Beware split-the-difference scam
Agents should not require bonus incentives
Property sellers and buyers fall prey to all kinds of scams devised by real estate agents. One that is not well-known, but can be deadly for home owners, is the "split-the-difference" scam.
It happens like this. An agent is appointed to sell the home of a client. The property remains unsold for a number of weeks and then a prospective buyer emerges who wants to offer $460,000. The agent tells the home owner that the offer is $420,000, which the home owner declines. The agent then negotiates a new fee arrangement with the owner: if the agent can bring him an offer of more than $420,000, they will split the difference - i.e. the agent will pocket half of any offer over $420,000. Then the agent presents the $460,000 offer and receives a bonus $20,000 commission.
Last year (April 2002) a Melbourne real estate agent was convicted for his part in a "split the difference" scam.
Alan John Sydenham pleaded guilty in the Dandenong Magistrates Court to two counts of obtaining property by deception. Four weeks earlier two of his colleagues at McIntyre Real Estate were fined for their involvement in the scam, after they had pleaded guilty to seven charges.
They had tricked home sellers into believing the offer made on their property was lower than it really was. They then convinced the seller to pay them half of any increased offer over that figure. The agents then reported the genuine (increased) offer to the seller and pocketed half the difference.
More recently The Age reported that another Melbourne agent had been called to account in a similar situation. The REIV confirmed that a Richmond agent was being asked to explain the apparent misleading of the owner of a Collingwood apartment.
The seller wanted $800,000 and the agent, having received an offer of $850,000, asked the seller (who did not yet know about the offer) if he would pay him half of any amount above the asking price. The seller agreed and the agent then presented the $850,000 offer.
Property owners can protect themselves by resisting any request by agents to be paid bonus commissions for achieving sale prices above a certain amount. Agents have a moral and fiduciary obligation to get the best possible price for their clients and should not require bonus incentives to fulfil these obligations.
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