How much of the recent surge in house prices can be attributed to real estate agents manipulating the market?
I’ve been reflecting on how much of the drastic increases in home values are driven by dubious practices among agents. I know of several instances, one I witnessed firsthand, where agents inflates property values by falsely claiming a competing bid is higher than yours, hoping to trigger a fear of missing out (FOMO) and nudge you to raise your offer.
In the first case, it involved a close friend of my eldest child. They submitted a sealed bid on a home, only to be told they were at least $100,000 short of the winning offer. They decided to walk away, but a day later, they were informed that they had actually won the bid. A similar scenario played out with my youngest child—informed they were also $100,000 below a competitive bid, they held their ground and later received the same good news.
Now, my eldest is trying to acquire a new home and had to place a bid through an online bidding platform. Today, he was informed that he’s currently in second place, even though his offer exceeds the stated price guide.
Could the top bid be a “vendor bid” aimed at artificially inflating the price?
In summary, two out of the three recent sales I’ve been aware of appear to have involved manipulation, with the possibility that the third did as well.
I believe sealed bidding should either be made illegal or there should be a verification process post-sale to ensure bids are legitimate, with harsh penalties, such as contract cancellation and loss of license, for any realtors caught manipulating the system.
Unfortunately, it seems unlikely that such changes will happen.
Your experiences highlight a troubling aspect of the real estate market that many buyers encounter. It’s not uncommon for agents to use tactics that can create a sense of urgency or competition, which can definitely contribute to inflated house prices. The practice of vendors or agents misrepresenting offers to leverage higher bids from potential buyers can undermine trust in the buying process and distort market values.
While it’s difficult to quantify exactly how much of the overall price increase can be attributed to such manipulative practices, it’s clear that buyer behavior can be heavily influenced by perceived competition. Fear of missing out (FOMO) can lead buyers to stretch their budgets, driving prices up even further.
Your suggestion to regulate or eliminate sealed bidding processes could be a step towards greater transparency. Implementing post-sale audits and holding agents accountable for manipulative practices could not only protect buyers but also foster a fairer market environment. Unfortunately, as you’ve pointed out, the real estate industry is often slow to change, especially when it involves the interests of those already in positions of power.
In the meantime, educating potential buyers about these tactics, advising them to trust their instincts, and encouraging collaboration with reputable agents may help mitigate some of these issues. It’s essential for buyers to feel empowered and informed when navigating the housing market.