Be Cautiously Kind To Sellers' Agents

Published 02 June 08 07:42 AM | Peter Mericka 

by Tim O'Dwyer M.A., LL.B
Solicitor
Consumer Advocate
watchdog@argonautlegal.com.au

 

Although agents use slogans like "Nobody does it better", "The right advice", "More personal attention" and "We'll look after you", they are really offering buyers something for nothing. At all times the agency s legal duty is to their clients, the sellers. The agent s prime job is to find a buyer at "the best possible price and contractual terms for the seller".

The least expensive part of buying a home is the looking. Legals, searches, loan fees, stamp duties, insurance premiums and removalists' charges come later.

While "just looking", your only cost will be the time and effort put into that quest. Many hours will probably be spent with real estate salespeople keen to help you make your final choice.

Most home-hunters look with a real estate agency, yet this service is provided free. Why so?

"Buyers do not pay fees to the agent. The agent receives commission from the seller."

This answer comes from a brochure produced jointly and incredibly - by a Real Estate Institute and a Law Society. The brochure continues:

"A real estate agent, as the agent of the seller not the buyer, is responsible for obtaining the best possible price and contractual terms for the seller. The agent will receive a commission from the seller when the property is sold."

Although agents use slogans like "Nobody does it better", "The right advice", "More personal attention" and "We'll look after you", they are really offering buyers something for nothing. At all times the agency s legal duty is to their clients, the sellers. The agent s prime job is to find a buyer at "the best possible price and contractual terms for the seller".

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Comments

# Agent said on June 4, 2008 1:05 PM:

Thanks Tim, I often only post here to have a crack at you guys for contantly running down the real estate industry, so it is a breath of fresh air to see some commonsense advice for consumers. Great article and I thought if I'm quick to take a shot back then I should be just as quick to praise good posts - well done, you seem to be truely a consumer advocate with out resorting to mindless agent bashing. I am all for highlighting bad estate agency practice, I just disagree with inflammortory posts with an unfair anti agent bias. As far as I can see you don't seem to get sucked into attacks for the sake of attack unlike your learned colleague.

# Peter Mericka said on June 4, 2008 2:39 PM:

Hi Agent,

OK, I've taken the bait.  First, you're anonymous (at least Enzo Raimondo is no coward, and signs his silly comments (See

http://reic.com.au/blogs/australian_real_estate_blog/archive/2008/04/09/was-enzo-raimondo-gagged.aspx).

Second, I offer you the same courtesy as I extended to Enzo: nominate any of the "inflammortory posts with an unfair anti agent bias" you've mentioned, and I'll address it.  Oh yes, don't forget to identify yourself this time.

Somehow I don't think we'll be hearing from you again.

# Agent said on June 4, 2008 3:13 PM:

I have no need to identify myself. I've made my comment and as far as I'm aware the protocal of blogs is allow anonimity if so desired. I care very little what you think Peter, your views or requests mean nothing to me. I will not be baited by the likes of you.

# Peter Mericka said on June 4, 2008 5:05 PM:

Hi Agent,

Keep your mask on if you really need to, but please do stay on point.

You have made allegations of "inflammortory posts with an unfair anti agent bias" (sic), and I have asked you to nominate the article(s) you refer to.

Are you able to nominate any actual examples of "inflammatory posts" or "unfair anti agent bias"?  Or are you going to do an Enzo?

# Agent said on June 4, 2008 5:16 PM:

I am not prepared to enter into a debate with you as past experience has proven it to be fruitless. You don't have the capacity to ever see an opposing point of view. Your arrogance destroys any attempt at meaningful dialogue. I'll leave it to the next bunny to try and reason with the unreasonable.

# Peter Mericka said on June 4, 2008 5:28 PM:

OK, thanks for your contributions Agent.

# Agents Victim said on June 5, 2008 7:19 AM:

Your just a gutless flea agent you the same as othe real estates that lap up the good stuff and squeal like a stuck pig when someone tells the truth  You make me sick

# Agent said on June 5, 2008 9:17 AM:

Very mature Mr. Victim. Another comment on this blog devoid of any real intelligence.

# Peter Mericka said on June 5, 2008 9:26 AM:

Hi Agent,

Perhaps if we could lift the standard a little by focusing on the problem of inaccurate and biased reporting.  I will moderate any further nasty comments, but I would like to be able to rectify any inaccuracies or examples of bias you may wish to identify.

