August 12, 2025 • 59 mins
Underquoting in real estate remains a persistent challenge despite years of legislative attempts to address it, with the REINSW CEO, Tim McKibbin, joining John McGrath and Tom Panos to unpack the legal and ethical dimensions of property price guides. The discussion explores whether underquoting actually benefits vendors or merely creates disappointed buyers who waste time and money.
• The offence of underquoting is representing a price that's less than the agent's estimated selling price
• Agents must work within a maximum 10% price range when quoting to buyers
• If a vendor rejects an offer, the quoted price cannot be lower than the rejected offer
• Agents can adjust price guides during campaigns as market feedback comes in
• The obligation to represent accurate pricing rests with the agent, not the vendor
• Poor industry education contributes to pricing issues with 80% churn rate in NSW real estate
• Serial underquoters damage the industry's reputation and create emotional distress for buyers
• Technology may play a role in monitoring compliance in future regulatory approaches
• Transparency and integrity are essential for rebuilding trust with the public
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Tom Panos (00:00):
Million dollar agent, john McGrath, and I have
decided we'll kill two birdswith the one stone.
We're going to talk to thechief executive officer of the
Real Estate Institute of NewSouth Wales, tim McGibbon, and I
haven't really spoken with Timsince the days of COVID.
(00:20):
We were jumping on during thosetimes when people were at home
and we were talking about things.
Obviously, my co-host, johnMcGrath, is here Without Troy
Malcolm today.
We thought two verse one isbetter than three verse one.
If there was three of us.
We thought so.
This is a podcast.
So those of you that arelistening on the Million Dollar
(00:40):
Agent podcast, wherever you getyour podcast from, we're also
live streaming this as we speak,because we thought it was a
very important session to havein information, particularly the
fact that some of the stuffthat we're going to talk about
is stuff that you've got a view,tim, obviously, fairfax on the
weekend we're writing storiesabout auction, price guides and
(01:07):
a number of issues.
I don't want to sit there andtalk about detail by detail, but
listen, tim, it obviously.
Firstly, do I make theassumption.
Have you caught up on thatexclusive story that they
covered about the difference ofprice between the list price and
(01:30):
what it's sold for.
Yeah, you're across the storieshere.
Tim McKibbin (01:33):
Yeah Well, I've read all the stories, tom, and I
guess underquoting is somethingthat has been with me as long
as I've been at the REI.
That has been with me as longas I've been at the REI, and
before I joined the REI,underquoting was with us.
You know, governments over theyears have tried to bring in
(01:56):
some solutions, but theycertainly haven't worked,
because we're still talkingabout the problem now.
Why haven't?
John McGrath (02:05):
they worked, Kenny .
Why haven't they worked?
Tim McKibbin (02:08):
Yeah, it's a great question.
I think part of the reason isthat it's a difficult thing to
gather enough information if youare going to do regulatory
enforcement.
That's part of the reason, andthe resources that would be
(02:29):
involved is another reason.
And lastly, I think that thelegislation that we have now
certainly doesn't serve us well.
You would be aware that thelast time that we played with
the legislation and I say thatrespectfully, but the last time
(02:52):
the legislation was amended, weended up with some rules in
there that said we weren'tallowed to use the words offers
over or offers above, and I'venever understood why.
I just don't know what the evil,what the harm is that we're
trying to protect consumers byand I remember sitting down with
(03:15):
Fair Trading after they cameout and we were sort of
brainstorming the problem thatwe had, which was to try and
communicate to a purchaser thatthe price that the vendor was
looking for was greater thanthis price, without using those
(03:36):
words.
So you know it's a bit crazy.
So everybody's had a crack atit.
I don't think it's thelegislation.
I don't think it's thelegislation.
I don't think it needs changes.
I think we need changes in theway that we we deal with it, can
I?
Um, can I come back to you witha question then?
Um, when is is under quoting uh, do do you achieve a better
(04:03):
price for your vendor withunderquoting?
Does anybody has anyone everasked that question?
Tom Panos (04:12):
So, John, I'm sure we've both got views.
John, do you want to go first,John?
John McGrath (04:16):
Yeah, no, I don't think misleading anyone ever
serves a positive purpose.
But I think here's where theproblem is, timmy, and there's a
lot of great agents on thiscall, some newish, some
experienced.
I think that one of thechallenges is, obviously, we all
(04:37):
arrive at a lounge room andlook at a property and the
vendor has a certain expectationand desire for a property.
Call it $1.2 million.
We look at it and there arecomparables that are probably
saying that would be highlyoptimistic, it's probably worth
$1.5 million based oncomparables.
Now, by the way, most of usthat are on this call, been
around long enough, would knowthat we don't actually never
(04:57):
know what it's really worthuntil the market's been through
it, and all of us, hopefully,have been through situations
where we've achieved a lot moreUm.
So I think I think there isit's a, it's a um, it's an
inexact science Um.
I think then, on top of the,that you've got an agent who's
trying to win the business anddoesn't want to sort of tell the
(05:20):
vendor anything that mightsound a tad negative.
So they don't want to say, well, the comparables are 1.5
million.
Too many of them haven'tdeveloped the skill to handle
that narrative.
So they say, oh well, 1.2sounds pretty right.
Then unfortunately, many ofthem go back and when they start
speaking to the other side ofthe equation, the buyers, they
(05:42):
start, you know, sort ofthinking well you know, probably
on a good day it's really 1million and 50.
So I better be kind of tryingto get anyone that's got high
nines to a million entertainingit.
And then you've got this gap.
Now I think there are somesystematic under quotas and I
believe, tim and I know you andI've spoken about this over the
years, I know you agree theyshould be running out of the
(06:04):
market.
I mean, that's very differentto someone who actually got the
price wrong or occasionally, notby choice but just by mistake
they underquote.
So I think that's very, verydifferent and I applaud and
support the OFT in any actionthat actually stamps out serial,
systematic underquoters,because I think that's why the
(06:33):
agency industry can have often abad name, because people say
they all lie and some do, ofcourse.
But I think you know up inQueensland, as we all know, or
most people on this call know,you know they come around by
stopping quoting at all, which Ithink is ridiculous.
But I do think that it's a goodthing, tom, to try and
eradicate the underquoters,because these are people giving
(06:56):
the industry a bad name and notjust giving the industry a bad
name.
That's probably one of the leastissues.
One of the worst issues ispeople are spending hard-earned
money and getting buildingreports, pest reports and
conveyancing reports when theynever had a chance of buying it.
And then there's the emotionalissue that comes in where?
And I remember speaking to abuyer one day and she said you
(07:16):
know, john, I turned up to theauction and we thought we're
above where the way, above wherethe market was, and it went so
far above us it wasn't funny.
And she said my little kids hadnominated each room and they
were just devastated becausethey thought that was their new
home.
So you've got the emotionalprice, Tom.
You've got the price ofactually getting ready and
getting prepared for an auction,and then, of course, you've got
(07:38):
the industry's reputation.
So no one wins when peopleserial underquote.
What are your thoughts, tom?
And so no one wins when peopleserial underquote.
What are your thoughts, tom?
Tom Panos (07:45):
So I have a view that if a property is overpriced and
you adjust the price, a buyermay appear, no question about
that, but it wasn't priced rightat the start.
But where I've got a real issueis where agents are quoting,
(08:06):
underquoting very low and theyare attracting.
So, to answer your question,tim, do I think those are going
to get a better price?
The answer is no.
I think that underquotingactually will bring 20 buyers
that will register and out ofthe 20, there would be one that
there's a big gap between oneand the other 19.
(08:28):
And on John's point, is that 19of those people will walk away
thinking to themselves I've beenlooking at this brochure on my
kitchen table for four weeks.
