This is where I see us heading in the future and its not too far away.
Firstly, we have seen in the last 5 -10 years the medium house price outpace the medium wage in Australia and unless the medium house price drops to say 30% and putting this in proportion with economic affordability, I think sales growth in the future will somewhat stagnate. What this also indicates, is a potential drop in the number of sales people working in real estate offices. These people will either leave the industry and seek further employment elsewhere or move into a property management role.
I'm pretty certain the growth in real estate will come from the rental market and why I say this, is due to a strong demand for rental accommodation -outnumbering buyers coming into the market to purchase properties. The affordability problem in Australia, is the sole contributing factor in all this, however, as the state government releases and zones more land for residential housing, initially the dwellings on these lands will sell to investors and any other purchaser for that matter, but the long term result of this - will be the people lining up now to get a rental property, will endup occupying those properties in the future.
Secondarily, many consumers want to see value for money and have often questioned the agents value of services inline with the agent commission structure. Unfortunately, what compounds the problem further, is the poor reputation the industry has, in delivering their products and services. The problem arises due to systemic corruption and poor corporate governance and control. It's quite obvious the industry was not built on the foundation of core ethical values, such as caring, honesty, fairness and professionalism. I believe to overcome an unsophisticated system that lacks transparency would almost require the services of a legal expert to
establish a compliance management framework which detects any violation of the law and raises standards in everyday practice.
This now leads to the safe cost effective way of selling real estate - being fixed fee services. Under this model the lawyer oversees compliance of the operations - sales agents and property managers would be like portfolio managers who oversee particular customer service tasks, control resources and execute decisions. The conveyancers would manage the conveyancing process and facilitate the settlement process. I think as the private sales sites make their services more attractive for private sellers - a model such as this one, is likely to be more attractive for consumers, due to low fixed fee charges and a large variety of services that add value. Terri, I think, the way information and technology is heading in the future, very likely, agents will be required to do very little with marketing and advertising. Web portals are fast becoming more advanced by introducing additional features for reporting and tracking of marketing campaigns, making these websites more sophisticated to use.
Finally, across Australia as we all know, real estate agents come under the supervision of state bodies. However, it's been reported in the media bringing the supervision of real estate agents within the purview of ASIC would harmonise the function on a national level. A better housing market would involve a transparent on-exchange securities market overseen by market-conduct regulators. Other innovations such as continuous disclosure and hedging instruments would help minimise distortions and bring corruption under control.
We will go the way of the USA. There, 25% of sales are FSBO (For Sale By Owner).
The current structure of the real estate industry is all wrong, because the fee structure provides no incentive at all for any agent to get the highest price possible. An agent does not care if he sells your $400K house for $350K, its not that much less commission. For any property, there is a firesale price - that price at which any Tom Dick and Harry can advertise it and an astute buyer will snap it up within 48 hours. Lets say 80% of the amount a valuer would value the property at. Agents should earn their commission starting somewhere around this value so that every $1000 they get for your property gives them a significant % of that, ie thus a real incentive.
Couldnt agree more with GeorgeRousos's 4th paragraph. The industry is rife with corruption and poor ethics.
The other problem with the real estate industry is the ignorance and stupidity of the general buying public, the mums and dads. They actually think the buying process is somewhere safer when an agent is involved. Those who are savvy about real estate buying know otherwise.
Also there are now more options available for sellers to advertise their properties with much lower fees and commission than what an agent will take form you. The future should see an increase in the number of agencies who offers cut price services, such as the purple lizard crowd who are expanding nationally at a great rate.
When FSBOs become more accepted as they invariably will, and as people become more savvy to real estate selling options, I believe the day of the lazy "sell one property a fortnight or month" maximum commission real estate agent will be a thing of the past.
Currently there are too many agents in this country. Most of them spend their time swanning around doing nothing. they should be selling a property or two every day . To do this, the whole lot need to be culled like they did will service stations in the 90s.
Here's a reason why I believe that real estate agents will become obsolete unless they move with the times. This is my comment on a blog posting on Business2 about REA allowing estate agent portals to provide FSBO access to realestate.com.au
"It’s was as obvious as it was inevitable:
1. REA creates and maintains a monopoly for real estate agents.
2. Opportunists give FSBOs access to realestate.com.au.
3. REA sees that the FSBO sites are taking its revenue.
4. REA sells FSBO services direct to consumers, bypassing the FSBO sites.
5. Estate agents lose their monopoly as REA deals direct with consumers.
6. Competing portals woo consumers while estate agents decline.
7. Professionals offering legal, conveyancing and real estate related services gain the ascendancy.
Now, it’s just a matter of adjusting to the change."
I agree with MMMM - if this is all an agent does for you - they do not deserve to be in the business. All it does is to fuel the perception that yes agents should become obsolete! Unless the industry changes - unless agents themselves (and trainers) are responsible for this change then the future looks bleak. Mu own passion and guiding light is that change IS possible - if not from the top - then from within - and I have committed myself to being at the forefront of that change!
Well Terri, if you're serious about bringing our industry into the present (let alone the future), you'll have to address the two problems that generate corruption within the industry - appraisals and commission. We must replace real estate agent appraisals with proper valuations provided by independent valuers, and commissions must be replaced with fixed-fees. Are you and the industry up to it?
I just had 2 valuers in my group who were gaining their real estate licence. They had been valuers for more than 30 years. Their statement regarding the independent valuations which are done shocked me. They each said that uniquivocally that the valuation conducted by a registered valuer did not reflect "market value" and would result in a much lower sale price for the seller. They told me that their valuation was an unemotional one, based on criteria which was dictated by the fact they were legally responsible - so their valuations were in line with the figure which they could guarantee. A good agent will get much more than this figure for their seller as this registered valuation needed to be conservative as the valuer could be sued if they were wrong - hence these 3 valuers told me that of course their figures had to conservative - and did not take into account what a keen buyer would pay.
"were legally responsible - so their valuations were in line with the figure which they could guarantee."
