Lies, damned lies and statistics
Lying to clients about how many properties you’ve sold and inflating the selling price in an effort to impress can lead to all sorts of problems
By Lea Jacobs
There are unscrupulous agents and agencies out there that appear to thrive on hype and inflating things beyond reality. The seemingly innocuous statement “We sold 10 properties last month”, possibly made on an expectation, legitimate or otherwise, has the potential to slip between the high bar of truth and the low bar of misrepresentation.
Exaggeration, often referred to as ‘puffing’ in the world of advertising, plays a role in most business dealings. This fairly harmless practice of generally embroidering the facts may often be innocuous. We have all seen these sorts of property adverts, the ones where they describe a three-bedroom, two-bathroom suburban home in such glowing terms that the average man in the street could be excused for thinking the queen is selling Windsor Castle. This practice is pretty easy to see through as a quick visit to the home in question puts things into perspective. It’s fairly obvious that this type of puffing doesn’t mislead a potential purchaser – it is mere bait in the water, so to speak.
However, there is a line that cannot be crossed. If an agent exaggerates to the extent of misrepresentation, there is the potential that someone will act to their financial detriment, potentially giving rise to fraud. For instance, exaggerating the number of properties that have been sold in any given period may sound innocent at first blush, but if the motivation behind the sales has been a recent crime wave, this puts a different perspective on the matter. The other side of the numbers coin is a statement like “We are really ripping the local property market, we have sold 90 properties in the past eight months” is innocent when uttered to an acquaintance over lunch, but takes on more dire consequences when directed at a purchaser who is hesitating about buying in a certain area. Whilst your average Joe doesn’t have any easy way of checking those statistics, someone with access to online Deeds Office records can soon verify whether or not there actually have been 90 sales over that time frame. Perhaps even more sinister are those who inflate the prices of the properties that they have sold. Again, this may appear harmless, but unfortunately it can, and often does, raise sellers’ expectations. So what is the general view regarding this practice? We asked some industry leaders to comment.
“Agents who inflate their sales figures and the prices they have attained adversely affect the market,” says Marsha Haupt Cooper, the principal of Links Living in the Eastern Cape. “It sends out the completely wrong message and although exaggerating both the amount of homes sold and the price attained may be a ploy to attract buyers and sellers to a particular agency, I consider it totally unprofessional and believe that the perpetrators should be bought to book. In my opinion, this practice gives all estate agents a bad name once it becomes clear that the agency in question has lied. We cannot allow these cowboys to continue – they continue to give our industry a bad reputation. Their Fidelity Fund certificates should be revoked.”
Adrian Goslett, CEO RE/MAX of Southern Africa, says that the company not only disagrees with the practice, but is actively running a campaign entitled ‘Facts not Fiction’ on a national level and is encouraging its membership to do the same on a local level.
When asked whether the recently introduced educational standards could help stamp out this practice, Goslett says, “No. I don’t believe it’s an education issue. It’s an integrity one. I don’t agree with bolstering numbers with misinformation. However, it may be very difficult to police unless there is complete transparency in real estate with respect to figures. In the USA, you can use software (publicly available) to gain access and drill right down to the sales of an individual agent in a particular area.”
Roderick Williams, head of operations, training and business development at Chas Everitt International, says, “We discourage puffing since it is misrepresentation and does not convey the correct facts and information. We also discourage the same in light of the Consumer Protection Act (CPA) and the Estate Agency Affairs Board (EAAB) Code of Conduct.”
He says the CPA is very clear on this and that marketing methods will have to comply with the various chapters in the CPA, keeping in mind the following:
a) the consumer is entitled to equality and privacy;
b) the right to disclosure of information;
c) the right to fair and responsible marketing;
d) the right to honest dealings.
Section 40 of the CPA deals with unconscionable conduct. The CPA clearly states that a supplier or an agent of the supplier may not use:
a) physical force against the consumer;
b) coercion, or undue influence;
d) duress or harassment;
e) unfair tactics relating to any of the marketing of the goods or services or the supplier of goods or services whether it is in the negotiation, conclusion or execution stage of an agreement.
Section 41 deals with false, misleading and deceptive representations and states that no supplier or agent of a supplier by words or conduct may:
a) directly or indirectly express or imply a false, misleading or deceptive representation concerning a material fact to a consumer;
b) use exaggeration, innuendo or ambiguity as to a material fact, or fail to disclose a material fact if that failure amounts to a deception.
Dr Andrew Golding, CEO of Pam Golding Properties, says that there are a number of reasons why the practice is not acceptable and adversely affects the market. “Apart from the fact that this information is spurious, it’s also fraudulent, potentially gives the industry a bad name, confuses or misinforms the public and is fundamentally misleading. If it were widespread, it could create an artificial market.”
“We have an entrenched policy and philosophy that simply reports accurately the sales we have concluded and the prices that have been achieved. If an agent were to be found misquoting or inflating their sales figures, we would view it in a most serious light,” he says.
Real estate is always going to be a competitive arena and Golding says that agents are utilising all tools at their disposal to persuade sellers to choose them in the important decision of the sale of their home. “Hopefully this is always conducted within the bounds of acceptable practice and within the code of conduct that estate agents have subscribed to, but naturally there are probably some exceptions to this, which is unfortunate.”
Outselling and outperforming the opposition is obviously key in real estate, however, trying to gain the upper hand by essentially telling untruths is not the way to go. It stands to reason that the perpetrator is going to be caught out sooner or later, however, the chaos that they cause in the local market can prove to be incredibly damaging. Sellers who receive misinformation regarding prices achieved in their areas are going to want to base their own price on what they have heard.
“Agents often overinflate prices to get mandates to sell properties, says Jaco Rademeyer of Jaco Rademeyer. “Unfortunately they also often use the overinflated prices to sell other properties in the same area that are more realistically priced. Every suburb has a ceiling for its asking price and any agent worth his salt is going to utilise a comparative market analysis in order to sell the property in the quickest time.”
Unfortunately, he says, the practice of puffing creates an unrealistic expectation among sellers because it’s not just the seller of the property in question, but other sellers in that area who in turn overinflate their asking prices after seeing the overinflated prices in the press.
Interestingly enough, hardworking, successful agents do not allow their egos to get in the way of their jobs. They don’t have to; their results have a voice all of their own. They don’t need to feel threatened by the competition – the competition tends to feel threatened by them. They don’t need to boast or speak half-truths, the proof of their success is with the large number of happy clients who return to utilise their services time and time again.
The question is, however, should it play a role in real estate? We all tend to have a rough idea of what has been sold at what price in the areas in which we work.
How many agents do you know who live in this grey area of half-truths?