cannot dictate behavior to its subscribers. Not all real estate agencies ignore their responsibility to keep information current, yet many excuse themselves saying they will not change the status until the last contingency is met or even until the deed is signed. Probably more than 95% of the transactions here on Martha’s Vineyard go to record. Another excuse is to say it’s just business in a competitive market; it makes the phone ring, and perhaps the buyer could be steered to another property. Who does that benefit? It benefits the real estate company and the sellers of those properties still languishing in the unsold inventory. It does not benefit buyers like you and it frustrates buyer agents like me.

Shell #2 - Show Me the Money: Another trick is for agents in traditional real estate companies to call themselves buyer agents. At best, they are Designated Buyer’s Agents, Dual Agents or Transactional Agents better known as Facilitators. Look at real estate websites and print advertising, what do you see? You see dozens of properties advertised for sale. All of these properties are supported by seller agency written contracts and an agency commitment to get the highest price and best terms for the seller. Furthermore, advertising is very costly and therefore another incentive to get as much for the seller’s property as possible. A true buyer’s agent is always a buyer’s agent and never switches roles; they only represent people, not property. Only Exclusive Buyer Agents exhibit advanced skills in property analysis, price evaluation and negotiation. There is one more trick I want you to know about.

Shell #3 - The Meat Grinder: While you are surfing the Internet looking for your dream home, most likely you have come across some intriguing and very slick real estate websites boasting to be your number one real estate resource. Many of these companies will not let you look for an agent or review properties for sale until you fill out a complete contact information form. Even then, you may have to wait for a response with the promise that you will be contacted by the best real estate agent in your area, a real estate agent that you did not personally choose. These are not real estate companies, they are advertising companies only interested in one thing --- making money. They may even send your contact information to several “best” agents. They don’t care who or what they represent. If a real estate agent can pay the price, and it’s a steep price, these companies will send them “leads”, or display listings for them, even if those listings don’t belong to the company advertising them.

If you have ever inquired about listings on one of these websites, you most likely realized the information was quite often inaccurate or obsolete. It is all about getting the leads. As I said before, these leads are expensive, so the agent subscriber will want to recapture their advertising expense, and you can bet that will be at your expense --- the BUYER.

Another unfortunate aspect of these lead generation services is the agents that buy your contact information are often the least experienced agents in the market. Some of the companies that do this type of pay-per-lead marketing are Connect2agent, Homegain, Neighborhoodscout, Realtyconnect and Servicemagic. Many of my seasoned colleagues who have tried these services will say you gain almost nothing for the money spent. Common sense should tell you the smartest way to find the best agent or properties in the area you are interested in, is to look for a company in that area.