Why do real estate agents have a bad reputation?

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It isn’t a secret that the real estate industry is not well respected. According to Forbes Magazine, real estate agents rank 23rd on the list of most admired professionals below actors, stockbrokers and politicians.

Why is this so? Research reveals that ‘home’ comes second only to ‘mother’ as the word in the English language that is closest to our hearts. Therefore, buying or selling a home is a major emotional event. Yet some real estate agents treat it as a financial transaction involving lucrative commissions and nothing more. This makes it enticing for greedy real estate agents to place their interest above yours and prey on the naive, uninformed or simply trusting. Although real estate agents have a disciplinary board through RECO, no industry can fully legislate ethics: this means the onus is on you to do your homework before choosing an agent.

I believe educating the public about the potential problems that can arise is critical in order to protect consumers from dishonest and unethical practices.The following are some of the most egregious problems I have encountered. Hopefully this awareness will provide you the knowledge to protect yourself:

  1. An agent intentionally gives an over inflated appraisal of your property to get the listing and, shortly thereafter, asks you for a price reduction. This can be quite damaging, particularly if you bought another house counting on a dollar amount for your current one which does not materialize. So what do you do? You stay up at night worrying, you eventually reduce the price because you have no choice and forego the vacation, the new car or the kid’s lessons.

  2. An agent promises you a sale price above the list price. Don’t believe this just because it’s what you want to hear. Ask yourself “can my real estate agent see into the future?” The answer is obvious. Your agent cannot possibly know the price that a buyer - who hasn’t even seen your house yet - will pay. As well, there are swings in the market that are unpredictable as happened this fall, when Toronto’s hot market “balanced out” leaving most of the bidding wars behind. Your agent should not quote you an overinflated or unrealistic sale price just to get the business. Use recent comparable sales and common sense NOT wishful thinking to assess the truthfulness of your agent’s prediction about the sale price of your property before you decide to use this agent.

  3. A listing agent who excludes other agents when they have their own offer from their own buyer.  Imagine this: your house is listed for sale at $799,000. Agent A presents you an offer for $807,000 and your listing agent presents one for $805,000. Your listing agent contacts their buyer in private and suggests they can procure the house if they offer $808,000. What is wrong with this? When an agent represents both buyer and seller, as in this case, the listing agent is breaking rules by suggesting to their buyer the price to offer. If the listing agent were representing your best interest, he would advise you to send both offers back and ask both buyers to improve their offers in fair competition. Agent A's buyers may potentially jump to $820,000  but the listing agent, motivated by making double commission, curtailed competition and broke the rules. Did your listing agent work to get you the highest price? I don't think so. If this ever happens to you, send both offers back and insist your listing agent present his offer before he sees all other offers first, on each round, and stay alert during negotiations.

  4. A listing agent with a support team who lists your house and then disappears. I bumped into an acquaintance who told me she had listed her house with a brokerage, six months before, but she had not seen her agent since the day her house got listed. This elusive agent has a slew of junior, less experienced assistants to serve you while she/he is concerned with volume and signing up the next listing. Before you hire a "team" to sell your house, ask the team leader 1) who will be your main contact person 2) how often will you hear from the team leader 3) who will perform the open houses 4) who will show your house to potential buyers 5) who will negotiate the offer? If the answer is not acceptable to you then interview other agents.  

  5. An agent disappoints you after you sign a Buyer Representation Agreement. This document signifies that for the term of the contract, the buyer has engaged a brokerage to work exclusively on his/her behalf at finding a property. A brokerage is mandated to ask their clients to sign this document at the earliest possible time and binds you to pay a commission to the brokerage during the term of the contract. If you are unhappy with your agent you can ask the brokerage to set you up with another agent or request the brokerage release you from the contract. There are no assurances this request will be granted, so it is advisable you checkout the agent before signing this document and limit the term of the contract so you will be relieved of the obligation within a short period of time.

  6. An agent who discourages you from including an inspection condition in your offer. I recently received a call from a distraught consumer whose agent convinced her to forego the inspection condition in a multiple offer situation. After closing she discovered the house was riddled with asbestos, knob and tube wiring and many other maladies that will cost many thousands of dollars to remedy. This buyer was a recent immigrant and had no idea about the laws or procedures for buying property in Canada. While sobbing profusely she said “why did my agent do this to me? I trusted her”. After she moved in she tried in vain to contact her agent to no avail. Her agent had received her commission and was long gone.

