Can You Trust Your Real Estate Agent?

Do You Trust Your Real Estate Agent?

The answer to the question, “How long can you keep an entire continent locked indoors before people start to go a little crazy?” was given as protesters took to the streets barely two months into North America’s lockdown. Ironically, as it turns out, as their very protest risked elongating the thing they were protesting against.

That’s right, gathering in large groups accelerates the spread of the virus, which means the best way to end the quarantine as early as possible is to not gather in large groups.

This is nothing new - people act against their own interests all the time; Donald Trump was voted in by lower income Americans who are now faring worse under his policies.

Have you heard the expression, “Never take advice you didn’t pay for”? Yeah, I hate that expression. Mainly because it’s just so darn true, especially in real estate where agents are highly incentivized to encourage you to act in their best interests, not yours.

If your agent will make a $60,000 commission if you purchase a building and $0 if you don’t - how reliable is his or her advice concerning the purchase of that building?

Turns out, it depends on who the agent is.

Have you ever seen one of those movie scenes where the guy is so shocked that he almost falls out of his chair? Well, I almost experienced that in real life with one of my clients. The man literally almost fell out of his chair as he was trying his hardest to throw $2 million at me and I told him to get out of my office (not in those words).

Here’s what happened.

This particular client had a nose for a deal. The trouble was, once he found something he liked, it was hard to draw his attention anywhere else. Let’s call him Joe the Deal Hunter.

We came across this retail plaza - great location, existing tenants - exactly what he was looking for.

We talked to the seller and found out that there were two tenants each paying about the same amount in rent on variable length leases. All good so far.

We shook hands (remember those days?!) and went our separate ways, eagerly anticipating the paperwork (words no one except real estate agents and lawyers have ever spoken). When we did receive the package, we were surprised to find we were missing one of the leases. After weeks of hassling the seller, we finally got the other tenant’s lease.

Turns out the tenant was actually paying about 20% less than we had been led to believe.

Despite this “discrepancy,” Joe the Deal Hunter wanted to press forward.

We approached the seller and said we were fine with the lower rent, but we would need the purchase price adjusted to reflect that.

A few days after making that request the seller came back to us and - magically! - the tenant was now willing to have their rent raised to the original amount. A retail tenant acquiescing to a 25% rent increase in a few days? Something was off…

Additionally, some further digging into this tenant found nothing - literally, nothing. The tenant had no corporate identity and was known simply as ‘TBI’.

If your Spidey senses are tingling right now telling you, “something’s not right here…” you’re not alone. We noticed all the red flags piling up and started to feel uneasy about doing business with this seller.

You know who didn’t feel the least bit uncomfortable? You got it - Joe!

After reviewing the pros and cons with him, Joe was still set on buying that building. I’ve never seen someone more intent on getting rid of $2 million.

I finally looked at him and said, “Joe, do you know how we get paid?”

“Course, you get paid when I buy a building.”

“Right! And ONLY if you buy a building. Despite that, I’m telling you not to buy this building, do you understand?”

Well, he sure didn’t understand. He just could not fathom that I was advising him against buying this building. It took some doing, but we were eventually able to talk him into walking away from the deal.

We lost that commission. But we gained a client for life.

By Steve Peres

Learn more about Steve Peres.

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