I fell in love with thisproperty.
I may have spent a grand inpest building due diligence and
(08:50):
I've also spent a lot of timegoing back and forward and the
reality is I was out of thebidding within 10 seconds of the
first bid.
Right, that's there.
So the answer is no.
The answer is no.
I think there's, I think, Ithink.
And, john, I get really confused.
When I go to a property and Isee 20 people registered and
(09:12):
they say 20 registered, thefirst thing goes to my head is
did they, throughout the process, realign the guide up to
reflect that there was going tobe a higher interest?
The guide up to reflect thatthere was going to be a higher
interest?
Because I think to myself that,like why is there so many
people there?
I think two proper buyers forthat property is a lot better
(09:35):
than having 15 people thinkingthey're going to get something
that they're not in anywhereclose to getting.
That's what I think.
John McGrath (09:42):
Tim, I assume this is the hottest topic in terms
of complaints about the industry.
Would that be a fair?
Tim McKibbin (09:47):
Oh, yeah, yeah, Unquestionably, john.
It's the big one and, as I saidto you at the outset, it's been
with me for the 21 years thatI've been at the REI and I don't
know that there's a magic wandthere that we can wave.
I do think that the currentgroup I'm working with at Fair
(10:09):
Trading now so it's a broaderstakeholder group I'm limited
about what I can say, but I doget a feeling that we're going
to positively impact it thistime around.
As far as a solution, that'sthat's tougher.
Yeah, it is, it's, it's, it's atougher thing, just to get a
(10:29):
solution, I think.
I think if it was easy, we wewould already have had one okay,
if you've got a proverbialmagic wand, though, what?
John McGrath (10:38):
give us one or two things, or three things,
whatever you think that might beable to clean this up.
I I mean obviously either.
You've been thinking about it.
I know there is no, you know,sort of ultimate panacea, but
what would you be doing?
Tim McKibbin (10:53):
I agree with you when you said that there's part
art, part science in it, becauseit is for any other name
evaluation.
We're taking a punt at what wethink, an educated punt about
what we think this property isgoing to sell for.
Now, if you got three valuersin there, you'd have three
(11:17):
different valuations.
So I think it is the case thatthe agent is trying to crystal
ball what this thing is going tolook like into the future.
So it's a valuation by anyother name and for that reason,
the only time that you are goingto know what the property is
(11:38):
really worth is when it's sold.
And I often have people theysay you've got greedy agents and
greedy vendors pushing theprice up and I've just said well
, no, they're not.
The people who set the price ofthe property are purchasers in
competition.
If anyone doubts that, go andlisten to an auction.
(11:59):
Go to an auction and see thepurchasers set the price of the
property.
To an auction and see thepurchaser set the price of the
property.
Agents have an educatedexpectation.
Vendors have their fingerscrossed with a big hope, but at
the end of the day, it's thepurchaser set the price of the
property.
So it is an in-act science andthat needs to be also accepted.
(12:21):
But there are some rules aroundthat about the way we go about
it, and if you follow thoserules, then I think that that is
satisfying the expectation ofthe community as well.
John McGrath (12:36):
But, timmy, let's I mean if, by the way tell me if
you're okay with it and ifanyone has any suggestions that
you want to put up there thatcould help clean this up, please
pop them in the chat box below.
So, tim, what are the rules?
Just to reinforce with everyoneon here, because people are
going to lose their licensesover this because there's a
clampdown, as there should be.
(12:56):
Some agents have been seriallyflaunting the rules, so let's
just go through.
Obviously, there's a 10% rule.
Do you want to explain a few ofthe rules pertaining to this in
New South Wales?
Just so everyone's got theirhygiene right.
Tim McKibbin (13:12):
Yeah, I guess it starts, john, right back at
education, because there aresome people that have come
through the training, theeducation and I'll use that
loosely and get spat out theother end and then they're put
out into the field to startpricing property and they have
no idea what they're doing.
(13:33):
It's always amazed me thatprior to 2002, if you wanted a
career in real estate, you wentto TAFE for three years.
Then in 2002, you went to TAFEfor three years.
Then in 2002, you can be a realestate agent in a week or
something stupid like that,depending on which RTO you go to
.
So there's a big competencyissue and I'm on my high horse
(13:56):
now.
But excuse me, but we have an80% churn in New South Wales.
People coming in realising theindustry is not all Ferraris and
fat wallets and then they exitout 80% churn.
So we've got to start, I think,with education.
You've got to show people howto price property properly and
(14:22):
that's got to be our startingpoint.
You can't expect somebody toget it right when you haven't
trained them on how to get itright.
I'll tell you one story, andit's just one.
There was an agent that pricedthe property I think it was
around about two and a half mil.
It was on a corner and went toauction and it sold for $5
(14:46):
million and he went.
What happened?
What happened here?
Why did it go like that?
What have I done?
I'm great, but what did I do?
And what he didn't know was thelatent possibility of that
property from a developmentpoint of view.
Possibility of that propertyfrom a development point of view
.
So we had two developers thathad read the contract, two
(15:10):
developers that knew what wasgoing on, and they bid it up to
the $5 million, with a viewersmashing the house over and
doing some stuff with it.
But the agent didn't read thecontract, didn't know how to
read the contract and thereforewasn't able to price that
property properly.
John McGrath (15:27):
The product knowledge they hadn't done their
homework.
Tim McKibbin (15:29):
Product knowledge.
Well yeah, well summarised,that's exactly right.
But people.
John McGrath (15:33):
So the obligation though, tim, as I understand it
is, you must provide writtencomparables, and I think it's
three or more, but is that thenumber that actually, when you
list a property, three or more?
But is that the number thatactually, when you list a
property, that are the best,closest comparisons in your mind
?
Is that?
Tim McKibbin (15:50):
Yeah, look, it isn't that heavily prescribed.
But there is an expectationwell, no, there is a requirement
that you would price theproperty properly, that you
would get that right.
That's part of the expectationsof being an agent that you
would be able to price theproperty correctly and then take
(16:13):
that price to market.
That is the expectation.
John McGrath (16:17):
Robert's just going.
Robert, thanks for that.
That's music for my ears, tom,if you can see in the chat line.
Tom Panos (16:23):
Yeah, is that what you're saying, john?
Um, that's music for my ears,tom, if you can see in the chat
line.
Yeah, it's just an advertisedprice.
Is that what you're saying,john?
Should there be an advertisedprice on all properties?
John McGrath (16:31):
on all properties which, tim.
As you know, I went to war withthe reiq, your counterparts in
queensland, because they werethe opposite way.
They said oh you know, we knowhow we'll clear this up.
We won't let agents quoteanything.
And I thought either thoughteither I'm an imbecile or they
are, because I would havethought the opposite, which is
what Robert's saying.
If at least you have the agentshave a requirement to put their
(16:53):
money where their mouth is andsay price guide one to 1.1
million.
Well, that's now documented.
And you talked before aboutresources, tim and evidence and
so forth.
If you did require agents tomake known more publicly and
transparently their pricerecommendation expectation, if
you will, to me that would be astep in the right direction to
(17:17):
actually to do that.
But, as I said, somejurisdictions have deemed it
appropriate to remove everythingas well, have deemed it
appropriate to remove everythingas well.
Tim McKibbin (17:25):
We should have said I mean, queensland's
approach is a bit like throwingyour teddy out of your cot.
They're just saying, well, wecan't fix it, so we'll just stop
everyone talking about prices,which I find a bit odd.
I mean, if I walk through thedoor and I like the property,
the first thing I'm going to doto the agent is say I don't want
to waste your time, you don'twant to waste mine.