# Agent said on June 5, 2008 9:42 AM:

Mr Mericka,

If you are prepared for a reasonable discussion, I will spend sometime going back through your blog and provide examples of posts I consider anti agent and biased. I am not running away, I have work to do but I will submit a follow post tonight and allow you the opportunity to respond to specific examples.

# Peter Mericka said on June 5, 2008 9:51 AM:

Hi Agent,

Excellent!  I believe that it is the interests of all that there is some discussion on such matters.

Rather than confine it to a mere comment to a blog posting, I would much prefer to allow you to write a full blog posting of your own.  Perhaps we could call it "Agent Exercises Right of Reply" or similar.

# Agent said on June 6, 2008 10:55 AM:

Mr Mericka,

Having trolled all the way through your blog, all the way back to your 1st posting I would now like to retract my comments and accept that it was not enitrely accurate. I see you take great delight in highlighting agents actions and the enjoyment certainly shines through in your posts but your concerns in most posts are legitimate in nature.

A tinge of sensalionalism shines through in many of your posts but by and large my comments were unfounded and unfair.

# Peter Mericka said on June 6, 2008 3:11 PM:

Hi Agent,

First, I must thank you, first for having the courage to retract your comments.  The CEO of the Real Estate Institute of Victoria can learn a great deal from you. (See http://reic.com.au/blogs/australian_real_estate_blog/archive/2008/04/09/was-enzo-raimondo-gagged.aspx)

But I cannot allow this opportunity to go by, as it is probably the only opportunity I will ever have to ask this question of an estate agent who has read the material I have written and agrees that it is valid:

Agent, are you as disgusted as I am with the state of the real estate industry, and is there anything more I can do about it apart from simply reporting what I have experienced?

# Agent said on June 6, 2008 3:38 PM:

Mr. Merika,

I agree that there are many agents who do the wrong thing and engage in practices that are less than ethical. Having said that I firmly believe that for every bad one there are many more good ones who are trying really hard to provide high quality service and value for money for their services. I accept that many people believe we are paid too much for too little work, but my experience over the years is contrary to that school of thought. Long hours and around the clock availability has its price tag. I am sure this is an area we can never agree on, so let’s just agree to disagree on this topic.

I have happy for bad agency practice to be highlighted and I welcome all competition, market forces dictate that if another system benefits the consumer and works better than current methods it will be embraced by the general public. If that becomes reality then the rest of us “traditional” agents have little choice but to adapt to change.

As salespeople we are adaptable and speaking personally, I welcome any new initiatives to the industry. I am not disgusted with my industry but I acknowledge room for further improvement. This is simply my opinion and is obviously not in line with everyone’s thinking.

# Peter Mericka said on June 6, 2008 3:56 PM:

Hi Agent,

Again, thank you for comments.  I have so much more that I would like to ask you, and things I would like to put to you, but I don't think it would be fair of me to "punish" your preparedness to open up by throwing a heap of questions at you.  And I'm sure that you don't want to be pushed into the position of having to answer for the whole industry.

# Agent said on June 6, 2008 6:20 PM:

I am not in a position to answer for the whole industry. I am, however,  willing to answer what I can - honestly and without fear or favour.

# Peter Mericka said on June 7, 2008 4:42 AM:

Hi Agent,

This is probably the most important question I have, and your response will assist me in the way I conduct my legal practice.

I regard the contract as the means by which most improper practice in the real estate industry is perpetrated, and I believe that I can do something about this by ensuring that the estate agent has no involvement with the sale after the purchaser has been introduced to the property.  This would keep the estate agent safe, and leave me free to look after all legal aspects.

Imagine that you are the estate agent, and I say to you:

“Agent, I’m going to save you a whole lot of time, effort and responsibility by assuming full responsibility for the closing of the sale.  Just refer the purchaser to me, and I will negotiate the final terms of the sale, I will draft any special conditions, and I will arrange execution of the contract.  My office hours are the same as yours, so availability is not an issue.”

Would you have a problem with such an arrangement, and if so what?

# Agent said on June 7, 2008 11:14 AM:

Would I have a problem with this example? I understand where you are coming from Peter and my instructions to my Vendors and staff is simply that if they are confronted with a request for a clause then the Vendor's solicitor bears the responsibility for drafting that clause. That way we can never be in a position of over stepping the mark from a legal point of view.

I would however be uncomfortable with you interfering with the price negotiations, as this is my job and my pay is directly affected by the amount the house is sold for. I would advocate greater communication between legal reps and agents to ensure we were not overstepping our authority in areas we are not qualified to advise on and legal reps stuck to their area of expertise. To put in simplistic terms, I deal with the price; you deal with the legal clauses. That seems to be the best solution to me. Do you agree?