The occurrences of these serious matters could be lessened if consumers did more due diligence before hiring an agent. Some of the following suggestions may help you avoid these pitfalls when dealing with real estate transactions:

  • Interview an agent whose For Sale sign you see in your neighbourhood repeatedly. Then take further precaution and knock on the doors of the homes that have the agent’s sign on the lawn and ask the homeowner about their satisfaction with that agent. Just because an agent is active in your area doesn’t guarantee they are ethical. I have met many excellent area experts and a few unethical ones as well.

  • Sometimes people use an agent they met at an open house or through their child's school or the agent is a friend of a friend. These are all perfectly fine ways to meet your agent, but don’t ever feel obligated to work with an agent because you know him or her personally. And even if they’re a lovely person socially, they may be very different in a business context. If you entrust the biggest financial transaction of your life to someone whose business ethics you know nothing about, you may be asking for trouble.

  • Before you sign a listing, it's advisable to ask for references. Since no agent would willingly volunteer an unhappy client as a reference, don’t bother calling those proffered by the agent. Instead, ask for the owners' contact information of the ten most recent homes they've sold; and YOU should be the one to decide which one(s) to phone - with the homeowners permission of course. Most people will not mind giving a reference if they are happy with their agent. Make sure you ask this person specific questions about the agent's performance and confirm with them that it was a recent transaction (you want to make sure it's not a three year old reference).

  • It’s critical you read and understand every document you sign. I can’t tell you how many consumers get into trouble because they don’t read what they are signing.
  • If you’re elderly, or you’re helping an elderly person sell their home, make sure a close family member is involved with every single aspect of the transaction. A study led by Shelley Taylor, a professor of psychology at UCLA, in fact suggests that age-related changes in the brain (< Click underlined article) make elderly people much more trusting and therefore among the most vulnerable to unethical practices.

  • Ask your agent to give you a written marketing plan - with dates included, that details all the activities they will perform to sell your house. You can insist the plan be attached to the MLS Agreement and that the contract will be terminated unless the marketing activities are performed as the agent committed to in writing. (Consult your lawyer to draft a clause that can be binding.)

  • Before you choose an agent, visit Real Estate Council of Ontario's (RECO) website and review the published disciplinary hearing cases. RECO publishes these to protect you against agents who have broken the rules.

Ultimately, if you’re ever subject to unethical behaviour by an agent, you should report that behavior to the Real Estate Council of Ontario. RECO receives thousands of complaints regarding agent misconduct and adjudicates in order to protect you. If you succumb to apathy, and let the misconduct go unreported, you are giving the agent the passport to do it over and over again to someone else.

The majority of real estate agents are professional, abide by the rules and provide the consumer with enormous benefit. But unfortunately the misdeeds echo louder than the good deeds which gives us all a bad name.

The bottom line is the consumer must exercise due diligence before hiring an agent because ethics cannot be legislated. But, although the industry can’t force agents to be ethical, we can make you aware of the pitfalls so you can protect yourself. The more educated you are, the less likely you will hire an unethical agent which will hopefully run some of the bad agents out of town.

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64 Responses to Why do real estate agents have a bad reputation?

  1. Love this blog! You’ve captured so much of what buyers and sellers need to be aware of.

    Reply
  2. Magda Mo says:

    It is a good blog. There are bad apples out there and it is frustrating for the rest of us to deal with them. Thank you for posting.

    Reply
    • Josie says:

      I’m glad you found it useful Magda. The good thing is that there are great agents too that set a great example.

      Reply
  3. Barbara Maria Eder says:

    Thank you Josie for sharing very real information insights to help ALL interested parties effectively manage real estate sales with trust as the fundamental underpinning.

    Barbara

    Reply
    • Josie says:

      You are 100% correct Barbara. TRUST has to be the number 1 criteria.

      Reply
  4. Pingback: Why do real estate agents have a bad reputation? | Josie Stern … | London Ontario Real Estate Agents

  5. Craig Homewood says:

    A well-written piece Josie. I hope, and think, that the number of these “bad apples” is declining. It really is a great business helping people ethically with their real estate needs.