I've never heard of a valuer (real estate, or otherwise) being sued because the market didnt achieve the appraisal value.
You would first have to prove that a short sale price was under the market value. And how you would prove market value in a court? Its a subjective value. Its not a provable value say for an off the shelf item like a car or a diamond.
Obsolete? Hard to imagine that but definitely under increasing pressure. Like most things these days, the internet helps squeeze the middleman. Take the managed funds industry to pick on another justly maligned group, not opinion but math that this industry is a net negative for end value, index all invested money and people would be better off in total. This group won't be going anywhere either, marketing and sales have been around a while :)
Terri, agreed about the valuation points, it's cost me plenty of money when I last sold using a registered valuer rather than my own appraisal at the time. To be fair it's a good idea in theory but plenty of issues to work through.
Terri, no wonder these guys are becoming real estate agents - they are failures as property valuers. A good valuer, not one who's last resort is to become a real estate agent, is able to advise a vendor as to the objective current market value of the property (a figure that would be accepted by a court, government department or family law mediator) AND be able to advise as to whether that figure could be achieved upon sale in the prevailing market. Your statement "A good agent will get much more than this figure..." is rubbish. Real estate agents extract more for a property only if they resort to deception of the type described at http://www.lawyersconveyancing.com.au/deception.asp or if they are dealing with naive vendors (the types that don't do the due diligence, and therefore accept the real estate agent's underquoted appraisal and are then pleasantly surprised when the sale "exceeds vendor's expectations") or naive purchasers (who have no idea as to whether they have paid a fair price until the bank valuation is in). I'm surprised that you would regurgiate such discredited industry propaganda on this site Terri - you're communicating with people who are more informed than that.
Allen, I assume that you chose the valuer. Would say in retrospect that the valuer was incompetent? If so, did you seek a refund for his/her fee?
One more observation to be made regarding valuers. Does it occur to anyone that the conflict of interests is the main problem with real estate agent appraisals? I put it to a real estate agent that I would have no problem with real estate agents competing with professional valuers, so long as they did so in an honest and transparent manner. This would require that an estate agent who is engaged to sell a property must NOT provide the appraisal/valuation, and must ensure that the vendor obtains the appraisal/valuation from a real estate agent who is in no way related to the agency or the agent conducting the sale. I was told that this would be unworkable, as no real estate agent would ever trust another real estate agent to provide an honest appraisal/valuation in such circumstances. I was also told that the appraisal is such an important marketing/conditioning tool that real estate agents would be in uproar if they lost it. Rather sick, I thought.
If you can pin down 'incompetent' for me as opposed to having just done a very conservative valuation (about 5-10% in my example) I will estimate how many % of valuers fit that description for properties I have bought over the last 18 months.
Used that valuer twice before and had done a decent job, was a sale to a related party and I had agreed to abide by the decision.. so my loss was their gain which was something I was prepared to accept.
Sure Allen, incompetent is where you tell the valuer that you're putting your property on the market and you want him/her to assess the current market value, and to advise you as to what you can expect the market to pay for the property. You also ask the valuer, "What's the difference between a sale valuation and a valuation for current market value?" To which the valuer replies, "Well a valuation is an assessment as to what a willing but not anxious purchaser would pay, and a willing but not anxious vendor would accept in the prevailing market." You then respond by saying, "Hey, that's the way real estate agents are supposed to determine their appraisal figure." The valuer then tells you, "If I provide you with the current market value, you can then determine how much you want to accept for the property, because current market value is simply an estimate and a starting point for your own due diligence." An incompetent valuer is one who determines value in the same manner as real estate agent do; by stopping after comparing a few similar sales in the neighbourhood.
I client of mine made the mistake of using a valuer who is also a licensed real estate agent. His valuation was $100K less than what the client believed the property was worth. I advised her to obtain a second opinion, which she did, and the property sold for over $100K more. I wrote to the valuer to ask for an explanation. He did not even bother to reply, but the client has since informed me that when she rang him he informed her that he has now "retired" as a valuer.
Allen, I deal with valuers all the time and I can assure you that the ones who play for both teams (as real estate agents and valuers) are the ones to watch out for.
Allen, here's what I advise my clients about obtaining a valuation: http://www.lawyersrealestate.com.au/realestate/selling/valuation.asp
Can you tell me if you would change anything in that information, as I value your opinion on this.
The points you make in your last post (two posts ago.. you are a quick poster!) all make sense to me. I had a valuation $360k below contract price last year so $100k seems quite good. I deal with valuers all the time as well. My name is Andrew by the way.
Terri and Allen,
Valuers these days cannot afford to price a property incorrectly, due to the banks around Australia having tightened up on their lending polices since the global financial crisis.
Medium house prices are not in accordance with economic affordability and therefore, a valuer would need to look at this first and all other factors in order to get a definitive answer of the sale price. Obviously, they would also need to get this right to avoid being sued for any errors and omissions found in the report.
I don't know how an agent could get a higher price when he or she can only go by the data that is at their disposal and the fact that current real estate prices are over inflated anyway, would make it clearly impossible to do anything differently. If they were to manipulate the prices inorder to induce a buyer at a bogus price, this could lead to a charge of fraud in a criminal sense.
Also, an agent doesn't have the teritory qualifications to consider all factors when determining an estimated sale price. For example, here is an email I shared with blog readers recently on Business2 website that was sent to Fair Trading Minister NSW- Anthony Roberts, regarding the estimated price guidelines.
If you could please confirm to me, that a real estate agent when determining an estimated selling price must have a recent valuation.
It appears from the estimated price guidelines, that either an agent or vendor would be required to have this report.
We look forward to your considered response.
What does the Office of Fair Trading require of agents?
http://www.fairtrading.nsw.gov.au/pdfs/Property_agents_and_managers/estimatedpriceguideline.pdf (Page 3 and 4)
When an agent provides an estimated price they must be able to demonstrate that their estimate of the selling price of a property was reasonable in all the circumstances and that they took due regard of those matters that should be included in determining an estimated selling price.