What do you think this is goingto go for?
John McGrath (17:47):
So, Tim, there's a 10% limit, right?
Sorry, 10% range.
So you cannot quote to a buyer,either verbally or in writing,
a range that's more than 10%.
So you can say 1 to 1.1, butyou can't say 1 to 1.2, correct?
Tim McKibbin (18:03):
That's right.
Yeah, You've got a maximum of10%.
John McGrath (18:07):
Yeah, and look, I guess that might play a role.
Otherwise people could say it's1 to 1.5, you know, and that
really doesn't help anyone.
That gives everyone an out.
So I guess having a sort of a10% range may be okay.
The other thing is if at anypoint my understanding, tim and
I'm not expert, you are if atany point during the sale
(18:28):
process and a lot of agents askme about this one, tom if there
is an offer that is rejected bythe vendor, my understanding is
the price quote cannot be lessthan that offer.
Tim McKibbin (18:40):
That's right.
So that's right, but I've gotto put a caveat on that.
That's right.
So that's right, but I've gotto put a caveat on that.
It has to be an offeracceptable to the vendor, and by
that I mean, let's say, theproperty was a million dollars.
That's what we wererepresenting it to be.
And somebody came in and said,well, I'll give you 1.2.
(19:01):
However, I want a 0.25% depositand I'll settle in two years'
time.
Now, yes, you've got your 1.2offer, but the rest of the money
money-wise, 1.2,.
But the rest of the conditionsthat the purchaser is putting on
(19:22):
you are not acceptable.
So that is not an offer that Iwould view would change the
estimated selling price.
John McGrath (19:31):
Which is a hard one, tom, because I mean, let's
just say, for example, the pricewas acceptable but the terms
weren't.
So I said I'll give you 1.2,but I want six months to settle
and the vendor says no maximum.
I'll give you 1.2, but I wantsix months to settle and the
vendor says no maximum I'll giveyou is three months.
So what you were saying, tim ispotentially there, or probably
in that instance the agentwouldn't have to change the
(19:54):
quote because it had a termattached to the monetary offer
that was unacceptable to thevendor, correct?
Tim McKibbin (20:00):
That's right, that's right.
The terms weren't acceptable tothe vendor.
The vendor correct.
That's right, that's right.
It the the terms weren'tacceptable to the vendor.
But here is.
I like to use this examplebecause it demonstrates what the
the offense of underquoting is.
So let's start and we look uh,we price the property, estimate
selling price of a milliondollars, and the um.
(20:21):
The vendor says I want 1.1,that that's my bottom number,
1.1.
So if we're going out into themarket, we have to be
representing a price that isgreater than the 1.1, because
the vendor has said I'm nottaking anything.
Listen, even though we thinkthat the estimated selling price
(20:43):
is going to be about 1, we havehave to go with $1.1.
All right, so that makes sense.
You can't offer the propertyfor less than what the vendor is
going to say.
Let's spin that around.
John McGrath (20:56):
Can I just stop there, tim?
What you just said, there neverhappens, never happens.
There is never well, sorry whenI say never, that's a strong
word Generally what would happenthere is?
An agent would say yeah, lookto you, I know you'd like one
one.
As you know, the comparablesare closer to a million.
I think we have to get peopleinterested at around the million
if we are to have any chance ofachieving your 1.1, because
(21:20):
that would be a great price.
That's what would likely happen.
I'm sure most people on the callwould agree with me.
You wouldn't generally say,okay, I'll quote 1.1 because
that's what you want.
And if you did, your clearancerate at auction would probably
go down a long way because mostvendors would say I won't take a
cent less than 1.1.
On auction day they hand you areserve of a million and 50 and
they'll take a million and 20because they've been convinced
(21:42):
through the process that theprice that you originally quoted
may well be the price.
So just legally here this isvery interesting.
So if the vendor says, john, Idon't think I'll take under one
one, you know, give it a go, butI think unless you get me one
one, I'm unlikely to be a sellerand the comparables are at a
million.
Is there any legal obligationon me to have a price that
(22:07):
either is at or even straddlesthe 1.1, even when I know it's a
dream price?
Tim McKibbin (22:15):
If the vendor is saying to you that they will not
take a price less than 1.1, sothey've made that clear.
You can't go into the marketand say that the estimated
selling price here is going tobe 1, because you know that your
vendor is telling you theywon't sell it for 1.
John McGrath (22:34):
Doesn't happen, Tommy, doesn't happen like that.
Tim McKibbin (22:37):
So let me spin this around, though, and I like
doing this because itdemonstrates what the offence of
underquoting is.
Now let's assume that Tom is insome financial difficulty and
the estimated selling price ofthe property that Tom owns is $1
(22:58):
million.
We'll stay with the sameexample, and so I say to Tom
look, I reckon that thisproperty will reach a million
dollars at debt sale.
Tom says that's fascinating,tim, but I need money and I need
it now.
So I've got the bank breathingdown my neck.
I want you to take this out at$800,000.
(23:19):
That's my instruction.
That's what I'll take, but getit sold Now.
Can I take that out at $800,000?
No, I can't.
I am not allowed to represent aprice less than my estimated
selling price.
Now, my estimated selling priceis a mil, so what Tom wants is
(23:45):
less than that, but I can't dothat.
I can't take it out at thatprice.
John McGrath (23:49):
But on the previous example and I could be
wrong, but I thought you weresaying the exact opposite that
the comparables your estimatedselling price is a million but
because the vendor said I'm notgoing to sell under a million
one, you've got to take it outat their.
Let's call it inflated for aminute or optimistic price.
You've got to take it out oftheir.
(24:09):
Let's call it inflated for aminute or optimistic price.
Tim McKibbin (24:12):
So that almost sounds counterintuitive and this
is the reason I've done it.
The reason I've used thisexample is to demonstrate what
the offense is.
Because when you're looking atthe first example, where the
price that the vendor wants andthe vendor's made it clear I am
not going to accept anythingless than 1.1, and we all know
(24:33):
how these things change over thetime then 1 million isn't going
to buy it.
We know that it's not going tobuy it.
But in the other example thatI'm giving you is that the
offense of under quoting is istake it, taking a um, a price
(24:54):
out to the market, arepresentation to the market
that is less than the agents,the agents estimated selling
price.
So when tom wants his 800 000,it's an offense for me as the
agent to be going out theresaying you'll buy this for
$800,000.
John McGrath (25:13):
Tony's just made a comment and I was going to go
there myself, tony.
So if on that $800,000, tom'sdesperate for cash, he said,
mate, I'll take $800,000 plus,just get me out of here.
And I've said, look, comprowill say we should be able to
get a minion.
Why could I not say thevendor's reserve at auction will
be 800?
I personally think it's worthmore than that.
(25:35):
But if the highest bid on theday is 800, it'll be selling.
So you're saying that would be?
Yep, that's wrong.
I couldn't say that.
Tim McKibbin (25:44):
No, you can't represent a price that is less
than your estimated sellingprice, and your estimated
selling price is a milliondollars.
We've all agreed that.
So it is an offence to go outthere and do it, to actually
offer the property to the marketfor less than your estimated
(26:05):
selling price.
John McGrath (26:06):
There's a few questions there.
Tom anything you want to.
Tom Panos (26:09):
Yeah, can I just, tim , picture this scenario?
Owner wants one point.
Owner is hoping to get 1.2.
Hoping to get 1.2.
Your estimated selling price is$950 to $1,050,000.
(26:34):
So it's within the 10% range.
You wrote on your agencyagreement $950 to $1,050,000.
Yep, your owner has said to you1.2.
The conversation you had withyour owner is listen, 1.2 is
(26:55):
very aggressive based on mythree comparables.
