JUST SAY NO TO BAIT & SWITCH ADVERTISING
Article By: Maggie Clemens
Why is Bait & Switch advertising still alive and still effective today?
The other day I was doing some research for a client on the internet and ran across an ad from a real estate agent that read something like, “I will Sell Your Home in 29 days or I will buy it – Guaranteed”
I am beginning to see more and more of these ads as real estate agents try to differentiate themselves from the others. How in a sea of agents do they make themselves stand out?
Hence the return of the Bait & Switch advertisements.
Most of us know what Bait & Switch advertisement means, for those who don’t the dictionary defines it as “the action (generally illegal) of advertising goods that are an apparent bargain, with the intention of substituting inferior or more expensive goods.”
Bait & Switch advertising has probably been used for as long as there have been markets, stores, salespeople with goods to be sold. From the looks of it, it will always be around.
Car dealerships are a great example. You need only to look as far as your newspaper to see many ads for cars – one at this price. Typically, a dealership will order a popular, or inexpensive model with very few, if any options from the manufacturer. They then reduce the price to very close to or even slightly below their cost, this is known as a “loss leader.”
They will then advertise this loss leader “after” all manufacturer rebates and back-end incentives are subtracted from the price. It looks like a great deal when compared to the original price. The bait has been set.
The switch happens when a customer comes in looking for that great priced vehicle and the salesperson shows them that “one” base model, if it is still in stock. They are banking on most people wanting a few more of the basic options on a vehicle, so it is very easy to switch the client to a more upgraded model that is not on sale. And so begins the negotiations.
They can afford to “lose” money on one vehicle because they will make it up by switching the customer to a more expensive model. The whole purpose is to get more people to come into the dealership.
In real estate, bait & switch often looks like some variation of “We Guarantee to Sell Your Home in 29 days or We’ll buy it.”
The whole idea is to get into your home. Once there the agent will explain the “fine print” of the offer and see if it is a good fit for you and your home.
Each year the National Association of Realtor does a study called the Profile of Home Buyers and Sellers. They interview people who have either purchased a home or sold one in that year. The 2017 study of home sellers revealed that 74% contacted only one agent for the job of selling their home, the single largest investment for most. Only 15% interviewed two agents.
Like the car dealership, they realize that if they can get into your home the chances are they will leave with a signed contract on that very first visit.
This is why Bait & Switch ads are so effective, they just need to get in the door. Many home sellers mistakenly believe that all real estate agents are the same so there is no point in interviewing more.
Nothing could be further from the truth. That’s like thinking that all dentists are the same, or every tax preparer will get you the same result. Most realize that is not the case but forget that about real estate agents.
But, I digress, back to revealing the secret sauce of the fine print.
The ad states that if your home is not sold in 29 days that they will “buy it.” Realistically, how many homes do you think one agent can afford to “buy?” Imagine the shock if a home seller were to ask to see proof that they are able to purchase the home if it doesn’t sell!
First, let’s look at a basic misconception: All real estate agents are the same. Wrong.
Most real estate agents are independent contractors, basically a sole proprietor. Which means that each is responsible for their own business, how they get it and what they do once they get it. Each can decide what their own “fine print” reads, here are the most common.
- The house must be priced 5 – 10% below market value. They will tell you that by pricing your home below market value you will get more people looking at it and hopefully get multiple offers. Then they are able to play one buyer off the other and hopefully drive the price higher. Sometimes it works, sometimes it doesn’t. But in this market of very limited inventory why start below market?
- You must agree to automatic price reductions. They are on the hook to “buy” your home if it doesn’t sell so the goal is to sell it FAST. The fine print will state that if there is not an offer in the first week the price must be reduced by often 5 – 10%. Then again if there is not an offer in the second week and so on.
Understand that your home is priced from the beginning 5 – 10% below market to get more people to view the home, and if that doesn’t work you are expected to reduce the price another 5 – 10% meaning you are now 10 – 20% below market value. How does that make you feel?
In our market we are experiencing extremely low inventory levels. So what is the point in pricing it below market value? None. Other than it is better for the agent, there is less chance having to “buy” your home.
As you might guess, I don’t like bait & switch advertisements. Using our documented approach there is no need for the smoke and mirrors. There is no need to “trick” someone into an appointment, and then coerce them into signing a contract that night.
Remember the saying, “If a tree falls in the woods and nobody hears it, does it still make noise?” Well, I ask, if an agent says they consistently sell homes for over list price but that list price is well below market value in the first place, does that make them a good agent?
Is that really the way you want to be treated?
Having a documented approach doesn’t mean underpricing your home. Our well-thought-out, well researched and well documented process means putting in the work so our clients consistently get above market value for their homes, put more money in their pocket, and set the bar higher for other agents to reach.
Don’t be a victim of bait & switch advertisement. Just say no!