Matters that should be considered when an agent is determining an estimated selling price include:
Features of the property which would affect the value of the property in the market, such as recreational facilities or special architectural features.
Future use of the property (such as zoning, rights of way, redevelopment, resumption by public authorities, historical preservation orders, covenants or restriction of user, development approvals)
Market demand in the area
Sales of comparable properties
Likely level of demand for the particular property
Recent valuations of the property
The circumstances of the vendors (are they under pressure to sell, how much time is available to develop a marketing plan, are they limited in terms of the way they wish to exhibit the property or in respect of their desired method of sale)
Seasonal factors (does demand traditionally fall away or increase at the time of year the property is being marketed)
Economic factors (the level of demand for property, whether interest rates on the move, whether the authorities warning about overheated markets).
Agents when determining the estimated selling price of a property should ensure that any information that is relied upon to determine the price is retained in the Sales File for the particular property. Agents should also ensure that any notes they made of their inquiries are also retained. A copy of the sales inspection report should also be retained on the file as it forms part of the agency agreement. This will ensure that if the Commissioner for Fair Trading requires an agent to substantiate the reasonableness of an estimated selling price, they will be able to do quickly and with confidence.
Sorry Andrew, I'll get your name right from now on. So, do you agree that the conflict of interests is the greatest problem regarding sale price valuations/appraisals?
George, I don't know of any real estate agents who document their methodology in estimating sale price.
George, it's these little steps that are making the old-fashioned real estate agent obsolete. The future belongs to those agents who are prepared to adapt and adopt.
GeorgeRousos said "they need to legislate that every vendor be required to have an independant valuation before their property is listed for sale."
No definitely not! ITs a big enough nanny state as it is. We dont need further draconian legislation like that.
The decision to choose a sale price should remain with a vendor as it does now. RE agents all seem to think vendors are clueless and uninformed. I can assure you a lot investors dabble enough in real estate to know what properties are worth. We dont often want someone elses opinion, let alone pay for it. And often we prove agents valuation estimates are very wrong and thats costs us a lot of money.
Dont labour under the impression vendors always require an agent's/valuers opinion. We often dont.
Hi Oigevay, I think you're taking George a little too literally. Legislation can bring about the desired result in a variety of ways. Perhaps the best way to achieve the result required (stopping real estate agents from cheating consumers with dodgy appraisals) is simply to ban real estate agents from using valuations as a grubby marketing tool. This means legislating to prevent agents from acting in circumstances of conflicting interests. As it is, they should recognise and avoid such conflicts, but experience has shown (i.e. dummy bidding) that unless illegal and improper behaviour is clearly and definitely declared as such by way of special legislation, real estate agents will exploit whatever opportunity is available.
GeorgeRousos said "my advice is to carefully read through the information in my previous comments"
Ive read all your posts in this thread "carefully" as you say. You're missing the point completely. Agents are not the final arbiters on setting a price. They recommend a price but at the end of the day, the vendor has to decide whether it looks right, or not, and its the vendor's decision to seek advice elsewhere if they are unsure.
Many vendors dictate to their agent the asking price they want, and agents go right along with it so they dont lose the listing. Right now I can show you properties here that are 33% overpriced and been advertised for 12 monbths. I dont see anyone suing these agents? Try suing an agent on the everyday matter of over/underpricing a property; its virtually impossible to prove intent to deceive.
In Qld we have Fair Trading legislation and a PAMD Form 30C which gives a warning to a buyer before signing the contract to seek and independent valuation. That is sufficient I think. I am fed up with nanny legislation because the powers that be deem every citizen to be too dumb to make an analytical choice. I dont want "nanny" legislation telling me I have to fork out for a $300+ valuation that I dont need! It should be buyer optional.
Dear oh dear,
Oigevay, you clearly haven't understood any of the information produced by me on this blog nor do you understand the serious offence of obtaining financial advantage by deception or causing a financial disadvantage by deception ( under criminal law ) and the impact this has on both the vendor and agent.
The Estimated Price Guidelines comes from the NSW Office Of Fair Trading - not the Queensland Office Of Fair Trading. Also, had you read the guidelines more carefully, you would have identified the real estate agents code of conduct prescribed under the regulations on page 4, which is no different to what is prescribed under the PMD in your state of Queensland.
Your assertion of the warning statement is ridiculous as it doesn't give the real estate agent a free ticket to go ahead and inflate the listing price due to matters irrelevant to the value of the property, such as marketing fees, commissions and profits, nor should the purchaser have to rely on a valuation just to find out if the vendor and agent are involved in a dubious practice to trick them into paying a higher price.
Oigevay, the real estate agent cannot use the vendor as an excuse for fraudulently manipulating the listing price that was already substaniated in the agency agreement, otherwise, this would then implicate the vendor aswell.
Let me finish with this bit of information that was sent to me by the former Fair Trading Minister of NSW last year. This I might add would be no different in Queensland because the ACCC make this pretty clear aswell under their Guidelines. http://www.reia.com.au/userfiles/REIA_Guidelines_TradePracticesAct2004.pdf ( Two Tier Pricing, Price Ranging and Misleading and deceptive conduct).
In respect to my concerns regarding price manipulation by agents in the marketplace- here is an excerpt taken from that correspondence Oligivay -
In relation to your concerns about agents over or under-estimating the likely sale price of a property, NSW legislation of real estate agents makes it clear that they must not misrepresent a property's estimated selling price, whether this be through over-estimation or under-estimation. Fair Trading has a demonstrated track record of taking action against agents found to have acted in this way.
On another note it should be clarified and highlighted aswell, that under the PSBA Regs 2003 - Schedule 1 General Rules of Conduct - it states that an agent can only act in accordance to the clients instructions, when it isn't contrary to the act and regulations or otherwise unlawful to do so.