But I'm letting you know.
If it's out there I'll get it.
And I'm also letting you knowthat in real estate I've learned
there's no recommended retailprice, that sometimes properties
sell above, lower, but I'mletting you know these are the
(27:16):
comparables Now at the buyer'stable.
Can you be saying this whenthey ask you?
Can you be saying this whenthey ask you, what's it going to
go for?
You say my estimated sellingprice is $950,000 to $1,050,000.
Tim McKibbin (27:40):
Is that allowed?
If I followed you with that,tom, if the vendor is in
alignment with the agent aboutprice, then yes, that's fine,
but if the vendor is looking youup and down and going, no, I
want this, I want this price.
Tom Panos (28:00):
That's my bottom number.
Okay, but if that's the case,what you're saying then is
you're not quoting the estimatedselling price that you've said.
You're quoting what my vendorwants.
That's a different number.
Tim McKibbin (28:12):
Correct, correct.
And you notice that in doingthat.
It's the reason I use thatexample of the $800,000, because
the offense is quoting a pricethat is less than your estimated
selling price.
Now your estimated sellingprice is $1 million.
The vendor wants $1.1.
So you've got to go out thereat the vendor's price because
(28:35):
the vendor is telling you that'swhat they want and you've
noticed here that the price thatthe vendor wants is greater
than your estimated sellingprice.
So on the agency agreement,it's done for this reason, on
the agency agreement, you haveto put in your estimated selling
price and you also have to putin there what the vendor wants.
(28:58):
That's the reason it's in there.
Tom Panos (29:01):
Okay, but my reading and, by the way, while I've got
everyone online, let me just sayeveryone here nearly everyone
here is New South Wales.
Could I urge you to actuallysit through this course?
It's an online course, it's 75bucks.
It's actually mandatory anyway,so you've got to be using it.
(29:23):
It's mandatory and it's acollaborated course between the
Office of Fair Trading and NewSouth Wales TAFE, I believe, and
it forms part of your CPDrequirements.
But I'm still so, tim, I'mstill so.
Here is where I think we havean issue right, Because often,
(29:49):
and you'd agree, most owners atthe beginning of a campaign are
aiming for a number that'shigher, just like my wife thinks
we've got the best two lookingkids and my wife thinks our
house is probably worth amillion more than what it is.
That's a lie.
Tim McKibbin (30:05):
I accept it, right , I'm not going there, tom,
you're on your own.
Tom Panos (30:13):
But what I do know and you see this in the full
sales space, like I've looked up, the data's clear 75% to 85% of
properties that get sold asprivate treaty sell lower than
the list price.
And that shouldn't come as asurprise, right?
Even if it's five or 10 grand,they sell lower than the list
price.
So what I'm thinking to myselfis, if you're saying to me, on
(30:37):
an agency form you might have950 to a million and 50, your
owner has says I really amhoping to get 1.2.
Tim McKibbin (30:46):
Yeah, but there's nothing wrong with aspirations.
But I mean, as the agent, you'dbe explaining to your vendor
that on the day, if we do ourjob well, we will attract a lot
of competition here and thecompetition drives the price up.
Tom Panos (31:06):
Can I ask you this Do you feel like this kind of
dialogue and approach will fitthrough the framework to the
buyers?
Mr and Mrs Buyer, I'm lettingyou know our owners have gone to
auction.
They're hoping to get as muchas they can, like everyone else.
I've got an estimate of $950 to$1,050,000.
I'm letting you know they'vecommitted to this auction
(31:28):
campaign.
They're hoping to get $1.2.
I do think they are the peoplethat will respond to market
value.
I do feel that if they see 40or 50 groups through that, they
(31:48):
yeah, let's say I pull it upthere.
John McGrath (31:50):
Let's assume you finished the sentence.
But the owner would like to geta 1.2.
But the owner would get.
I think based on comparables,it's worth around a million.
My client would like to see 1.2, but they've told me to take it
to auction to see what it'sworth.
I'm looking, tim.
Is there a distinction betweenan owner and I think the answer
(32:10):
might be yes that says I willnot sell under 1.2, as opposed
to an owner that says I reallywould like to get 1.2.
Tim McKibbin (32:19):
Yeah, of course, of course.
I mean, if the owner is sayingto you that I'm selling the
property, I'm realistic.
You're telling me it's amillion bucks.
If you can get me a mill, thenyou've done your job.
But you've taken it to market,you've got me in the market
price, but there's nothing wrongwith them saying if you can
(32:40):
generate a bit more interest,I'm not opposed to you setting a
suburb record here.
You know, knock yourself out,that'd be great, uh.
But you know, you, if the vendormakes brutally clear that
they're not going to accept theprice below something, then as
the agent you have to make adecision as to whether or not
(33:01):
you want to represent thatperson.
I don't, I don't.
Um, an auctioneer told me oneday that the vendor said to uh
him, I'm thinking about askingfor two mil on this property,
and the uh and the.
The auctioneer said well, whatabout three mil?
And he said you know, will Iget three?
And he said you got as muchchance of getting three as
(33:23):
you're going to get it gettingtwo.
So you, you know you've got to.
You need to have thoseconversations with your vendors,
you know, and you'd be sayingto them you're not realistic,
mate.
John McGrath (33:34):
Another question here, chris.
Thanks for that.
Chris has just written in aboutwritten adjustments.
What is the protocol?
So we've gone out, we'requoting a minion.
You've said, yeah, okay, that'sabout right, we go there.
The market's actually coming inat under that, saying it's
probably $9,950.
And I say, tim, I think if wewant to have competitive bidding
, we've got to adjust our pricedownwards because we got no
(33:55):
interest, no contracts.
All the interest are $9,950.
I think you need to beresetting your expectation.
What do I need to do?
Because I get a lot ofquestions about this too,
because people talk about I needto get it in writing.
I need to do, because I get alot of questions about this too,
because people talk about Ineed to get it in writing.
I need a form signed.
Will a text message do?
Will a diary note do?
What do I need to do in orderto satisfy any OFT investigation
(34:18):
down the track if I am tochange the price guide, either
up or down, I assume, during theprocess?
Tim McKibbin (34:27):
What's the-?
So the estimated selling priceis the agent's number.
All right, I think people get abit confused here with this.
They think that they have toget the permission of the vendor
to change the estimated sellingprice.
They don't.
They simply advise the vendorthat they are moving the price
(34:47):
because that's what they thinkthe price is.
So normally, as the interestgenerates, the price would be
going up.
If you are to express price inthat market as it's moving up,
you have to adjust your price,your estimated selling price, to
(35:08):
be reflecting the market.
So to stay with our earlyexample, imagine somebody's come
along to the vendor and saysI've got 1.2.
You know it's standardconditions, 1.2.
And the vendor looks around andsays I think things are hotting
up here.
I won't take 1.2.
So you can't go out in themarket and say 1.2 because the
(35:34):
vendor's already turned it down.
So you would have to be comingback out there saying it's going
to be a price above 1.2.
John McGrath (35:44):
So even if that buyer has now bought something
else, and even if that buyer wasa standout buyer for whatever
reason and you knocked it backas the vendor, they have now
bought the neighbouring property.
Are you saying?
I still have to quote the levelwhere the offer happened?
Tim McKibbin (36:02):
Well, now you're getting.
This is where we spoke aboutearlier, about the art and the
science.
I mean, if you've got apurchaser that was, you know,
out there on their own and thevendor turned it down, you'd be
saying to the vendor like youknow, you should take this, this
is good.
But if the vendor says no, wellthen they say no.
