Deceptive Sale Techniques and Practices
Group Members: Cameron Cairns, Tim Kumse, Roxana Minuz
Deceptive sales techniques have been addressed as a major problem in California Real Estate sales. Deceptive practices are present on both sides of the selling issue involving, the seller, buyer, agent, and broker. The word deceptive by definition means “tending or having power to deceive, misleading” (Merriam, 2009). To deceive means “to cause to accept as true or valid what is false or invalid” (Merriam, 2009).So, deceptive sales practices cause a consumer to accept as true what is not. Though the idea of deception carries a negative connotation, the denotation is not explicitly negative. There are deceptive sales techniques that do not have a negative intent, and there are those deceptive sales techniques that are premeditated with a malicious intent. With this knowledge, it is impossible to measure the moral fortitude of an agent simply based on a deceptive practice, since they may had just overlooked a piece of information that did not seem pertinent or the exact opposite is also possible. It is necessary to look at the situation deeper to truly gain an understanding of the intent of the agent. With recent changes in the real estate market, the process of buying and selling homes has become more difficult for some, leading to practices that may be deceptive. The idea of deception can take different forms from misleading mistakenly to straightforward lies, but in the end they are still deceptive and the agent or broker will be held liable.
A very common deceptive sales practice is simply failure to disclose information about a property to a perspective buyer. According to the Realty Disclosure home page, “under California Law, the seller of real property - or the agent for the seller - must disclose ‘accurate information of material fact’telling whether historical evidence indicates that an event of natural origin is likely to affect the desirability and value of the property, even if the property is listed ‘as is’"(Residential Disclosure Law, 2007). Even if the agent did not mean to withhold any information, perhaps they accidently overlooked a piece of information; it is still a deceptive sales practice. That one fact may have given the buyer a different angle on negotiation, or may have turned the buyer off of the property all together. For example, if the house was painted using a lead based paint, and the agent misses that information and fails to inform the buyer, the agent is firstly breaking the law since it is required to inform a buyer if lead based paints had been used on the home, and secondly taking away some of the buyers negotiating power (Residential Disclosure Law, 2007). If the buyer has this information, they may be able to negotiate the price down to subtract the cost to remove the old paint and repaint the house, request that the seller handles the issue, or just stay away from the entire deal. If the buyer does not have this information, they have been deceived and when the information comes out, legal actions are sure to follow.
Another way that agents may be deceptive by mistake is by lacking the proper knowledge, or accidentally giving out incorrect information. This can occur through miscommunication with a buyer or by making an assumption that is not accurate. If a buyer is asking for specific information and the agent misinterprets what the buyer is asking, therefore giving false data, the agent has been deceptive. Even with no intent to provide inaccurate knowledge, inaccurate knowledge has been relayed, and so the agent has been deceptive. If an agent makes an assumption about a property, and the assumption is not backed by the facts and they give the buyer this information, they have been deceptive. If the agent for instance assumes that all the plumbing is in prime condition, when in fact there is a problem with the plumbing, the agent again has been deceptive. It is the agents’ responsibility to make sure they are knowledgeable about the property they are representing, and to make sure that all of the information is disclosed to the buyer and that all the information is accurate. These are a few examples of deception that was not made with the negative intent, however, there are agents that deceive and do so with a malicious intent.
To deceive with a malicious intent is to cause a consumer to accept as true what is not, and to do so purposely with no regard. The goal of these people is self gain first, and help only when it is convenient for them. An example of malicious intent from an agent would be steering the buyer to a particular location or to homes that would offer a higher commission. This could be based on discriminating against their race, religion or natural origin, or even based on level of income. Take for instance a couple who goes to an agent, tells them what they are looking for, and that they have a limit of $300K to spend. If this agent finds many houses that fit the couple’s needs with prices ranging from $200-$350K, but only shows the couple the houses closer to $300K, or only in certain areas, the agent is acting deceptively. Other examples include things such as telling a potential buyer that the commission percentage is a standard rate, or even charging higher rates to people with more money for the same amount of work. All buyers should be treated equal and all should be asked the same questions only regarding annual income, down payment size (Haupt, 2009 p.110). There are standards that need to be followed by the agent, and some do not care to act in a professional manner, and when agents do not act professionally, that is the problem.
http://miamiangelproperties.com/blog/short-sales-101.htm for image on the right.