    Reply
    • Josie says:

      I agree with you Craig. It is a great business and very rewarding when the client is happy.

      Reply
  6. Jake says:

    Good post.

    Other common reasons are: they play with your emotions; it’s always a good time to buy/sell; and poor understanding of economics/investing/personal finance.

    Reply
    • Josie says:

      I understand your frustrations Jake. Awareness of these practises and doing due diligence when hiring an agent is key in order to minimize the occurences of these unethical practises.

      Reply
  7. Kelly Koselek says:

    Josie, Well written. This has hit a really sore point with me as an agent. Sadly – I have run across all of these situations on a regular basis, and I think it is getting worse, not better. It comes down to Agent greed – doing anything for the dollar. One of the most deceitful practices, is when another agent comes up with a far higher sale price, using the exact same comparables that I use (funny how the seller believes them???) and gets the listing. This is so deceitful, because as soon as we give the Seller a number – they start mentally spending the money – retirement planning, a vacation property, a bigger house… By overpricing at the start, the Sellers often get less than what they would have sold for had they listed for the right price at the start. Losing listings this way, tempts other agents to also adopt this practice. As an agent we have a choice – play the game, or do the right thing and show integrity. My mantra in these situations (often through gritted teeth) is “Kelly, it’s not about you, it’s about the client – do the right thing and the money will eventually follow.” I’d like them to teach us that in our RECO update course!

    Reply
  8. Josie says:

    I believe you are doing the right thing Kelly. You should read this other article that I wrote. I think you will find this interesting and relevant to what you are saying. link to josiestern.com

    Reply
  9. Joe Q. says:

    TREB reports that there are more than 35,000 licensed REALTORS in the GTA, which works out to about one REALTOR for every 60 families. Many of these are part-timers or “hobbyists”. In a field that has such a low barrier to entry, and with so many REALTORS crowding the market, there are bound to be some who are willing to stoop low to get business.

    I know that I personally would not want to use the services of a REALTOR who has not worked through a housing downturn. REALTORS who have only known the boom times of 2002-3 to present can’t provide the same perspective as those who worked through the massive decline in home values of the early 1990s.

    Reply
    • Josie says:

      Hi Joe,

      Thank you for your feedback. I completely agree with you that an agent needs a different skill set to work a hot market versus a declining market As a matter of fact I wrote a blog about this exact topic last month. Feel free to read it.

      link to josiestern.com

      Josie

      Reply
  10. David says:

    The problem I experienced was an unwillingness of my agent to look at FSBO properties. There were a number that I wanted to see – and was willing to pay the agent’s commission on – but he was quite adamant.

    That sort of behaviour makes me suspicious that agents are working together to limit competition.

    Reply
    • Josie says:

      I am surprised that your agent didn’t want to show them to you especially if commission was not an issue. In a low inventory market, finding a FSBO who wants to sell privately is an amazing opportunity for a buyer. First, since the seller is not represented by an agent and the buyer is, as in your case, you would have an advantage. There will not likely be competition for this house since the seller may not have the skill and resources to generate a bidding war against you. Secondly your agent would hopefully have more honed negotiating skills than the seller representing himself so you may get a good deal. There is no collusion in the real estate industry to exclude showing buyers FSBO’s that I am aware of anyway.

      Reply
  11. You have to extra care when you are going to hire a real estate agent. The best way is that before hire an agent you must be consult friends or relatives and get information about agent.

    Reply
    • Josie says:

      You are absolutely right. There are great agents and terrible agents and you have to do your due diligence before hiring one. Good luck.

      Reply
  12. Wow this was a fantastic article you have written Josie!

    Reply
  13. Mimi says:

    Very good information and a succinct summary of important points. Thank you.

    Reply
    • Josie says:

      Mimi I’m glad you got something out of the article.

      Reply
  14. Great article. Mind if I link it to my Fan Page (Central Toronto Houses and Condos). I always encourage people to take action when discipline is required. Bad Agents will never learn if the public doesn’t report a transgression. Perhaps the “Working with a Realtor” should have a section recommending actions thru RECO, if the items you listed above take place.

    Reply
    • Josie says:

      Of course you can Garry. You are right reporting unethical behaviour is the only way to stop it from happening again and again.