George - your point about over and under estimating is of course true and legislated to this effect (PAMD ACTand Code of Conduct in Qld) . Best practice in my experience, is that one of the primary roles of the agent is to educate. and inform. However as Oigevay says, the information regarding property values is readily available now to all serious sellers - they are not dumb or uninformed (unless they have just dropped in from another planet!) and should be respected for this fact..
It would be highly unusual for a seller to even consider calling in an agent for an appraisal without having done their own informal (or formal) research. All the property websites have pages of properties which a prospective seller can compare with their own. Print media has photos and descriptions (often with price indications). Attending open houses are another way of consumers doing their own research. When the agent is eventually called in, their role is to educate further via the detailed Comparative Market Analysis report - this would be discussed in depth.
Together the decision should then be arrived at in respect of what price the property will be presented to the marketplace. Every GOOD agent will conduct this part of the listing presentation IN COLLABORATION WITH the seller, based on informed market indicators.
In my experience of around 20 years, agents who do not follow this process and overquote or underquote to secure the business are among the ones who bring our industry into disrepute. The answer is consumer education as to what to expect and demand from their agent at every stage of the process.
Our industry is in the midst of a big shake-up. As you know George, 10,000 were reported to have left the industry over the last 12 months. This can only be a good thing for the long term. The industry is demonstrating that it will no longer tolerate mediocrity - great news for those of us who are 100% committed to industry and agent change.
Good grief George. Dont sell yourself too long, theres no rocket science in your long posts and they are not hard to understand. And i did read them all as I told you once before.Your reply doesnt counterpoint anything I said at all.
I am from Qld, so I comment from the context of living there. Im not going to read NSW legislation.
Point 1. (valuations)
There is no law in Qld that says a person cannot advertise their property for whatever price they want. Of course if a licensed REA is involved, they should obtain a fair market value as the selling price, in the interests of complying with the Qld Real Estate Agency Code of Conduct Regs.
Whilst you are vocal to shout "this is what is and what should be " in relation to legislation , its pointless when the reality of what is practiced is very different indeed. Fair market price is being falsely inflated on most listings! Agents will put a 5% markup straight away over and above what they determine the sale price to be.This is to compensate for the below advertised price offers that come in. They dont want to put "Firm Price" on the listings. Its all psychology. And as I said before, I can show you properties that are overpriced by 33% right now. Is that fraud? No.
One of the things I do is track the advertised price, and the eventual sale price of many properties when they changes ownership. And I can reliably inform you, that it is common to see very large gaps in those two figures. 10%- 15% of the advertised price not uncommon. The gap can often be up to 30%. This is not the agents fault a lot of the time either - many other factors induce a seller to sell well below the advertised price.
So your assertion that REA's must advertise honestly on fair market value whilst technically correct, is totally out of touch with the reality of what is happening. The fact is, when a clueless vendor wants a too high price for his property and demands the agents try to sell at that price, the agent still takes the listing at all cost, even when they know it has no chance of selling. This is the prelude to conditioning the vendor to lower his price. An agent is not going to clue in a greedy vendor and tell him it wont sell at their desired price, for fear of losing the listing to an agent that will tell them what they want to hear.
The ethics of this behaviour are covered in Sections 7,8,14,and 15 of the Qld Code of Conduct.. So why isnt it that none of these agents are prosecuted right now for these advertised /actual sale price discrepancies? Answer: because it isnt indictable fraud.
To prove an exact market value for an item which has a certain amount of unknown specific "fit for purpose" value to an impending buyer is very difficult. And everyone in the RE game knows that. And so as other people have mentioned here , valuations can in fact undersell your property.
Also valuation is not an exact science. Get two valuations for the same property, and they can be quite different. At the end of the day, its just someones opinion. And I believe the people at the coal face, the REA's , are going to be as good a judge of market value as anyone else.
Therefor I am opposed to your idea of mandatory valuations. Sorry If you dont like that. As Terri's coment above points out, people are not as stupid or uninformed as you think.
My assertion about the Form 30 warning statement is not ridiculous at all. The warning serves its purpose along with the other warnings given on that Form. People have the right to act on it and obtain independent advice, or ignore it.
Point 2 (Fraud)
Causing/obtaining financial gain is not so clear cut as your belief of "he who profits from property sale" is a criminal. Over pricing a property is not fraud. Not by a long chalk old chum. Fraud has a lot to do with intention , and the financial gains that motivates that intention.
Where we see agents being charged with fraud its mostly where they commit a type of "insider trading ". Where they use their position to coerce people to sell their properties to them at undervalued prices, then buy them (under their own or a relatives name), and then immediately on sell them for a huge profit. For a Crown Prosecutor, these are open and shut cases to prove.Also the amount of money involved has a large say in whether a fraud charge is pressed. If an agent doing this type of "insider trading" resells at very little profit, fraud charges wouldnt most likely not be pressed, and intent for finacial gain would be hard to prove..
Fraud , and being recompensed by the courts for that fraud through enforcemnt, does not give justice to the ordinary person.Try getting a judgement enforced in a Civil Court , or a compensation claim through the Land court when a Town Planning Amendment causes your property's value to drop. Anything under 50K you will not get any money. Fraud prosecutions usually involve substantial amounts of money well over 50K.
But most importantly, if you had read my post previously and understood it, there is no great financial gain for an agent to get a high price for your property anyway, due to the current fee structure in Qld. So for every $10K extra achieved for a sale price, an agent themselves makes roughly an extra $120. That is chump change ,and not enough to prove intent to achieve financial gain through deception. Every agent Ive ever met is super keen to sell your house for the lowest price you will accept. Its then a quicker turnover, more money for less work.
So this is why overpricing a property is not indictable fraud. IT would be an uphill battle to prove it.
Point 3 (nanny legislation)
So taking into consideration points 1 and 2 above, what is the point of foisting further mandatory legislation on us for valuation certificates at sale time? Just to keep advertised sale prices down? Pfft. So what? Let the market decide what the sale price is. Australia is a free market capitalist society. That is what causes booms and busts in property. You aren to going to legislate these cycles out of existence.