(36:28):
But as far as the price isconcerned, the estimated selling
price, you would have to belooking at all the facts here
and saying to yourself, if thisgoes to auction, um, we, you
know, we're not going to get 1.2, we're not um, we're only going
to get 1.1.
So you know, I'll stay with theone point.
I'm happy, happy to back myselfthere.
The vendor's made a horriblemistake.
John McGrath (36:48):
If you've got it, because I don't.
If there's been a 1.2 offerrejected by the vendor, that
buyer is no longer in the marketbecause they bought the
neighbouring property.
All the other interest prior tothat offer was at a million to
a million, one which is what Iwas quoting.
One which is what I was quoting.
Do I have an obligation, ifthat offer is no longer valid,
(37:09):
even though it was at the time,to keep quoting that offer, or
can I revert back to the offer?
Tim McKibbin (37:16):
Well, again, this is where the art and the science
come in.
The vendor in this example,frankly I think, is being stupid
.
They should have taken theoffer.
It was the best they're goingto see.
The agents advised them that,but they've said no, so that's
fine if they haven't and theybought the neighboring property.
Well, you've got a couple ofproblems.
(37:36):
Firstly, you've been offeredthe 1.2.
The market has clearly gone upbecause they just bought the
property next door at 1.2.
John McGrath (37:45):
That was a better property.
That was a better property.
Tim McKibbin (37:47):
Oh, a better property, it's fine.
They bought the property.
If, in all the circumstancesaround you, all the data that
you have indicates to you thatwhen you go to auction, that
it's going to sell for 1.1, not1.2, that's fine, that's fine.
1, not 1.2, that's fine, that'sfine.
It's your estimated sellingprice, not the Vendors, not
(38:12):
anybody else's, it's yours.
So if you're happy to backyourself at 1.1 and you're
saying, vendor, you made ahorrible mistake.
That's life.
But when we go to auction, it'sgoing to be 1.1.
It's not going to be 1.2.
, that's fine.
John McGrath (38:28):
Tim.
Back to the question, because Idon't think we actually ever
finalise it.
So if we adjust the price guidedown during a campaign because
feedback is that it's not worthwhat we had hoped and the vendor
is understanding of that and mybelief is you need to get that
instruction in writing.
(38:49):
I could be wrong.
Do you have to get thatinstruction?
Could I have a chat and say andyou say yeah, john, whatever,
if you think, put it down to 900, I agree, I just want to sell
it.
Do I need to get that inwriting from you?
Do I need a form?
Tim McKibbin (39:02):
Well, that figure, that figure it would be in the
agency agreement.
When Tom signs me up and says,and I say it's one mil, tom, and
he says, fascinating, get me800k.
And I'm happy he would put thatinto the agency agreement.
But the reason I use thisexample is because it
demonstrates what underquotingis.
(39:22):
The fence of underquoting iswhen you take a price to the
market that is less than yourestimated selling price and
that's an example.
And, in addition, if the vendoris saying I want this, I want
1.2, well, you've got thosedecisions to make.
Tom Panos (39:46):
If you're looking at a vendor that's saying I'm
unrealistic, I'm not going tosell unless I get this price,
you've got to say well, so Timso I'm clear If you go out in
the first one or two weeksthere's no feedback or low
feedback, you sit with yourowner and you say listen, I'm
making a recommendation, we'vegot an auction in a week or two
(40:08):
weeks time.
We're halfway through thecampaign.
We have no one Based on marketconditions, based on buyer
feedback.
I'm suggesting that we realignby 5%.
The owner agrees and says yep,okay, you go back to your form.
(40:29):
I know some agents do itdigitally.
I think companies like Ethantold me he does it on real-time
agent.
You go on real-time agent, youdocument it.
You actually put the reason whyright, that's not underquoting.
Then is it when you go outthere, because you've got the
approval of?
Tim McKibbin (40:47):
your-.
That's right and I thinkthere's probably.
It's probably a decision thatyou make with your owner when
the price is coming down,because they need to be on that
journey.
But when the price is going up,if the owner has said, no, I'm
not going to take any less thanthis, and then no to that price,
(41:08):
then you have to push thatprice up, whether you like it or
not, because the owner has saidno.
Tom Panos (41:14):
Quick question, john.
I've got to ask this becausetoday I was bombarded by around
five text messages on the samething.
They said I think what happenedis some people didn't want to
ask the question publicly, sothey've come privately.
Right, and they turned aroundand they said Tom, I'm getting
all these savvy vendors rightthat are saying oh, by the way,
(41:39):
what price are we going to quote?
Because I think if we quote itlow, we're going to get a lot of
people interested.
Now you must have heard, tim,this come from agents that are
yeah yeah, yeah, and I have.
Tim McKibbin (41:51):
The vendors are thinking that the best way to
get the best price for theirproperty is for the agent to
underquote, and this is reallythat's come because other agents
that have gone to the listingand may have actually suggested
it to them or they've heard it.
Yeah, they're seeing it in themarket every day.
They're reading it innewspapers.
That was the reason I startedthis conversation where I said
(42:15):
is it the case that you will geta better price, better sale
price using underquoting as atactic?
Now I know I put to one sideall of the misleading aspects of
it.
Is it the case that you will?
And you would have heard theold sayings quote it, what was
(42:35):
it?
Quote it low, watch it grow,watch it grow.
Quote it high, watch it die,watch it grow.
Yeah, quote it high, watch itdie.
All of that sort of stuff.
But I've never seen anyevidence that underquoting
delivers a better price and Idon't know whether or not it
does, and that's a question I'dlike answered.
I'd like to know whether or notit actually does drive a better
(43:00):
price.
John McGrath (43:01):
Look, it doesn't.
In my opinion it doesn't.
And by definition underquotingis deception the word
underquoting, now, it'sdifferent if you say he's
quoting the right price, if thevendor is hoping for one too,
but the comparables are at amillion.
Quoting a million in my worldwouldn't be underquoting.
But here's the other thing, tom, that you know a lot of agents
(43:22):
are doing.
They're saying, tim, look, yeah, look, I think one, two, it's
possible, yeah, it's possible.
It's a really good home.
But here's what I'm going to do.
I'm going to put a lower figureon the agency agreement,
because whatever I put on here,I have to quote, and I think if
we, the one too, we might kindof be a little bit high to start
.
So what I'm going to do is I'mgoing to put $950 to $1.5
(43:44):
million on the agency agreement,just so you know.
The reason I'm doing is a lot ofagents, tom, they're actually
colluding, if you will, with thevendor to get around this legal
requirement to not quoteanything other than what you've
got on your agreement.
So they're having these nod anda wink conversations, which
(44:05):
again I think is terrible, andthen I'm all for transparency,
whichever I know is just havethe damn conversation with the
vendor hey, tim, if we can getone, two we will.
That'd be a record.
I can't guarantee you thatbecause all the comparables are
a million, a million and 50.
However, let's give it everypossibility.
We'll do an amazing marketingcampaign.
We've got the best auctioneerin Sydney booked to do your
(44:26):
auction, but I think we've gotto go out there and get interest
at where I think it's abankable price a million, a
million and 50.
If we get enough interest andthey get emotionally connected,
I think that gives us the bestchance to get the next figure.
To me that's a goodconversation to have, because I
can't guarantee you we couldn'tget the 1.2, but I can also tell
(44:47):
you the comparables above that,tim.
There's another thing that andagain I'm sort of coming in
third hand because I'm notday-to-day selling every day.
I list it quite a bit but I'mnot selling every day.
But they tell me now thattechnically, every time in New
South Wales you have aconversation with someone and
you quote price, you're meant todocument it.
Yep, I spoke to Tim McKibben at3.40 on Tuesday, the 4th of
(45:09):
August, and I told him I thought1 to 1.1.
