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Bait and Switch in Real Estate

Bait and Switch in Real Estate

You’ve probably heard of the bait and switch game in sales and perhaps have some first-hand experience. It is a tactic where a product is advertised at a low price to get a buyer’s attention. Once the buyer is on the hook, there is an attempt to switch him to a higher-priced product or service. Car dealerships often use this trick by deeply discounting a popular barebones model vehicle to get customers in the door.

Lenders also use the bait and switch model to lure customers. For instance, mortgage companies continually advertise their lowest interest rate, but the reality is only a tiny percentage of consumers will be able to qualify for that rate. Car manufacturers frequently offer 0% financing on purchasing a new vehicle, but a high credit score is necessary to allow. It’s all in the fine print, which most people do not read.

Here is What Bait and Switch Looks Like in Real Estate

Scenario 1. You meet with three agents and listen to their marketing plan to sell your home. Agent A suggests a list price of $350,000, and agent B is in the same price range and says $360,000. But Agent C tells you he would recommend listing your home at $400,000.

Red Flag. Some Real estate agents practice a form of bait and switch when they attempt to acquire a listing from a seller. However, rather than enticing a homeowner at a low price, they bait the hook by suggesting their home will sell at a higher than market value price. If you list with this agent when your home doesn’t sell a few weeks later, he will suggest a price reduction.

Listing below Market to Create a Bidding War

Scenario 2. A seller wants to sell his home at a price point that will move his property quickly. It’s a seller’s market, so Agent A suggests pricing it below market value to create a great deal of interest and result in a bidding war to bring in a higher than market price.

Red Flag....