      Reply
  15. Shannon says:

    This is a great piece Josie and reinforces a lesson we learned the hard way when we bought our first home 3 years ago. We were working with an agent (good references but ones she proffered.. Love the suggestion to ask for 10 most recent sales) and had seen a number of homes in the area. We got to the point of wanting to make an offer on one and were absolutely discouraged to include a home inspection clause. We were told we’d lose the house, pushed to use the sellers home inspection report which showed a few very minor things.. We were first time buyers, a tad naive and I was pregnant and we wanted to be in our home before my due date. I think we were a quick and lofty commission for our agent who essentially disappeared once our offer was accepted. She encouraged us to get a survey of the property and offered to pay for it as a closing gift and also offered to order us a beautiful # plate for the front of the house and followed through on neither promise. I felt very disheartened when we discovered some water damage in the bsmt that was creatively hidden by the seller and on a matter of principle was upset with empty promises made by our realtor. We did write to her with no avail and my husband complained to her superior but now that I’ve read this article I realize RECO would have been our best course of action. We know better now!

    Reply
  16. Josie says:

    Shannon I’m sorry you had a bad experience. There really are very good agents I work with every day. Next time you will know how to find one that puts the client first. I hope you love your house though.

    Reply
  17. Buy property says:

    I found this site very informative because very qualitative stuff is available over here.Thanks. Buy Property

    Reply
    • Josie says:

      Thank you. I’m so glad you found the site informative.

      Reply
  18. Sabrina says:

    First of all, thanks a lot for highlighting this subject, but my idea is while it is true that the real estate industry is not well respected, we still can find reliable real estate agents.

    Reply
    • Josie says:

      Sabrina the real estate industry has great real estate agents who work very hard to do what is in their client’s best interest. It is because of this that it is so unfortunate the few bad ones give the industry a bad reputation.

      Reply
  19. Steve says:

    Very good article – I know a handful of reputable estate agents who would frown upon this sort of activity.

    Just a handful.

    Reply
  20. Japeth says:

    I always make it a point to contact real estate agents that my relatives have hired in the past. Since I have a hard time trusting people especially when there is money involved, I go with those that my family trusts. I mean, at least they know that the agent is someone credible right?

    Reply
  21. James says:

    Great article Josie, but I noticed there is no mention of the exorbitant charges for a standard product sale. By that I mean, a house-a car, a loaf of bread, whatever. When someone can charge $15,000 or $16,000 to help with the sale of a run of the mill $400,000 residential property, a low average in many Canadian cities, I think something is seriously wrong. Sure, the Taj Mahal might be a tough sell and require some special work, or a $,4,000,000 residence might require finding a particular buyer. But, the everyday, average home. I don’t think so.

    I’m sure individual realtors will claim all the work and expense they have to expend to fulfill a sale, is enormous, and with no sale, there’s no income, but really, don’t we all have expenses and setbacks? In fact it’s my understanding most public search is now internet based, and far less advertising is undertaken by realtors in their marketing strategies. I would hope that once some controls are placed on organizations like CREA, that the little guys under their wing, the realtors, will have to face reality and, as they say, get a real job.

    It will be great to see the fee structure change to a reasonable flat listing fee, in the $600 or $800 range, and a selling fee of a thousand or, at most 2 thousand dollars. And to see the ransom type marketing approach of today’s real estate industry, become a regular service industry that it should be.

    Reply
  22. It’s interesting that you said ‘home’ and ‘mother’ are close to our hearts in the English language. I completely agree. Looking for a home now I know that it’s close to my heart finding the right one. Thank you for sharing. I enjoyed your post.

    Reply
    • Josie says:

      I wish you lots of luck finding the perfect home!

      Reply
  23. jeremy speiser says:

    thanks for the information

    Reply
  24. Crispin says:

    Hello,

    Interesting article, thanks for sharing.

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    Reply
  25. Excellent content Josie!

    Reply
  26. P cote says:

    Great blog you people are so right , real estate agents have taken over as being WORSE than second car salesman , the only thing they want is $ ,it should be unethical and against the law for agents to be permitted to represent both seller and buyer period???it’s a license to cheat people out of money ??how can a money hungry person give an unbiasth opinion???