# Peter Mericka said on June 7, 2008 11:46 AM:

Hi Agent,

When you say that you would not like me “interfering with the price negotiations” what do you really mean?  Surely the sale price is no more your business than it is mine – it’s the business of one person, and one person only: the vendor.

I never ever “advise” the vendor as to whether or not the price is OK, nor should you.  But I know that most estate agents want to have some say in the price because as you put it, “…this is my job and my pay is directly affected by the amount the house is sold for”.

Surely, if the vendor wants to sell the house for a lower price, and you will miss out on some commission as a result, the vendor is entitled to sell for a lower price regardless, and without being concerned about how much you will get as your “pay”.

Similarly, if the vendor does not want to sell for a lower figure than intended, he/she should be able to do so without taking into account the fact that you will not receive your “pay”.

This leads on to the problem of conflicting interests.  If your “pay” is the reason you want to deal with the price, and your “pay” may put you at odds with the vendor, then this is a classic case of conflicting interests.  This is why I should be looking after the contract and not you.

If I control the contract your interests are not taken into account in the decision making process at all.  The decision about whether or not a sale takes place, and the price at which the sale takes place is left entirely to the vendor.

In most cases the vendor will sell, and you will get your “pay”.  However, in some cases the vendor may act on my advice and refuse to accept the purchaser’s offer.  If I give such advice to the vendor it is because it is my duty to do so, even though it may cause you frustration and a loss of “pay”.  There is no doubt that it would be in your interests to prevent me from advising the vendor to refuse an offer, but again the question arises as to whose interests should take precedence.

I believe that the best solution is to operate within a structure that eliminates the conflict of interests.  That is, you bring the parties together in the hope that a deal will be struck, while I negotiate the deal on behalf of the vendor with the purchaser’s legal representative.  If both parties ( with the benefit of the advice offered by their legal advisers) are happy with the final deal, then you will get your “pay”.  If they are not, you will have to wait for your “pay”.  In the very unlikely event that the vendor decides not to sell, you forgo your “pay”.  Of course, there is the risk that the vendor may go with another estate agent, but again it’s about the vendor’s interest being in conflict with yours.

Surely the rare occasion that you may have to forgo your “pay” would be balanced more than favourably against the huge savings in time, responsibility and risk.

# Agent said on June 7, 2008 2:43 PM:

Peter,

I would like to negotiate the price because that is my job and like or not, as agents we are good at that. In certain circumstances, where the contract is difficult , you may do the closing but in a straight forward sale I want to close to show the Vendor that we really are working to secure the best price possible and there for they are getting value for money.

Having said that if the rules changed and it was no longer our duty to finalise the sale I would want to work very closely with you to ensure final closure of the sale.

You are right in one respect we are governed by the final closure of the sale as this is how we get paid.

# Agent said on June 7, 2008 6:04 PM:

I am done. I can no longer answer your questions. Good luck with what you want to do.

# Peter Mericka said on June 8, 2008 4:28 PM:

No, don't clam up now Agent when we're arriving at the concluding stage of this discussion.

First, think about what you have just said, and let me remind you that this is not about you.  It is not about the estate agent's ability to look good to the vendor, nor is it about securing your commission.  Service to your client is what you are supposed to be about.

Let me remove one variable from the discussion, and it will confirm that the only interest you have in the contract stage of the sale is self-interest.

As the lawyer who has prepared the contract of sale, I say to you, "Agent, send the purchaser to me, and I will attend to the rest."

When you begin to object for the reasons you have outlined above, I reply to you by saying, "It's OK, I  will pay you your commission now in cash, please take it and leave."

Agent, I have no doubt that you will take the cash and go.  You will immediately accept that you have no further role to play, and that I have full responsibility for concluding the sale to the vendor's satisfaction.  If the vendor chooses to reject the offer it will not bother you.  Nor will it bother you if the vendor chooses to accept an offer that is lower than he/she may have wanted.  No will it bother you if I have to go a few rounds with the purchaser's lawyer, negotiating through counter-offer and counter-offer.

This scenario confirms that true responsibility for the vendor's legal well-being and the following of his/her instructions remains with the lawyer.

Thus, if you could be convinced that you would be paid your commission 100% of the time, you would have no interest in taking control of the contract.

Agent, please let me have your response to this.

