The Solution to Underquoting: Transparent Agency Agreements

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Live from Japan. A family member I know has put their home up for auction. By week two, they had three qualified buyers, but by week four, they'd lost all their buyers.

You see, a property nearby had also come onto the market and their agent quoted significantly lower despite the homes being comparable.

This happens all the time. And the solution to prevent this is not so simple...

Episode Transcript

Speaker 1 (00:00):
Today I want to talk to you very briefly about a
subject that involves a familyrelative of mine who was
auctioning their property in Mayhad three buyers by around week
two.
At week four is the auction,they're informed hey, john, good
to see you they're informedthat they've lost all their
buyers because another propertyonly a hundred meters away has

(00:23):
come on the market and the realestate agent on that property is
quoting a lot lower figure thanthe number that's been quoted
on this one, even though theyare comparable properties.
Well, hello, this is a commonweekly occurrence in real estate
where you actually have twosimilar properties up for

(00:46):
auction, one being quoted lowerthan the other even though
they're similar properties.
And, of course, the buyers well, they get seduced by greed, as
one trainer used to say, and Idon't approve of it.
As one trainer used to say, andI don't approve of it feed the
greed, feed the greed, tell themlow, quote it low, watch them

(01:18):
go.
In fact was another one ofthose one-liners that were used
10, 20, 30 years ago in auctioncircles.
That still is used now.
So here's the big dilemma.
Here's the big dilemma.
The big dilemma is that, if youlook at the contractual
relationship that a real estateagent has.
It is hey Tass, hey John.
It is in fact with a vendor.
They're employed by theirvendor and paid a fee by their
vendor and sign a contract, anagency agreement by the vendor

(01:41):
to represent them and look aftertheir best interests, which
obviously involves getting themthe highest price for the
property that's available in themarketplace.
And if you're going to do that,what you want to do is go out
and engage and collect as manybidders as possible.
If it's an auction property,now obviously going out there

(02:01):
with a buyer excite price isgoing to attract a lot more
people than going out with aprice that's not exciting.
So here lies the dilemma.
On the one hand, a real estateagent has got to actually go off
and excite buyers because theirjob is to get the vendor the
highest price, and to do that inmany parts of Australia you'd

(02:37):
be acting marginally, if notmore than marginally, illegally
off.
That doesn't follow the law canend up stuffing it up for a
vendor who is listed with anagent who's actually doing the
thing within the law.
And I've got to tell you Iabsolutely despise and hate

(03:02):
buyers being deceived.
Despise and hate buyers beingdeceived.
I also understand that realestate agents are engaged by a
vendor to get them the bestprice.
So where do you stand there?
Does it mean that auction lawsacross Australia should head
down the path of Queensland,where it's a lot easier to

(03:25):
actually quote no figure?
You've heard me say it beforehere on Market Raps that I
believe that one possiblesolution is to make it law that
a real estate agent actually hasthe agency agreement and the
comparable sales they've shownthe vendor when they've
appraised and listed theproperty and that is made

(03:47):
available to buyers as theyinspect properties and, you know
, go off and do their duediligence.
Have one story.
Have one story.
Show the buyers what the agenthas shown the vendors.
Make the agency agreement atransparent document.

(04:07):
What's wrong with that?
I'm sure that the devil's inthe detail, but in many ways I'm
changing my mind about pricequoting because I've always
thought you do really need togive people a figure.
I wouldn't like walking aroundDavid Jones and everything I

(04:29):
look at has no price on it.
I'd walk away as a customer, asa consumer, and go find a store
that I can actually look at anitem and see what it costs
actually look at an item and seewhat it costs and that is what
I think buyers like.
However, it's causing so manyissues.

(04:56):
We need to find a solution tothat.
As for the real estatemarketplace, I've got to tell
you so much of the world in realestate appears the perception
to be around auction.
The reality is private treatyproperties across Australia and
New Zealand totally outstrip theamount of properties that go to
auction.
Auction obviously a lot morecolourful, a lot more media

(05:17):
friendly and they do grab theattention of the community.
And we've got a barometercalled an auction clearance rate
that allows people to actuallycompare apples to apples, one
week versus another week andmarkets versus other markets.
Anyway, team, I'm going tofinish this off.

(05:37):
We're on our way to get asclose as possible to Mount Fuji
in Japan.
Then I'm heading back to Tokyotonight and I've got to say to
you those of you that are goingto ARIC, looking forward to

(05:58):
seeing you to come over andcollect your million dollar
agent roadmap, which I'veprinted quite a few thousand
from my real estate gym members,but I'm also bringing extras
along to the ARIC event.
Come over to my booth.
It's booth number one, thefirst one you'll see as you walk
in.
Ladies and gentlemen, I'mlooking forward to seeing you at

(06:20):
ARIC.
I'm also letting you know thatit's so good to be spending time
with family.
Faith, family and friends isthe ultimate formula for
happiness, and that's what I'mdoing these six days.