    Reply
    • Josie says:

      Some agents are motivated by money and forget that their primary duty is to their client. That is why consumers should do their due diligence and find an agent to work with who has a deep moral fiber.

      Reply
  27. Good point of view for the writing. Thanks JOSIE team.

    Reply
  28. adam says:

    I think this is a great post and sheds a lot of light on the many issues that can come up, thanks Josie for putting this together.

    I do have a couple of comments and they’re regarding agents giving an over inflated appraisal and inspection conditions.

    My understanding is that appraisals given by certificed appraisers, unless the real estate agent is a certified appraiser, they are only giving you their opinion of value and not an appraisal.

    With regards to the inspections…. As a seller, why would I pick an offer with a condition when there are other offers without conditions. The root of this problem is the idea of ‘best interst of the client’. When there is a single industry (real estate agents) that respresents both sides I’m not sure how this isn’t considered a conflict of interest. The sellers agent is obviously going to suggest the offer with out the condition and the buyers agent is obviously going to suggest to not put the condition so their offer has as good a chance.

    Maybe the real estate industry could have a waiver that list a worst case scenario by not getting an inspection and the buyer must sign this to give an offer without the inspection condition? The real issue seems to be buyers not fully aware of the consequences by not having an inspection, this waiver would elimnate that.

    Thanks for reading :)

    Reply
    • Josie says:

      You are very welcome and thanks for your comments. Agents give evaluations and not formal appraisals, nevertheless, the consumer counts on them to be as accurate as possible. Consumers make financial decisions based on these evaluations and misleading evaluations by real estate agents based on ulterior motives can be very damaging. If you read some of the comments on this blog made by agents, you will see that this practise is not uncommon. Do your due diligence before hiring an agent.

      Reply
  29. Extremely exceptional information and a compact outline of the significant focuses. Much obliged to you.

    Reply
  30. I have read so many articles or reviews about the blogger lovers however this post is really a good paragraph, keep it up.

    Reply
    • Josie says:

      Thank you so much for the feedback. I’m glad you liked it.

      Reply
  31. St Augustine School Of Medical Assistants says:

    thanks for the great informaton

    Reply
  32. EJ Gordon says:

    I love that picture, gives you the perfect start of the misconceptions that people have of real estate agents. It is unfortunate that these practices happen, but I must add that there are many more respected real estate agents, with an agenda to TRULY find clients a suitable home. I just wish the public agreed. Thanks for spreading the word!

    Reply
  33. I think the problem is that people NEVER seem to rationally value their own house. Estate agents always value it too low. But then, they OVER-value the house that they want to buy!
    No win.

    Reply
    • James says:

      Your absolutely right.
      But, at present it’s the commission that’s the real rub. The commission is way too steep for the level of talent of most realtors, as well as the market they pedal. Fifteen to twenty thousand dollars for a standard, middle of the road home is just ludicrous. The commissions have nothing to do with the market or the location, just the demand of a monopolistic, greedy industry.

      Reply
  34. Angela says:

    Great article! Agreed, people need to have due diligence when seeking out a Realtor. There’s always a few bad apples in every profession and it’s unfortunate for the many when the few bad apples are there to ruin it. There are many many professional, hard working and flat out honest Realtors and it can be hard to know how to connect with the right one. Thanks for the tips!

    Reply
  35. Barry says:

    I keep chuckling when I see the term, “Professional” when it comes to being a Real Estate Agent.

    Sorry…but REAL professionals are educated.
    Like Welders, Doctors, dare I say…even Lawyers.

    Real Estate Agents are parasitic and rely on ignorance of others.

    Go FSBO!

    Reply
    • Josie says:

      I can appreciate your sentiment about real estate agent’s reputation but let’s not throw out the baby with the bath water. There are many great agents who do great work for their clients and consumers have to find the right one by doing in depth due diligence before engaging an agent. For example, it always puzzles me when a consumer chooses an agent by one chance meeting at an open house without knowing a single thing about this agent. People should take a little longer than a chance encounter to decide who to work with. The consumer has to take same responsibility for their choice. In this article, I am just trying to educate the public about some of the things that can go wrong so that the consumer is better prepared to avoid these pitfalls.

      Reply
  36. how to delete google plus accounts says:

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  37. Leslie Brlec says:

    Just came across this post. What a great article. I am going to share this with my clients.

    Reply

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