# Austin said on June 8, 2008 11:15 PM:

There definitely needs to be more of this. Whoever the agent is, you've done a service to the rest of us :)

# Peter Mericka said on June 9, 2008 9:20 AM:

Agent, you're anonymous and you have promised (above) to "answer what I can - honestly and without fear or favour."

We have arrived at the point that scares even the most courageous of those agents who regard themselves as fair-minded and ethical, namely the "admission point".

Any estate agent who handles a real estate contract must, if he or she is truly honest, eventually admit that the only reason he or she does so is self-interest.

I am aware that such a admission has the potential to bring down the entire industry (as it is also a admission that the estate agent really has nothing to offer vendors in practical terms), and it is personally confronting to the estate agent who makes it.  But it must be done.

Agent, you remain anonymous.  Making this admission will not harm you personally, and even if I were to become aware of your identity I would not disclose it.

It is important that you make this admission for two reasons:

Firstly, it is the right thing to do. It's equivalent to the tobacco industry finally admitting that smoking is addictive, opening the way for millions of people to take steps to avoid becoming addicted and for addicts to do something about their addiction.

By making this admission you will allow me and other consumer advocates to advance the cause of consumer protection in the real estate industry.

Secondly, it will benefit those estate agents who want to operate ethically, but who remain constrained by the norms of the industry.  Releasing these estate agents will also affect the CLOWNS (Conveyancers and Lawyers Offering Worthless, Negligent Services), forcing them to offer better protection to real estate consumers instead of collaborating/conspiring with estate agents against their own clients.

Please Agent, let's have your response.

# Shutup said on June 10, 2008 1:37 PM:

Shutup agent for chrissake. This *** is just using you to crap on the rest of us and your being used. You can not win this so just walk away.

# mick said on June 10, 2008 2:04 PM:

Comments such as these as said by "shutup" only adds fuel.  It makes me very wary of dealing with any agents.  I think after reading these sort of comments, that anyone entering into the propperty market should probably stay clear of any agents and deal directly with the vendor and legal professionals.  I thought we were all adults here, obviously I was mistaken.

# Austin said on June 11, 2008 9:19 AM:

Peter,

The thought has occurred to me - if real estate agents are encroaching on the 'legal' territory of property sales, why doesn't 'your side' of the industry i.e. the conveyancers, strike back in a way, and market yourselves as fully capable of doing the real estate agent's job?

From what I have read on this site a property sale can be boiled down to a simple transaction between vendor, purchaser, and their respective solicitors, with no agents involved. Shouldn't you be highlighting this fact? As I'm sure you know the one thing that would make the agents stand up and pay attention is the loss of their prospective commission.

# Peter Mericka said on June 11, 2008 9:44 AM:

Hi Austin,

It's already happening, but very slowly because of the CLOWNS (Conveyancers and Lawyers Offering Worthless, Negligent Services) and their collaboration with estate agents.

About 10 years ago I met a lawyer who was selling real estate for his clients, but he was following the estate agent model and it didn't work for him.  He eventually left the legal professional and bought a pizza shop.

I started selling real estate for my clients after a recently-widowed woman had been hassled by local estate agents when she advertised her Kew property on a DIY basis.  After experiencing the corrupt practices in the industry, and having initial success in selling real estate for a few clients, I started Lawyers Real Estate Pty Ltd.  (see my website at http://www.lawyersrealestate.com.au/realestate/default.asp).

The estate agents went nuts!  The REIV have tried all sorts of tricks to stop me, but they can't.  I have had to deal with some very unsavoury characters, and nasty attacks, but the concept has been growing slowly but surely.

The main impediment to the concept, believe it or not, is the CLOWNS.  Most conveyancers and lawyers involved in conveyancing/property law have come to rely heavily on referrals from estate agents, and don't want to bite the hands that feed them (see my postings of Richard Wood Solicitors at  http://reic.com.au/search/SearchResults.aspx?q=richard+wood for more about this).

I will continue to highlight the corruption in the present real estate industry via this blog.  At the same time, I will continue to build a new industry; one that is fair, transparent and far cheaper.  Eventually one will give way to the other.

That's the plan Austin; what do you think?

# Austin said on June 11, 2008 10:23 AM:

Hi Peter,

That is a great response, and I think it's a great plan. And by the looks of things I think the industry has felt it (i.e. Ian Reid's change of marketing tack http://reic.com.au/blogs/australian_real_estate_blog/archive/2008/01/18/ian-reid-takes-aim-at-fellow-estate-agents.aspx ).