I mean, is that the caselegally?
It's just not how the industryworks.
We're doing things Yep, yep,yep.
That's just not how theindustry works.
Tim McKibbin (45:18):
We're doing things .
Well.
This brings me back to what Isaid, that government and I'm
fearful this time around becauseit's all through the newspapers
, it's on the news, all the restof it so government will feel
the pressure to do something.
They've got to be seen to bedoing something and this is what
happened last time, when therewas a lot of media about it,
Government stepped forward andactually introduced the things
(45:41):
that John has just said You'vegot to make filenames, You've
got to do this, You've got to dothat, You're not allowed to use
words office over, office aboveand plus signs and all of these
things.
They did that in response.
My fear is they're going to dosomething equally stupid and let
me call it what it is this timearound.
That's my fear.
Can?
Tom Panos (46:02):
I ask does the REI NSW do you feel like for me?
I feel it needs to be acollaborative but industry-led
solution, because the industryis at the front line sitting
there talking to the buyer andthe seller right, and I just
(46:23):
feel just what John just saidthere.
Now I can tell you I'm not evenafraid of saying this, every
agent in New South Wales wouldbe in breach of that.
No way in the world.
Tim, you're telling me thatthey're getting email inquiries,
phone inquiries.
I mean, we're talking.
(46:43):
Some properties are gettingthousands of buyer inquiries in
the first two weeks.
You can go look at the data onrealestatecom and domain.
I think the compliance level ofthat there is close to
non-existent.
John, you'd agree with that,wouldn't you?
I?
John McGrath (46:59):
mean A hundred percent.
And that's why I asked thequestion, because when I heard
that was the legislation Ithought that's just unworkable.
Because I'm in the car and I'myou know, I'm walking down the
street, I'm at an open.
We're doing so many things atonce in this industry because
it's a mobile industry, asopposed to accounting where
you're in the office, meeting aclient every time pretty much.
(47:20):
Where we're not in the office,we're out and about and in cars
and so forth.
But it comes back to my mypoint about price guides, tommy.
I mean that would clear it upif, if there was a price guide
that at any point in time wasyour best estimate on price and
it was published.
That would probably clear up alot of this Again, opposite of
what Queensland is saying.
(47:41):
So you alluded to before, tim,it didn't sound like you wanted
to say too much, but you alludedto before.
There might be some discussionshappening that may involve the
industry, is that?
Tim McKibbin (47:51):
Yeah, no, we're at the table now.
We're sitting down with FairTrading.
We've got a group of peoplethere.
I won't go into who's there,but I think we've got a good
cross-section watch the industry, using technology to be able to
(48:22):
watch the industry more.
Because in being able to watchthe industry do what they do, it
will send that message outthere.
So my go-to example, John, isthat if I went up on the weekend
, up to see my latest grandsonup the M1.
Now I'd sit on around about 130or 140 k's going up there, but
(48:47):
I don't, because I know thatthere are people sitting on the
road that might have a speed gunand I'd end up really bad.
So I think if the industryknows that fair trading has the
tools to watch more closelythose people that participate in
this and I'm a realist, I knowthat people do I don't think
(49:11):
it's the majority of people.
I don't think that's the case.
The majority of people.
I don't think that's the case.
But those people who doparticipate in it, like speeding
they won't be interested indoing it if they know that
somebody's over their shoulderand they're watching.
John McGrath (49:29):
Why is this working group and I'm not being
critical of you, I'm justinterested why is it so
clandestine?
Why don't we know who's on itand what's the discussion and
get the minutes of the meetingand recommendations?
I mean, it seems to me.
I mean Tom and I and I'm notsaying we're any gurus, but we
do speak and coach and train alot, and that's the first I've
heard of it.
I would have thought, if we'retrying to reach transparency
(49:49):
here, there should be a processto debate this, and in fact
debate's probably a pretty goodword, because I'm guaranteed
that we'll have a slightlydifferent view as an industry
over the governing body.
I mean, surely we should havesome level of transparency.
Tim McKibbin (50:06):
Yeah, look, I understand what you're saying,
but it's very, very common, infact, pretty much every time, I
see all of the legislativeinstruments that come through
when they're in draft and wereceive them in what's called
cabinet in confidence.
So we put in a lot ofsubmissions and these sort of
(50:30):
things at that stage which we'renot allowed to talk about.
That's a frustration for us,because we do so much good work
in that space that we can't talkabout, um, one of the and you
know, that's a frustration forus because we do.
We do so much good work in thatspace that we can't talk about
it.
Uh, one of the things that whenI am speaking, I always say to
people that what we haveachieved is to take the
(50:50):
legislation from dreadful andmoved it to bad.
Now, if we weren't here it'd bedreadful, but it's a
frustration because we can'ttalk about that process and
internally, when you keep it inthat confidential, people can
throw ideas out there and letthem permeate around the room.
John McGrath (51:12):
Interesting Tim Doms from Blink Property.
Doms just said I agree with you, dom, if you call fair trading
three times, you're going to getthree different definitions of
underquoting, and I agree withthat.
And I don't think you and Iwere talking, tom.
Well, tim said that to me thismorning.
Yeah, I was talking to someoneearlier today and they said oh,
it was actually someone told meWas it you?
It wasn't you, tom, it wassomeone else.
(51:33):
I, it wasn't you, tom, it wassomeone else.
I remember what it was, butthere was something that they
said to Cindy Kennedy, who's oneof our best agents, and I will
guarantee you what they said isabsolutely not right.
But you and I weren't talking,tom.
Sorry.
Tom Panos (51:53):
It was about price adjustments that you couldn't
actually you're not supposed todo a price adjustment in the
first two weeks.
That's right, which I find hardto believe.
Tim McKibbin (52:14):
She was told by someone from the.
It's wrong.
Your obligation is to representto the market the estimated
selling price at that point intime.
That's what I said, that's all.
So if you've gone to your firstopen first week in and the
interest is such that it'sdriven the price up, you know
(52:37):
you're going to do better thanwhat your estimator's selling
price is on the agency agreement.
Then you move that up.
Tom Panos (52:42):
But, tim, this is the problem, same with down.
Tim McKibbin (52:45):
Yeah, same with down.
John McGrath (52:47):
This is the problem that you know.
A representative of fairtrading told one of our best and
most articulate, mostsuccessful agents you can't
change the price in the firsttwo weeks of a campaign.
You have to wait until thefirst two weeks.
That's not true, and so, as Donsaid, you're getting all of it.
Tom Panos (53:06):
I think what was said was you can't rely.
I actually did check it out.
Sorry, John, I did check it outafterwards with Michael Carolyn
.
If you know, he's a goodauctioneer and a Dubbo guy.
He said his understanding wasyou can, based on buyer intel
and things that have happened inthe market, but you've got to
(53:30):
be able to justify it.
John McGrath (53:32):
Yeah, but the RFT's told you you can't right.
Tom Panos (53:35):
They can't right.
She led me to believe that youcan't do it in the first two
weeks, taking the price downbased on buyer feedback alone.
It has to be another thing aswell.
Tim McKibbin (53:51):
No, I don't agree.
I don't agree.
If the vendor has said no to aprice that's higher than all
agreed, the estimated sellingprice said no.
You can't go out to the marketand keep pushing that price in
the knowledge that the vendorhas said no.
That's right and that doesn'tmatter.
If that happened before the inkis dry on your agency agreement
(54:16):
, all right, you don't have towait two weeks.
100%.
Tom Panos (54:19):
Okay, I'm just going to finish on this note.
This is a hot topic, tom.
This is a hot topic, johnny.
We could talk here for ages,and I'm having a look here.
