Real estate agents' conflicts of interest 'unavoidable'
Your house is probably your biggest financial asset. But how do you know the person you entrust to get the best price for it is really acting in your best interests?
Real estate agents are bound by a code of conduct. But they operate on commission – if you don't sell, they don't get paid.
Property commentator Olly Newland says that means some conflict of interest is unavoidable. "Now matter how much they genuinely try to act for the vendor, most are under pressure to get a sale. They do have a foot in both camps."
Method of sale
If you've tried to sell a house lately, you've probably heard that auction is the way to do it.
In some ways, that's true. On the right day, if you have a number of people competing for the property, auctions can give you a good price and a cash buyer.
But there are other factors at play here. Some agents earn more for selling a property at auction and means less work for them – there is no back and forth on the deal, no conditions to be satisfied.
If your house is a bit unusual, the right buyer for it may not be there at auction day. It could then sell for less than you might otherwise get, or be passed-in, leaving buyers with the impression there is little competition for the property.
Newland said auctions were overdone. "They are very suitable for certain properties but the problem is that they pinpoint the sale at a certain day and time and that is like trying to hit a bullseye from 100km away. The buyer may be floating around weeks before or after that day."
Make sure you're advertising your house, not the agent.
David Whitburn, director of Fuzo Property, said some real estate billboards gave as much prominence to the agent's name and details as they did to the property – all at the expense of the vendor.
Ask to see examples of the advertisements you are paying for and make sure you are happy with them.
Whitburn said it was also important that agents gave the property enough airtime. He had heard of cases where agents hogged listings and did not let other salespeople know about them. "They log it as late as possible and in some cases don't even advertise it so they can maximise their chance of selling it themselves."
It might seem like you'd get more traction with a general listing, where your property can be sold by any agent.
But Newland said agents work harder for an exclusive listing. "With a general agency it's nobody's. They don't want to do lots of work and someone down the road sells it without trying."
Agents receive a separate commission for listing and for selling a property under an exclusive listing, so even if another agent within their firm sells your house, they will get a cut.
Should you really sell?
Some people who put their house on the market and get an offer that is less than they expect can feel pressured to accept it.
Sometimes agents offer a high appraisal price to get the listing, then pull down vendors' expectations with open home feedback.
Newland said the adage that price doesn't matter if you buy and sell in the same market was "bunkum".
"That's a throwaway line but there are so many variables. Two identical houses side-by-side can sell for totally different amounts."
Do not accept an offer you are not comfortable with – almost all properties appreciated in value eventually. Newland said 95 per cent of buyers did not really have to sell. If that is your situation, you can sit back and wait for a deal that works for you.
Whitburn said it was important for buyers to do their own due diligence on properties. Agents are required to disclose what they know about a property, such as whether it has been contaminated with methamphetamine, or is leaky.
But Whitburn said some who suspected something was amiss could get around their obligation by not getting reports done to confirm it.
You often hear it is worth paying the commission to use an agent because their negotiating skills will get a higher price than you would through a private sale.
But Newland said that was not always the case. "I've seen successful sales done privately. Buyers often prefer to go to private sellers than go to an agent and risk being dragged around looking at other people's rubbish."
Ask for word-of-mouth referrals so you know you really are getting a good negotiator if you decide to go with an agent.
The big stuff
Every so often, there are high-profile cases where agents are outed selling properties at reduced rates to friends or family, or offering cheaper prices than they should to purchasers that they knew would keep coming back.
Whitburn said unscrupulous behaviour was limited to a minority of agents. "A small number let the rest of them down."
The Real Estate Agents Authority (REAA) administers licensing and complaints.
Chief executive Kevin Lampen-Smith said it was important that buyers used a lawyer, asked questions if they were not sure about any stage of the process and only dealt with licensed agents.
He said people could check the disciplinary history of any agent they were dealing with, on the REAA website.