Hopeful buyers sold a lie

The Daily Telegraph, 3 July 2010
by John Rolfe and Rosemarie Lentini

REAL estate agents have been accused of duping hundreds if not thousands of hopeful home hunters every weekend by deliberately under-estimating property values.

Experts said urgent reforms were required to protect would-be buyers from forking out a fortune on pest and building reports – as well as legal advice – before an auction in the false belief a property was within their budget.

The proposed reforms include compelling real estate agents to reveal the price range given to the seller on the written agency agreement, forcing the reserve to be within that range, and making the reserve public in ads.

The proposals have emerged in response to an investigation by The Saturday Daily Telegraph which reveals:

• THE State Government has abandoned its commitment to shift to sellers the responsibility for property reports; and
• MID-market homes are being touted for as much as $100,000 – or 12 per cent – below reserve.

“Auctions depend on the crowd, a crowd is dependent on a bait and the bait is that lower pricing,” consumer advocate and ex agent Neil Jenman said.

“It happens to hundreds of people every Saturday.”

John Keating, a real estate agent who has been campaigning for greater disclosure, went further: “One thousand to 2000 people are being duped every weekend in Sydney.”

Buyers agent Jacque Parker said: “I feel sorry for buyers who are buying for the first time and spend money when they never had a chance.”

While experts said baiting was rampant, NSW Fair Trading said under-quoting – as defined by law – was non-existent. Under-quoting is where an agent underestimates the likely sale price of a property to induce a greater level of interest.

“They haven’t done a proper investigation. They didn’t ask the under-bidders what they’d been quoted,” Mr Jenman said.

Fair Trading confirmed its most recent sweep, which found no evidence of under-quoting, did not involve speaking to under-bidders.

This was because “there was no indication that there was an issue with under-quoting”, a spokeswoman for Fair Trading Minister Virginia Judge said.

She said if there was anything the minister could do to improve the process she was “happy to consider options”.

The case for reform has been made more compelling by revelations the State Government has abandoned a plan to shift responsibility for property reports to vendors.

In January the Government vowed the change would be made “early this year”.

However, this timetable has been junked and a new review has been commissioned – after effective lobbying by real estate agents.

The review won’t be completed until December, which means nothing will change before the March 2011 election.

When Labor MP Matt Brown, who was given responsibility for the changes and had promised their implementation, was asked about the backflip, he said: “You’d have to ask the Government.”

When it was pointed out that he was in the Government, he replied: “I’m not in the Cabinet.”

A spokesman for Planning Minister Tony Kelly blamed the delay on the Council of Australian Governments, which had “indicated it wants to look at a national approach to vendor disclosure which includes property inspections”. While the Government is infamous for breaking promises, this latest deceit will be particularly costly for those already exasperated by trying to buy a home in this city as they will continue paying for expensive and potentially pointless property reports.

Real Estate Institute of NSW CEO Tim McKibbin rejected the proposed reforms.

“The vendor’s commercial interests are completely opposed to the purchaser’s and the agent is engaged by the vendor,” Mr McKibbin said.

REINSW has also opposed switching the burden of building and pest reports. This opposition is understood to have included directly lobbying the Government.

First-home buyer William Madani, 26, has bid at six auctions in 12 months.

He said he was often “priced out” at auctions for affordable units by foreign investors and married couples.

“I accept that that’s how the market is and I’m buying on my own,” Mr Madani said.

“But it’s a problem when agents start by saying a place is $400,000, then it goes for so much higher.

“There should be a tougher code of conduct for real estate agents because there’s often no truth to the prices they are giving you.”

Coogee couple Wade and Mel Garvin have been looking for their inner-west dream home for two years. The search has been difficult.

“We saw this great place in Botany and the price guide was $580,000. It went for $675,000. It was just not worth it,” Mr Garvin, 43, said.

He said he was shocked at the hidden costs of buying a property in Sydney.

“We’ve spent at least $4000 on building inspections. It’s killed us,” he said.