I reckon there'd be 400, 500people on here, but for some
reason, I don't know why, I'msure I've got the maximum
subscription.
It says maximum.
Yeah, we have.
John McGrath (54:35):
Yeah we have.
We've done that.
Okay, we've done it.
Okay, tell me there's anotherTom Panos on here.
Yeah, that's Susan.
By the way, that was someinvestigation into that.
Timmy, just before we wrap up,before you do, tell me, does REI
and NSW have trainingspecifically around this?
Tim McKibbin (54:49):
Yeah, yeah, we do about pricing property, yeah,
yeah we do.
John McGrath (54:55):
Is it webinar like this, or is it in room?
Tim McKibbin (54:58):
No, some of it's in room.
Yeah, we teach how to go aboutit.
But again, you know if you canget into this industry in, you
know, in a few days, as peopledo, you just don't have the
skills.
You don't know your product,you can't read the contract, you
know.
So pricing property is one ofthose skills that takes time to
(55:22):
develop and you're not going tolearn that.
You're not going to learn thatthat way.
I mean, the latest idea that wehave now is, if you go and get
your license in, let's sayVictoria, all right, and the
education down there is lessthan what it is in New South
(55:42):
Wales, okay, yep, and you aretrained on Victorian legislation
, all of that, okay.
You know nothing whatsoeverabout New South Wales
conveyancing practice, law andpractice.
Know nothing about agencypractice in New South Wales,
conveyancing practice, law andpractice.
Know nothing about agencypractice in New South Wales.
Now are you going to let thatperson come into New South Wales
(56:04):
and deliver, deliver realestate services?
Our current minister says, yes,they can come in.
John McGrath (56:11):
They know nothing about what it is everyone online
.
Just in case you didn't know,tim is also a lawyer as well as
or was a lawyer, or I guessstill he's as well as the ceo,
so this is coming from someonewho's the head of the best and
most authoritative body in termsof the industry representation,
as well as someone who's alegal, a legal scholar so well,
(56:34):
john, I've just got to say youknow what's fascinating.
Tom Panos (56:36):
Do you know?
In Australia, the totalproperties that are sold by the
auction system are under 15%.
So 85% of properties are notauction properties.
In Sydney, it's like 80% arenon-auction.
In Melbourne, it's like 78%.
Right, we are talking about asmall sample of properties, but
(56:58):
it's obviously an emotive issueif it's such a small amount.
And I think it's an emotiveissue, tim, because if you
fundamentally think about it,what has been the big burning
issue in Australia for some time, and now more than ever, has
been housing.
The whole federal election wasbased on a housing policy, the
(57:19):
fact that people are findinghousing, whether they're buying
or getting a challenge.
Tim McKibbin (57:25):
Yeah.
So you say, tom, you've hitonto something here that has
been spinning around in my mindand is the nuclear solution,
really isn't it?
And it is the nuclear solution,really isn't it?
You're saying 20% of themarkets is about auctioning, and
so if you just said no moreauctions, there's no more
(57:49):
auctions across the country,well, listen and be careful.
Be careful, because they mustbe thinking that way.
John McGrath (57:55):
No, they couldn't do that to me, but you're right
they might.
They might be that silly.
Here's the other thing, andwe'll finish on this, tommy,
because we're getting up to 5.30.
I know we want to let everyonego, either to close another.
Tom Panos (58:06):
This is the longest podcast we've done.
Tim, congratulations, we'regoing to.
John McGrath (58:10):
Here's what I reckon, just to let it, while
everyone's still here, the other.
The problem is, the buffoons inour industry are going out.
There's a housing crisis,there's a cost of living crisis
and we have buffoons going outthere showing they've got a
Rolex on each arm, they'redriving a Ferrari, they earned a
million dollars today becausethey sold 10 auctions.
(58:30):
We have caused a lot of thisourself from our egotistical
approach of going out andtelling everyone how much money
we're making, which is justabsurd.
So again, the industrysometimes is getting what they
deserve, and if I'm out thereand I've been under quoted an
auction or three times and allof a sudden I'm seeing the agent
(58:54):
that did it is flashing off,how much money they earn.
This stuff really irritates thepublic the non-real estate agent
public, which is a off.
How much money they earn.
This stuff really irritates thepublic, the non-real estate
agent public, which is amajority.
So, please, humility, please dothe right thing, please have
transparency, please haveintegrity.
Please get to the REI New SouthWales if you don't know this
stuff well enough, and learn it,because we've just touched the
(59:15):
surface here tonight.
Tom and we could have gone onfor another two hours debating
different scenarios.
So, yeah, please get along.
And Tim thanks for coming.
It's always a pleasure to speakwith you and the toy
stimulating conversation over toyou, tommy.
Tom Panos (59:28):
And listen, don't under quote, end the story Like
I think we all know what it isnow and I think we all know
there is no point having someoneat a $1.2 million auction that
thinks they're going to buy itfor $800,000.
No one's winning there, right?
No one is winning there, right?
(59:50):
Anyway?
John McGrath (59:51):
Thanks, tim Thanks .
Tim McKibbin (59:53):
John, good to see you.
Hey guys, see you, timmy.
Million dollar agent, john McGrath, and I have
decided we'll kill two birdswith the one stone.
We're going to talk to thechief executive officer of the
Real Estate Institute of NewSouth Wales, tim McGibbon, and I
haven't really spoken with Timsince the days of COVID.
(00:20):
We were jumping on during thosetimes when people were at home
and we were talking about things.
Obviously, my co-host, johnMcGrath, is here Without Troy
Malcolm today.
We thought two verse one isbetter than three verse one.
If there was three of us.
We thought so.
This is a podcast.
So those of you that arelistening on the Million Dollar
(00:40):
Agent podcast, wherever you getyour podcast from, we're also
live streaming this as we speak,because we thought it was a
very important session to havein information, particularly the
fact that some of the stuffthat we're going to talk about
is stuff that you've got a view,tim, obviously, fairfax on the
weekend we're writing storiesabout auction, price guides and
(01:07):
a number of issues.
I don't want to sit there andtalk about detail by detail, but
listen, tim, it obviously.
Firstly, do I make theassumption.
Have you caught up on thatexclusive story that they
covered about the difference ofprice between the list price and
(01:30):
what it's sold for.
Yeah, you're across the storieshere.
Tim McKibbin (01:33):
Yeah Well, I've read all the stories, tom, and I
guess underquoting is somethingthat has been with me as long
as I've been at the REI.
That has been with me as longas I've been at the REI, and
before I joined the REI,underquoting was with us.
You know, governments over theyears have tried to bring in
(01:56):
some solutions, but theycertainly haven't worked,
because we're still talkingabout the problem now.
Why haven't?
John McGrath (02:05):
they worked, Kenny .
Why haven't they worked?
Tim McKibbin (02:08):
Yeah, it's a great question.
I think part of the reason isthat it's a difficult thing to
gather enough information if youare going to do regulatory
enforcement.
That's part of the reason, andthe resources that would be
(02:29):
involved is another reason.
And lastly, I think that thelegislation that we have now
certainly doesn't serve us well.
You would be aware that thelast time that we played with
the legislation and I say thatrespectfully, but the last time
(02:52):
the legislation was amended, weended up with some rules in
there that said we weren'tallowed to use the words offers
over or offers above, and I'venever understood why.
I just don't know what the evil,what the harm is that we're
trying to protect consumers byand I remember sitting down with
(03:15):
Fair Trading after they cameout and we were sort of
brainstorming the problem thatwe had, which was to try and
communicate to a purchaser thatthe price that the vendor was
looking for was greater thanthis price, without using those
(03:36):
words.
So you know it's a bit crazy.