The consequences for a buyer and seller are kind of similar because they are wasting their time and money with a bad agent or broker. An uneducated or even just an unlucky seller can run into a lot of trouble if they choose a bad agent.There is a large amount of trust that the seller gives to the agent and expects the same back. There are so many problems that can go on from different forms of deceptive sales practices but the majority will waste your time and cost you money. An example of how the seller can be affected from the start is, if their agent does not put the listing in MLS in a reasonable amount of time “24 hours”. From the start the agent is not representing the seller but hoping to make more money off of them. Another problem can be seen in an agent that loves to talk and brings up information that should not be disclosed. They can say a lot to ruin the sale and hurt the seller even if they end up selling the house. The agent may have given away a lot of the seller’s personal information in order to complete the sale. Another factor is not letting the buyers know how to properly set their house up for an open house. A lot can be said at an open house, clutter and personal belongings should not be out in the open. All of these situations can make selling a house a nightmare. It will be hard to trust another agent once you have to deal with a bad agent (Rioux, 2000).
A buyer is hoping to be fully represented by an agent that is looking out for their interest and will help find their ideal home. This is not the case though and many fall victim to deceptive behaviors from their agents. Some agents do not listen when it comes to what the buyer is exactly looking for in a house. Some choose certain houses that are priced higher so they can get a better commission. Some in the same condition believe that they have been in the business long enough and they know what the buyer is looking for. This can also be seen in the form of steering and can really frustrate a buyer. It may be a week or so of driving around and looking at houses when the agent never mentioned to get preapproved by a mortgage company. Unless the buyer was prepared and are trading up to a bigger house or downsizing they will not have any idea on what they can afford for a house. A buyer’s biggest consequence is being frustrated because the agent does not listen and gives bad or no feedback. The time in between the agent communicating with their broker and other agents needs to be handled in a timely manner. Some buyers get “left in the dark” and never hear from their agent that is supposedly representing them (Rioux, 2000).
The consequences for an agent and broker differ from the situation that they were involved in. It is easy to say that if they are found at fault the Department of Real Estate will issue fines and may even suspend their license for using deceptive practices. Depending on the severity of the deception both the agent and the broker may have their licenses revoked.
If you have a claim and have been a victim of some form of a deceptive sales practice, go directly to the Department of Real Estate’s website. Its http://www.dre.ca.gov, they have a specified place on the website where you can get help and there is a step by step process where they will do their best to help you with your claim.
As a homebuyer or seller you have many rights. This is your home, your asset and it can haunt you for many years if the sale goes sour or you find out you were a victim of a deceptive sale. To limit this issue there are a few things that can be done prior to a sale to help you. Number 1, if you don’t trust real estate agents at all, take the time and be a FSBO (For Sale By Owner). If not, do some research on the agent and company that they work for to see what they are about. Google the agent and find some other information about them on sales or other problems from previous prospects. If you have a group of potential agents, have them do a small presentation for you. Get to know the agents to see if they practice in an ethical business manor and if so, can you trust them. Remember the commission is negotiable and you have many rights as a buyer and seller.
Take action and be proactive by doing your research on the agent and the company. Get familiar with them; it’s your responsibility in choosing the agent. So take the time and put in some good effort. If all else fails and you do fall victim of a deceptive sale, take action and be active. Contact the DRE, their website is user friendly and your time and effort to file your claim may save the next victim the pain and suffering that you had to go through.
Resources
Cook, Michael. Great Agents and Bad Realtors. 2007. Retrieved October 19, 2009 from http://buyingsellingahome.suite101.com/article.cfm/great_agents_and_bad_realtors
Department of Real Estate. Filing a Complaint with the Department, 2009. Retrieved October 21, 2009 from http://www.dre.ca.gov/cons_complaint.html.
Do's And Don'ts Of Real Estate Negotiating 2009. Retrieved October 18, 2009 from http://www.squidoo.com/realestatenegotiating.
Heddings, Douglas. 2009. Seller Beware: Is Your Agent Protecting Their Best Interest? Retrieved October 21, 2009 from http://www.truegotham.com/archives/cat-dirty-real-estate-tricks.html.
K. Haupt, M. Dorsey. 2009. California Real Estate Practice 4th edition. Rockwell Publishing Company.
Merriam-Webster Online Dictionary. 2009 Retrieved October 18, 2009 from http://www.merriam-webster.com/dictionary/deceptive.
Residential Disclosure Law, 2007. Retrieved November 17, 2009 from http://www.realtydisclosure.com/hazards/resident.htm.
Rioux, Pat, Nine Ways A Bad Real Estate Agent
Can Cost You Money. 2000. Retrieved October 22, 2009 from http://www.ired.com/news/2000/0004/badagent.htm.
U.S. Environmental Protection Agency, 2009. Residential Lead Hazard Standards. Retrieved November 17, 2009 from http://www.epa.gov/lead/pubs/leadhaz.htm.
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