Let me tell you this - lack of town planning knowledge, and actual building costs to rectify building faults, allows a lot of properties to be sold overpriced and underpriced. People simply have no clue what repairs will cost them, or what the town plan rules are for development.. So as well as getting a valuation, do you want to make it mandatory for buyers to get building rectification appraisals and town planning appraisal to even further refine what the true market value is? Where do you want to draw the line in "nannying" people?
George, Australians have had a gutful of this nanny legislation. $300+ for an valuation is just another overpriced service which has limited value. And zero value to myself.
And finally George, I would have thought that you be a little more savvy than to accept rhetoric from a govt agency about what a fine job they do in regard to their mission statement. Regulatory bodies, epsecially the consumer ones, all have a pretty lame record in investigating and prosecuting breaches. It basically has to be handed to them by comsumer groups or investigative journalists, or whistleblowers. On their own, they are pretty useless in enforcing anything. Which is why bad practices continue unabated in the industry. Like advertising 2 brn homes as 3 brm homes (sure, you can fit a bed in that little alcove). Gee, I dont ever recall a REA being prosecuted for small scale false advertising...do you?
I will finish off by saying for sellers (and buyers too) its caveat emptor as normal. A REA is there to get buyers for your property, and nothing else. There's nothing wrong with listening to their valuation opinions though, but the seller should suitably inform themselves. Also I think Qld and Vic are the only states that allow REA's to prepare contracts? That has to stop, as that has a coercive element to it as well
Oigevay how on earth can I take you seriously when I don't know who you are. For someone who is very vocal on this thread, you still choose to remain anonymous and given the issue with pricing is to do with a lack of disclosure, this only shows a lack of credibility and visibility on your part, when it is truly needed in the circumstances.
In regards to your respective legislation in Queensland, I have spoken with a number of industry stakeholders that have mentioned the current real estate agents act is archaic and in need of change when it comes to the overall issues of stated pricing in publications and advertising etc. However, it is still quite clear in the ACCC Fair and Square Guide ( for compliance of the Trade Practices Act 1974 which is now the Competition and Consumer Act 2010) that all real estate agent stated pricing or any price you represent to buyers, is based on reasonableness or based on a fair market appraisal or valuation. This is where the vendors need to be educated and why buyers shouldn't necessarily be compelled in obtaining a valuation just to ensure that there are no irregulatories between what is in the report to what is advertised for sale, although, many loan applications require bank valuations anyway and the important disclosure of these reports up front to all customers is happening more so now than ever before since the National Consumer Credit Act came into force.
Oigevay, I realise what I'm saying is never complied to, under the current reglutory regime and impossible to police, and that government authorities at this stage simply don't have enough resources and funding to bring the corruption under control. They are also reluctant to enforcing criminal sanctions on agents who manipulate market prices in their agreements ( or facilitated through advertising )and there is no civil legislation that prevents private sellers inflating their listings prices either. What is interesting though, is that real estate agents, developers, private sellers etc are often unaware that practices regarded as "standard" in the real estate industry are, in fact, serious criminal offences. Furthermore, because the concept of agency involves a high degree of trust, an estate agent or developer who commits a criminal offence through a "breach of trust" will be sentenced more harshly if found guilty. Any breach of trust is an aggravating factor in sentencing. The greater the breach of trust, the more likely it is that a term of imprisonment will result - even for someone with no prior criminal history. The fact that such practices may be common in the industry is neither a defence nor a mitigating factor to warrant leniency.
I should also point out to both yourself and Terri Cooper, that I do from time to time have Queensland real estate agents and trainers attending our CPD classes ( because of their licence in NSW )and they have alluded to me that all these issues we are discussing are being overlooked in Queensland aswell. The government authorities up there and the REIQ are not enforcing it transparently enough and warning the industry about the Competition and Consumer Act 2010 and that price misrepresentation can lead to fines of up to $220,000 for an individual and $1.1 million dollars for a Corporation. I agree also Terri that vendors and buyers are becoming smarter with pricing in general and that buyers who were once called "woodducks" ( taken from a module ) are now alot more savvy.
Strangely though, the ACCC last year were advocating that legislation be passed which imposes heavy fines on people who consciously mislead buyers.Interestingly, the proposed legislation not only put the onus on real estate agents but also vendors who too went along with the game”. That is why our conduct approach now must be about protecting ourselves and the vendor by providing them with the agents code of conduct and the ACCC guides.
Oigevay, I totally agree with you that trying to bring price collusion under control is almost impossible, hence, why ASIC's chief economist came out last year and made the announcement regarding their future role in regulating the housing market- which is to reduce price distortion and to raise the level of transparency on pricing in the marketplace.
And also, an industry that fails to take up the challenge of social responsibility would almost need to expect greater government interference and regulation in the future, without negatively affecting their relationship with their consumers and stakeholders
Finally, I like to thankyou Terri for having the courage to broad this contentious subject and the interesting thread of discussion we have all created together on this blog.
If you click on the hyperlinks below for other interesting reads feel free to make your thoughts known there too.
Silence Is Not Golden In Real Estate Negotiations
If Governments Trust Estate Agents, Why Shouldn't Consumers?
Realestate.com.au backs down from the fight.
I almost forgot, here are some other articles to do with Government crackdowns on pricing.
It will save a lot of taxpayers' money and pain and grief having the valuers who also have professional indemnity insurance to take care of the pricing side of things in the future.
We also wouldn’t have to read this nonsense that is only a blight upon the industry.
Watchdog raids real estate agents
Misleading price advertising
"how on earth can I take you seriously when I don't know who you are."
Indeed. Welcome to the interweb net thingamajig, my friend. Believe what you will at your own peril! Watch out for predators! You could be Demi Roussos's nephew for all I know, and that would be a serious credibility dive for you!
"For someone who is very vocal on this thread, you still choose to remain anonymous and given the issue with pricing is to do with a lack of disclosure, this only shows a lack of credibility and visibility on your part, when it is truly needed in the circumstances."
