A selling agent is not there to work in a buyer's best interest
A selling agent is not there to work in a buyer's best interest
By Catherine Cashmore
Tuesday, 25 October 2011
This week we witnessed a high-profile agent get slapped across the wrist for “lying” about an offer. I have to tell you, a selling agent “bending” the truth to manipulate a higher offer from a buyer is not a rare experience in real estate – or any other selling industry, for that matter. After all, a buyer won’t increase a bid just because he appreciates the property’s attributes; however he’ll shift if he feels the heat on his neck from another “interested party”. Sales agents won’t be slow to play on a buyer’s emotions if it means getting a higher price - they’re contractually obliged to work in the best interests of their vendor, not assist the buyer.
The vendor is paying the selling agent no meagre amount to get a premium price for their property. While most agents won’t go out of their way to openly lie to a buyer, any advice relating to the likely sale price of a house will always come with a good degree of bias towards the vendor. Therefore just as you wouldn’t trust the vendor’s solicitor to give you unbiased advice on a sales contract, neither should you trust a vendor’s selling agent to give you unbiased advice on price! You’ve got to do your own leg work – or you’ve got to enlist your own representative to do it for you.
The auction system claims to be a more “transparent” system of sale. Providing the property reaches its “on market” number, the process will clearly show who is there to purchase and a figure they’re willing to pay. However, considering most auctions in Victoria fail to be knocked down and end up being resolved via negotiation, it’s imperative buyers have a basic understanding of their rights should a property pass in. For example, it takes just one bid from the highest bidder prior to a property passing in to grant them an exclusive right to negotiate at the vendor’s reserve. While negotiations are ongoing, the agent may not deal with anyone else who may be willing, or able, to pay a higher price. The rule is reiterated at every auction I attend, however the message isn’t coming across. When I see properties pass in on a vendor bid and five people immediately approach the auctioneer following the auction to embark on serious negotiation, then later in the day see the property has sold for a price higher than the vendor bid given, I can only shake my head at the lack of experience. When this happens the agent is in the box seat – not the buyer – and as an experienced negotiator, they’ll often be able to manipulate a higher price from the buyer than they would have done had there been competitive bidding outside the property.
It’s all very well calling on the state government to place further safeguards on the industry, but it’s extremely hard to hamstring a sales agent to work fairly for both buyer and seller. Furthermore, it’s in the government’s interests to line the coffers with hefty stamp duty payments – who’s going to worry in Parliament if a buyer pays tens of thousands over the purchase price through lack of experience? When such issues arise, the government continually says,” We will look into it” however they will never be able to legislate that a selling agent must assist a purchaser. This would break the fundamental contractual obligation the selling agent has with their vendor.
We get a similar outcry every so often regarding price quotes. Rightly or wrongly, agents use a number of varied quoting methods to “condition” expectation. Quoting low – while unfair – is not officially underquoting. Pricing property is not an exact equation. When a sales agent lists a property for sale he draws a fine line between market expertise – (broadly based on comparable sales) – and personal opinion. The exact requirements by law are minimal. According to the Estate Agents Act in Victoria for example, the agent is required to write an estimate of likely sale price on the sales authority. This can either be a single price, or 10% price range. This range doesn’t have to be the vendor’s asking price or – in instances where the vendor’s asking price is unknown – reflective thereof.
If an agent advertises the property under the bottom number of the estimated price range, it is regarded as underquoting. However, the agent’s price quote is an extremely conservative appraisal of what the property can easily and comfortably achieve, not a “guesstimate” of what buyers might pay in the heat of an auction, or the vendor’s “wish” price. The vendor is employing the agent and approves of the way he quotes, markets, and advertises the property. Therefore perhaps the pressure should be placed on the vendor and if the vendor is not willing to sell within the quoted range, insist it’s changed? However, I doubt you’ll see it happen, vendors know as well as agents how the low quoting system works to attract buyers.
While I am in full agreement of fair legislation outlawing deceitful advertising and agree whole-heartedly that an agent openly lying to a buyer about a serious offer should be frowned upon, the responsibility unfortunately falls upon the buyer to get the right advice prior to purchasing to secure peace of mind. It would take a foolish selling agent to use deceitful tactics on an experienced licensed buyer’s agent. Throwing out a line about some “higher” phantom offer is just too easy to debunk. We’ve seen all the tricks of the trade and know our way around each and every one of them.
Nearly every person who sells property in Victoria uses a sales agent. They pay roughly 2.5% of the sale price to employ a professional expert to market, assess and negotiate the property’s sale. Most believe this is the best way to achieve the highest possible price in an industry where they have little expertise. Buyers also have the option of levelling the playing field by employing their own representative. Just as you wouldn’t stand up in court without using the services of legal counsel, so too do you risk being tripped up by the system if you purchase property without getting an experienced licenced agent to work on your side. It’s a choice – not a requirement – but it’s one every buyer should take advantage of if they really want to avoid the pitfalls.