But with all due respect, the 'concept' you describe doesn't exactly jump out at me when I open the local gazette, which is stacked full of real estate agent backslapping. Surely the conveyancers and lawyers know that they need to market this concept well for people to take notice? Particularly against real estate agents who practically own local papers.

Regards

# Peter Mericka said on June 11, 2008 10:36 AM:

Hi Austin,

Yes, Ian Reid's is just a poor copy of our concept and it seems that he's keeping it quiet until mine comes out onto centre stage.

You haven't seen much of our concept because we haven't been marketing it other than to existing clients and those who come across our website.  We've sold well over a hundred properties now, and you can see from the video testimonials on our website that clients and purchasers love it.

We have a program that we're working to, involving special accreditation and mass marketing.  But one of the issues we have to deal with first is the control that estate agents have over the CLOWNS, and the the failure of the CLOWNS to take control of the contract.

This is why I was pushing "Agent" so hard; to get his admission that estate agents have no reason to deal with contracts other than self-interest.

# Austin said on June 11, 2008 10:41 AM:

Hi Peter,

I am probably being quite naive, but how is it the case where the agents have control over the lawyers? Doesn't the very livelihood of the real estate agent depend on the competence of the lawyer in preparing and arranging their contracts for use?

Regards

# Peter Mericka said on June 11, 2008 11:46 AM:

Hi Austin,

Hear that squeaking sound?  It's coming from the hinges of Pandora's box!

I will write a blog posting in the not too distant future about CLOWNS (Conveyancers and Lawyers Offering Worthless, Negligent Services), but since you've asked I'll give you a brief glimpse into the real world of real estate and conveyancing.

Every lawyer and conveyancer entering the industry knows that estate agents tend to be the first port of call for consumers seeking to buy or sell real estate.  They also know that the real estate agent often determines which lawyer or conveyancer the consumer will use.

Obviously, an estate agent who receives free movie tickets or Gold Coast accommodation from Richard Wood Solicitors will refer clients to that law firm rather than mine (see http://reic.com.au/search/SearchResults.aspx?q=richard+wood).

And if I advise a purchaser not to proceed with a purchase because it is not in the purchaser's interests to do so, with the result that the estate agent misses out on a commission, the chances of my receiving future referrals are pretty slim.

So, a new lawyer or conveyancer learns very quickly that estate agents make very bad enemies - cross them and they will ruin your business by refusing to refer clients or by convincing existing clients to go to their "pet" lawyers/conveyancers.

As you know, estate agents use all kinds of strategies, tricks, deceptions etc. in order to close the sale and win a commission.  How can they do these things without controlling the contract?

Could Barry Plant and his agents insert a "gazumping clause" without having control of the contract? (see http://reic.com.au/blogs/australian_real_estate_blog/archive/2008/05/07/barry-plant-real-estate-gazumping-clause.aspx)

Could Ian Reid us his dodgy "finance condition" without having control of the contract? (http://reic.com.au/blogs/australian_real_estate_blog/archive/2007/04/30/estate-agent-s-finance-clause.aspx)

Estate agents want to control the contract, and the CLOWNS let them.  But even if a lawyer does prepare a contract, estate agents are brazen enough to simply switch them! (see  http://reic.com.au/blogs/australian_real_estate_blog/archive/2008/01/15/shane-lowe-of-methven-switching-of-contracts-and-conditions.aspx)

Thus, it is now commonplace for the CLOWNS to prepare no more than the Section 32 Vendor Statement (see http://www.lawyersconveyancing.com.au/section.asp), leaving the estate agent to prepare the contract as the estate agent sees fit.

But there is also a benefit for the CLOWNS in having the estate agent prepare the contract.  You see, the CLOWNS are able to avoid responsibility by having the estate agent prepare the contract.  If the estate agent stuffs up, the CLOWNS simply tell the vendor it was the estate agent's doing (estate agents are very good at explaining things away, and Consumer Affairs Victoria isn't interested in such issues).

If the vendor gets annoyed with the estate agent and wants to take legal action over the stuff-up, the CLOWNS will give plenty of reasons as to why this is not a good idea.  (You can see how these reciprocal dependencies develop.)

Estate agents have become so used to preparing contracts that they now believe it is their role; and they convey this to vendors and purchasers alike.  Read over the comments left by "Agent" above, and note how forceful he is with his insistence that the contract stage is his responsibility.

To conclude, it's not going to be easy to get past the CLOWNS and the estate agents, but I'm working on it.

Simply giving the problem publicity in this medium has to help.