That is an apallingly disconnected analogy. What has an RE industry practice of submerging true valuations have to do with me being anonymous on an internet forum? Is this the best you can do? Seriously, do you have no idea why people remain anonymous of internet forums? Maybe go and read a Neil Jenman book and learn about death threats you get when you try to clean up the industry. Its not quite the Mafia, but greed, big money, and entrenched monopolies can lead to serious trouble. Call me a chicken if you like. I have broad feathers.
And in regards to disclosure, I had a look at your profile, and guess what? A total lack of disclosure! How about that! I didnt know who you were either. It wasnt till i read some of your posted links I saw who you are.A real estate trainer? Thats delightful but I wouldnt care if you were a hobo living in an aircraft hangar, as long as you could contribute meaningful discussion. As for credibility, you cant even get my forum name right, and to me, attention to detail has a lot to do with credibility. But thats just me.
In your second last post I see you've changed tack and now agree buyers should not have to be compelled in obtaining a valuation. but today on the 27th June you post a link to a letter you wrote to the minister advocating compulsory valuations? So where is your consistency George? I think I may have to lobby the minister as well to present an alternative view to your opinions.
Yes the whole Qld industry is archaic and a complete redrafting of the legislation is long overdue. Rather like most legislated acts of parliament.
Correct, continued lax standards create the impression that it is normal. My favourite is this - no Qld trained agent will ever make 2 copies of the contract of sale (one for each party.) Instead, they are trained to make one copy only for the buyer. The vendor gets a photocopy. Just great if you ever have to go to court to sue the buyer for breach of contract! This is the shoddy one week training that agents get in Qld for $600. There simply isnt time to teach the finer legal technicalities of contract documents - but hell, we'll let REA's complete them anyway once they are licensed! Welcome to Qld. What a joke.
In regards to over pricing I believe its an inalienable right to choose whatever price you want when you wish to sell your possessions. Think about it. How draconian is it for the govt to dictate to you what you must sell your own possessions for? In a free market, you can sell goods at whatever price you like. Like all businesses do. And so the correction of deceptive pricing must be done on the buyers side of things.
As we agree, tighter legislation is pointless if the resources arent there to police it. And perhaps thats the biggest impediment. The sheer volume of transactions nationwide would require enormous manpower to police. Most people dont even know they've been had, so user complaints arent going to be an effective flag raiser to wrong doing. But think of the building industry. In Qld. Each building contract pays an insurance levy to the watchdog, so that when things go awry in the contract, the insured can make a claim against the fund(shoddy work, failure to complete, breach of contract, financial loss, etc). I wonder whether such an implementation is likely in the RE industry?
You mention Alex Erskine from ASIC produced a report of his opinions on the market. So what? That does not mean it has any weight or will be adopted by the govt. It will most likely be ignored as so many reports commissioned by govts are.
The links you posted were interesting, but we'll never know whether those 60 raids were genuine attempts on the watchdogs own part to police the industry , or just a kneejerk reaction to bad press so consumers think something is being done. Strange how 60 raids only results in 2? prosecutions, and only for under pricing. Which goes back to what I said before about what historically agents are prosecuted for. Never heard of one being done for over pricing.
In relation ot the REIA guidelines ( http://www.reia.com.au/userfiles/REIA_Guidelines_TradePracticesAct2004.pdf) according to point 4 "Misleading conduct can also include acts of silence or omission.". Well then, you pretty well have to charge every agent in Australia with wrong doing then. No agent I have ever seen will disclose anything negative about a property to a potential buyer if they can avoid it, and that will be with the full consent of the vendor. But try prosecuting them for that. Its not possible. "Your honour, I wasnt aware." Case dismissed. So these guidelines look good on paper, but some at least are useless in the real world.
Also, George 2 days ago you posted this "an agent doesn't have the teritory qualifications to consider all factors when determining an estimated sale price". What do you mean by teritory qualifications?
Oigevay, you are starting to become a real nuisance. Why don't you stop remaining anonymous and just do the sensible thing and contact me at my office on 0249691344. That way, I can try to make some sense of your comments and what it is you are trying to say.
For example, I never changed my tact with valuations. What I was alluding to was the fact that banks are now more willing to dislose their valuations up front to all customers, which is one step forward in the right direction, however, that doesn't exclude the fact that independant valuations still shouldn't form part of a duty of disclosure on all contracts for sale of land. It's not guranteed that all bank lenders will require a valuation anyway, because of the loan- to value- ratios.
The biggest problem with agents pricing properties, is that one they can't charge for it because their not a valuer, secondarily they can't get PI Insurance coverage for the appraisals they do, because its not classed as a formal valuation and it doesn't take into account all matters shown in the estimated price guidelines. Thirdly, a conflict of interest arises when the real estate agent has a pecuniary interest in the sale and also advises the vendor on price( That leads to a breeding ground for corruption and conflicts with the real estate agents code of conduct on conflicts of interests).
As Peter stated, you seem to take me literally with alot of the things I say, but what I find most frustrating is that you should just pick up the phone so we can discuss things openly. You know where to find me, but I don't know where to find you, funnily enough, we just received a letter from the Minister for Fair Trading about the issue of property valuations and auctions, it might be worth your while to give me a call and I'll read it to you, but I won't hold my breathe.
Yes i think we all already know the points of your 3rd paragraph. As ive said before dont talk to me about Estimated Price Guidelines you have down there, as we dont have them here. Different game there.
Agents pricing properties is NOT a problem in Qld , in a legal sense, if it is done for free, as occurs here now.
The stupidity of buyers is the problem.( like those two idiots who paid 70K too much in that link you sent us the other day). You cant legislate against stupidity, although this nanny Labour government is doing a damn fine job of trying.
