A couple of years ago there was a damning documentary that aired on British television, highlighting criminality within the real estate sector in that country.
Unbelievably, it seemed that some British estate agents were willing to go to any lengths in order to close a deal. In an attempt to get sellers to lower their asking prices, one agency made a habit of supplying the seller with numerous fake offers to purchase that were drastically below the original asking price. The theory behind this was that the seller would become so desperate to sell that he would drop his asking price and relist the property at what he believed to be a more realistic, market related price.
It now appears that some agents in South Africa are using the same tactic, not necessarily to lower the price, but to keep the property off the market and out of reach of other agencies, so that the crooked agent can market the home as a de facto sole mandate.
Fransiska Schutte, the owner of RealNet Wilgers & Surrounds in Pretoria, says that incidents of unscrupulous agents tricking sellers into thinking that a deal is done are surfacing in around the country. For this reason, property sellers should ensure that any offers to purchase are genuine - or they will run the risk of delayed transactions and extra holding costs.
She says that it is not only first-time buyers who are falling into this trap. "It is a disturbing trend and consumers not only stand to lose valuable marketing time, but can also incur extra holding costs amounting to many thousands of rands,"
"What usually happens is that an agent will present a fictitious offer to purchase, at the seller's asking price, and with attractive conditions. The relieved seller then notifies all other agents marketing the property that it has been sold. This leaves the field clear for the dishonest agent to find a real buyer without any competition."
It goes without saying that the ensuing mayhem that can be caused by this sort of behaviour puts the seller firmly on the back foot. Apart from the usual emotions that surface when a property has been sold, sellers generally start to make plans the moment the deal has been signed. Those who haven't found a new place to live will up the ante and start house-hunting in earnest, undoubtedly signing their own offers to purchase.
"All these arrangements will have to be cancelled - and the chances that penalties will be incurred are great - when the agent informs the seller that something 'went wrong' with the deal. Excuses can range from the 'buyer' passing away to unforeseen problems acquiring finance," says Schutte.
"The agent will then usually produce a real buyer but the transfer procedure will have to start from scratch, with delays that may not only inconvenience sellers, but could also leave them seriously out of pocket.
The worse news of course, is that there is a real danger that the property will sell below the market price. This is because listed properties have a window period of about four weeks where interest from buyers is high, after which they lose some gloss as they have to compete with new listings.
"A seller who finds himself in the unfortunate situation where a 'done deal' has supposedly fallen through may well find that the real buyer the unscrupulous agent then will produce an offer with a sum considerably lower than the listed price. And as all other agents have by then withdrawn their marketing services, the seller faces the choice between more delays as the property is once again marketed, or cutting his losses and accepting the lower offer."
Of course not every offer that falls through is due to the actions of an unscrupulous agent. Many things can go wrong, right up to the day of transfer. However, there are ways for sellers to protect themselves from dodgy agents out to pocket a quick commission.
Schutte advises that sellers insist on seeing a copy of any offer to purchase within 24 hours of it being signed. "Also make sure that the contact details of the transferring attorney are included so that you can personally check on progress - especially if and when a bond was approved and for what amount. If a bond was not granted, or if guarantees were not issued on the predetermined dates, chances are slim to none that the transaction will be finalised."
She points out that in the current economic climate where only roughly 60 percent of all bond applications are approved; it is prudent to exercise the option of a back-up offer. If the property offers good value, a second buyer - or even a third - will in all likelihood not mind waiting out the first option, which means the seller's prime marketing window will be used to best advantage.