On the subject of bank valuations, I dont know how useful they are. When i bought my first house in the 80s, the bank valued it at 2% under the contract price. They had no qualms in gving me the loan though. We didnt have the net, nor did I know about historical sales data. I did my leg work like you had to in those days, and Im confident I bought it at the right price. Why people cant estimate fair market value today, with all these online aids, is beyong me. Have people become more stupid, or more lazy?
Sorry George I have no desire to talk to you in person. Im bemused by the way you presume I should want to! Forum discussions are a group environment where we can ALL see what someone has to say. So play along if you like. Or not.
In an ideal sensible world, everyone could be taken literally I guess. Seems logical. But I guess people dont articulate so well, so who knows what they are saying?
Sorry If I get under your skin, dont take me so seriously? Or dare i say it "literally"? ha ha
Oigevay, do you acknowledge that there is a conflict of interests arising where a real estate agent uses the pricing of property as a marketing tool, then as a conditioning tool? The inappropriateness is highlighted by the fact that there are better qualified and independent valuers available for this purpose.
Yes, absolutely Peter. Only a fool would not see the conflict of interest.
But do you acknowledge what I said before, that an agents service to a vendor is to get buyers only? (ie marketing, show people the property,and take offers)
The preparation of a contract is really the buyers responsibility, but agents here prepare it for free . The vendor does not have to accept it and can redraft their own if they like.
The market appraisal is the vendors responsibility to him/herself before contracting with an agent. The vendor may elect to accept what advice an agent offers ( for free) in respect of those matters, but is not bound to accept it. The buyer should remain aloof to that obvious conflict of interest. As i said before, the vendor dictates to the agent what price they want.
Anyone who tries to sell you something is in a position of conflicting interests, because they are never truly independent whilst they make commission on what they sell you.
I think the crux of our different points of view is our belief in the ability of the consumer to arm themselves with knowledge. It seems incongruous to me that people cannot work out approx market value from just spending a weekend on this website for example.
Could you tell me what people would be better valuers than REA's, and apart from the factor of being independent, specifically why they would provide a more accurate appraisal? I mentioned in my previous posts about other issues (town planning, building repair costs) which i doubt these people know anything about. Certainly REA's do not.
Oigevay, your comment was
Agents pricing properties is NOT a problem in Qld , in a legal sense, if it is done for free, as occurs here now.
The stupidity of buyers is the problem.( like those two idiots who paid 70K too much in that link you sent us the other day). You cant legislate against stupidity, although this nanny Labour government is doing a damn fine job of trying.
You have to be kidding yourself with that statement, its common practice in your state that Real estate agents have enaged in the practice of setting different tiers of pricing, with higher prices being charged to consumers who are, for example, resident outside the particular area of the property or who are otherwise unaware of material facts such that they are prepared to pay prices for the property that are higher than the prices that those who are aware of those facts would be prepared to pay.
We have seen many agency agreements up there and have had this confirmed by an REIQ trainer which for example may show a range price of say $500,000 - $550,000, but the listing price will show $590,000 or you may just quote a single price in your agency agreement but this isn't the price you endup advertising and disclosing to the market.
Peter, has hit the nail on the head, inflate the listing price to get the vendor's business and then condition the vendor down to get the buyer's interested, but at no time does the public find out about the true price quoted in the agency agreement. This same old dodgy strategy has been going on for years and is rampant in your state of Queensland aswell, and yet you have the ordacity to call the buyer stupid.
As I stated before an industry that fails to take up the challenge of social responsibility would almost need to expect greater government interference and regulation in the future, without negatively affecting their relationship with their consumers and stakeholders.
Enough said !
Oigevay, your state of Queensland and Victoria could learn a thing or two from this aswell. The only people who should be handling contracts are solicitors, given real estate agents don't understand contract law and how it differs from property law.
I've also been told there is around 600 law suits, which have been filed against real estate agents in Queensland for engaging in dubious practices on contracts and what is most disconcerning is that they don't realise the consquences of their actions.
I had to laugh at your response to my invitation about calling me. I made a bet with someone in the office that you wouldn't pickup the phone - I reckon if I had a dollar for everytime I do that, I'd be an instant millionaire. :)))))))))))
"I had to laugh at your response to my invitation about calling me. I made a bet with someone in the office that you wouldn't pickup the phone - I reckon if I had a dollar for everytime I do that, I'd be an instant millionaire. :))))))))))) "
A million knockbacks huh? Maybe people arent as keen to talk to you as you think? Could be a message in there, George
"You have to be kidding yourself with that statement, its common practice in your state that Real estate agents have enaged in the practice of setting different tiers of pricing, "
True, and where in any of my posts have I contradicted that? None actually. Im no supporter of unethical RE practices. But perhaps I wasnt clear enough- when I say "Agents pricing properties is NOT a problem in Qld , in a legal sense, if it is done for free." I mean the agent is providing the advice not in a professional sense. ie not for money. As you might know, consumer laws are a often different for people who provide a service for a fee, as opposed ot those who do it for gratis. In Qld, the agent commission is for effecting a sale, and NOT for recommending a market value.The agent is not a valuer. yes, i know you are going to say that valuation is a part of effecting a sale, but in a legal sense, I dont believe it is.It is not the agents job technically to in Qld to assess and provide an appraisal.
So if you take that in context with all my other comments here, it means why is it a problem to ask an agent for an estimated price when you, as a vendor should be making sure that you yourself are taking reasonable steps otherwise to check what the market value is? After all the agent does have data broker info , which they usually are happy to supply. As I have said repeatedly, the vendor should choose and dictate to the agent what the market price should be after he/she has satisfied themselves of what they think it is ! Is that so hard to understand?
Go and look at Terri M Coppers post 1 day ago quote "Together the decision should then be arrived at in respect of what price the property will be presented to the marketplace. Every GOOD agent will conduct this part of the listing presentation IN COLLABORATION WITH the seller, based on informed market indicators."
Im not the only one saying it.
Here, a few more times....
the vendor should choose and dictate to the agent what the market price should be after he/she has satisfied themself
the vendor should choose and dictate to the agent what the market price should be after he/she has satisfied themself
the vendor should choose and dictate to the agent what the market price should be after he/she has satisfied themself
This is why what the agent suggests is not the be all to end all. The agents suggested estimate should be used as a double check for your own research. If you dont match up, then further discussion can take place.
Note that amounts of 100K discrepancies have been mentioned in this thread. How anyone can make a valuation blunder like that in normal residential property is beyond me! Even for the layman!
Can we move on from this point? OR do you need further explanation?
By the way in Qld, form PAMD 22A ( appointment of an agent) has an item in the schedule which asks "whether the client has requested information regarding the price at which the property is to be offered for sale?" You can tick yes or no. Now why do you suppose you have the option of ticking "no"?
It's a great discussion going on here, but please keep things civil. Remember this is supposed to be an open forum for discussing real estate related and local topics, not attacking each other.
"Oigevay........ The only people who should be handling contracts are solicitors, given real estate agents don't understand contract law and how it differs from property law."
there you go again, preaching to the converted. Had you read my previous posts properly, you would see that I pretty well said that already via some sarcastic humour. **sigh**
Terri, I've come to the conclusion that you may have an internet troll on this forum. The mentality of a Troll is obvious - he wants a cheap laugh, and that is all. The offense that may be caused is of no concern to him, as are any other ramifications of his actions.The best way to deal with a Troll is to ignore them entirely.
There are all sorts of Trolls that exist - The Bored's, The Liars, The Confrontationalists and The Controversials. I think this one is bored and confrontationalist.I also don't think these forums are dedicated to education and awareness of internet trolls either, so it might be wise in future to start a forum like this on your facebook page where you know everybody.
Anyway, I've now finished with this discussion entirely and hope to participate in many more of your's in the future.
Do you just label someone a troll because they have a different point of view to you? thats a bit sad. Forums are for the exchange of ideas, which I have done. I havent broken any rules here.
Do you feel threatened just because someone else on here is as prolific and opinionated as you are?
And if you are up in arms about a few humorous quips Ive made, well really, George, It hought a trainer would have broader shoulders? But I can leave them out if you have no sense of humour.
As it is, this seems to be the only topic that has generated some discourse in this Forum, so it cant be all bad hey? Ive certainly picked up some good points of view and found it worthwhile.
But interesting that no one could give an answer to my questions to why they thought valuers would be better appraisers than REA's, apart from the factor of being independent.
Why do people choose anonymity when conversing with others whose identity is known? It's rude, ignorant and unfair to all!
Getting right off topic now.
Why is anonymity here rude , ignorant, and unfair?
Does a person have to have a recognisable identity to give validity to their published thoughts?
IT always amazes me how people want to plaster their name everywhere all over the internet, then get indignant when someone doesnt want to do the same. I just love the way everyone asumes you are on Facebook these days. Not me.
Some of us like privacy and are not here to promote themselves at every available opportunity.
Will we become obsolete? No. Are lawyers and valuers the future of real estate? Well, hard to say. They could be. But they generally lack something that really is quite important in our profession: follow-up. Oh, and if they think lawyers are going to be embraced by the public as representatives for homeowners, they may need to reconsider their hours and get used to buyers ringing you at 10pm. I can really see that happening.
Peter, why can't I ever leave a comment on your website? You seem to always disable the comments. Worse than Jon Faine. Also, I think you have a real nerve by naming and shaming individuals, yet you don't allow those same individuals to respond. In my opinion, that is worse than olgevay's anonymity. Go check out his site everyone and you'll see what I mean. Beware what you say on here, he has a tendency for taking things out of context. Gosh!
MarieWaters You have just done exactly what you accuse me of! I have never named and shamed anyone without first sending them a copy of the proposed posting and giving them an opportunity to comment - this is also sensible for defamation reasons. It's unfair that you didn't extend me the same courtesy. Comments on my blog are disabled after a period of time (30 days I think) because most people have moved on by then. Perhaps you need to keep up to date. Anyway, if you want to take me to task you can do so openly on my Facebook page at http://www.facebook.com/LawyersRealEstate.
Give me a RE agent who genuinely knows his stuff and I'll be happy. Frankly am sick and tired of educating RE or Buyers agents who take no initiative to truly evaluate and understand the property they are trying to flog in comparison to the market trend.....
whilst I'm at it I've had the worst experience with a mortgage broker as well - I'm through dealing with incompetence by so called professionals who are gaining financial benefits at my expense for doing next to nothing...
This kind of discussion will always attract attacks from the real estate agents as once I experienced on property development Australia facebook group.
I am in the AEC industry and after having personally sold and purchased some properties I think the real estate agents are going obsolete once the technology is able to establish the credibility between the buyers and sellers. In Australia 90% of property transactions are originated from internet search. When I sold my own properties I didn't find it requires any expertise as most agents believe they have. What makes them so special to deserve 2% of the selling price. On the property development feasco sheet we can see the cost breakdowns - Architects who are responsible for a lot of work in the development get only about 1/10 of what the sales agents are paid.
People also like to believe the agent fees will be recovered by their effort to push price higher. Most agents would want the property sold by the first opening weekend. To them, 2% of 1 mil is 20k, pushing price up by 100k only gets them 2k. Their goal is more property sold, not highest selling price (well the market breaks the price record not them) - which presents the conflict of interest as many already mentioned above.
From my experience selling my own properties I did find it requires some strategies and the ability to distinguish the genuine buyers from the rest. It's just some "street smart" people skills that you probably already learnt in your life. It does not worth tens of thousands $$ commission.
To this day most people still "by default" go to the agents when they decide to sell because they don't want to go through the DIY hassle and believe agents will achieve higher price. I can tell you it's so easy, put it on the internet and watch people flow in on Saturdays.
2 days ago I was picking up some 2nd hand stuff from a guy at collaroy. He just sold his house with ocean view. He told me his neighbor walked up and offered to buy only 2 days after signing with an agent. So he had to pay the agent $150k for nothing.