So everybody's had a crack atit.
I don't think it's thelegislation.
I don't think it's thelegislation.
I don't think it needs changes.
I think we need changes in theway that we we deal with it, can
I?
Um, can I come back to you witha question then?
Um, when is is under quoting uh, do do you achieve a better
(04:03):
price for your vendor withunderquoting?
Does anybody has anyone everasked that question?
Tom Panos (04:12):
So, John, I'm sure we've both got views.
John, do you want to go first,John?
John McGrath (04:16):
Yeah, no, I don't think misleading anyone ever
serves a positive purpose.
But I think here's where theproblem is, timmy, and there's a
lot of great agents on thiscall, some newish, some
experienced.
I think that one of thechallenges is, obviously, we all
(04:37):
arrive at a lounge room andlook at a property and the
vendor has a certain expectationand desire for a property.
Call it $1.2 million.
We look at it and there arecomparables that are probably
saying that would be highlyoptimistic, it's probably worth
$1.5 million based oncomparables.
Now, by the way, most of usthat are on this call, been
around long enough, would knowthat we don't actually never
(04:57):
know what it's really worthuntil the market's been through
it, and all of us, hopefully,have been through situations
where we've achieved a lot moreUm.
So I think I think there isit's a, it's a um, it's an
inexact science Um.
I think then, on top of the,that you've got an agent who's
trying to win the business anddoesn't want to sort of tell the
(05:20):
vendor anything that mightsound a tad negative.
So they don't want to say, well, the comparables are 1.5
million.
Too many of them haven'tdeveloped the skill to handle
that narrative.
So they say, oh well, 1.2sounds pretty right.
Then unfortunately, many ofthem go back and when they start
speaking to the other side ofthe equation, the buyers, they
(05:42):
start, you know, sort ofthinking well you know, probably
on a good day it's really 1million and 50.
So I better be kind of tryingto get anyone that's got high
nines to a million entertainingit.
And then you've got this gap.
Now I think there are somesystematic under quotas and I
believe, tim and I know you andI've spoken about this over the
years, I know you agree theyshould be running out of the
(06:04):
market.
I mean, that's very differentto someone who actually got the
price wrong or occasionally, notby choice but just by mistake
they underquote.
So I think that's very, verydifferent and I applaud and
support the OFT in any actionthat actually stamps out serial,
systematic underquoters,because I think that's why the
(06:33):
agency industry can have often abad name, because people say
they all lie and some do, ofcourse.
But I think you know up inQueensland, as we all know, or
most people on this call know,you know they come around by
stopping quoting at all, which Ithink is ridiculous.
But I do think that it's a goodthing, tom, to try and
eradicate the underquoters,because these are people giving
(06:56):
the industry a bad name and notjust giving the industry a bad
name.
That's probably one of the leastissues.
One of the worst issues ispeople are spending hard-earned
money and getting buildingreports, pest reports and
conveyancing reports when theynever had a chance of buying it.
And then there's the emotionalissue that comes in where?
And I remember speaking to abuyer one day and she said you
(07:16):
know, john, I turned up to theauction and we thought we're
above where the way, above wherethe market was, and it went so
far above us it wasn't funny.
And she said my little kids hadnominated each room and they
were just devastated becausethey thought that was their new
home.
So you've got the emotionalprice, Tom.
You've got the price ofactually getting ready and
getting prepared for an auction,and then, of course, you've got
(07:38):
the industry's reputation.
So no one wins when peopleserial underquote.
What are your thoughts, tom?
And so no one wins when peopleserial underquote.
What are your thoughts, tom?
Tom Panos (07:45):
So I have a view that if a property is overpriced and
you adjust the price, a buyermay appear, no question about
that, but it wasn't priced rightat the start.
But where I've got a real issueis where agents are quoting,
(08:06):
underquoting very low and theyare attracting.
So, to answer your question,tim, do I think those are going
to get a better price?
The answer is no.
I think that underquotingactually will bring 20 buyers
that will register and out ofthe 20, there would be one that
there's a big gap between oneand the other 19.
(08:28):
And on John's point, is that 19of those people will walk away
thinking to themselves I've beenlooking at this brochure on my
kitchen table for four weeks.
I fell in love with thisproperty.
I may have spent a grand inpest building due diligence and
(08:50):
I've also spent a lot of timegoing back and forward and the
reality is I was out of thebidding within 10 seconds of the
first bid.
Right, that's there.
So the answer is no.
The answer is no.
I think there's, I think, Ithink.
And, john, I get really confused.
When I go to a property and Isee 20 people registered and
(09:12):
they say 20 registered, thefirst thing goes to my head is
did they, throughout the process, realign the guide up to
reflect that there was going tobe a higher interest?
The guide up to reflect thatthere was going to be a higher
interest?
Because I think to myself that,like why is there so many
people there?
I think two proper buyers forthat property is a lot better
(09:35):
than having 15 people thinkingthey're going to get something
that they're not in anywhereclose to getting.
That's what I think.
John McGrath (09:42):
Tim, I assume this is the hottest topic in terms
of complaints about the industry.
Would that be a fair?
Tim McKibbin (09:47):
Oh, yeah, yeah, Unquestionably, john.
It's the big one and, as I saidto you at the outset, it's been
with me for the 21 years thatI've been at the REI and I don't
know that there's a magic wandthere that we can wave.
I do think that the currentgroup I'm working with at Fair
(10:09):
Trading now so it's a broaderstakeholder group I'm limited
about what I can say, but I doget a feeling that we're going
to positively impact it thistime around.
As far as a solution, that'sthat's tougher.
Yeah, it is, it's, it's, it's atougher thing, just to get a
(10:29):
solution, I think.
I think if it was easy, we wewould already have had one okay,
if you've got a proverbialmagic wand, though, what?
John McGrath (10:38):
give us one or two things, or three things,
whatever you think that might beable to clean this up.
I I mean obviously either.
You've been thinking about it.
I know there is no, you know,sort of ultimate panacea, but
what would you be doing?
Tim McKibbin (10:53):
I agree with you when you said that there's part
art, part science in it, becauseit is for any other name
evaluation.
We're taking a punt at what wethink, an educated punt about
what we think this property isgoing to sell for.
Now, if you got three valuersin there, you'd have three
(11:17):
different valuations.
So I think it is the case thatthe agent is trying to crystal
ball what this thing is going tolook like into the future.
So it's a valuation by anyother name and for that reason,
the only time that you are goingto know what the property is
(11:38):
really worth is when it's sold.
And I often have people theysay you've got greedy agents and
greedy vendors pushing theprice up and I've just said well
, no, they're not.
The people who set the price ofthe property are purchasers in
competition.
If anyone doubts that, go andlisten to an auction.
(11:59):
Go to an auction and see thepurchasers set the price of the
property.
To an auction and see thepurchaser set the price of the
property.
Agents have an educatedexpectation.
Vendors have their fingerscrossed with a big hope, but at
the end of the day, it's thepurchaser set the price of the
property.
So it is an in-act science andthat needs to be also accepted.
(12:21):
But there are some rules aroundthat about the way we go about
it, and if you follow thoserules, then I think that that is
satisfying the expectation ofthe community as well.
John McGrath (12:36):
But, timmy, let's I mean if, by the way tell me if
you're okay with it and ifanyone has any suggestions that
you want to put up there thatcould help clean this up, please
pop them in the chat box below.
So, tim, what are the rules?
Just to reinforce with everyoneon here, because people are
going to lose their licensesover this because there's a
clampdown, as there should be.
(12:56):
Some agents have been seriallyflaunting the rules, so let's
just go through.
Obviously, there's a 10% rule.
Do you want to explain a few ofthe rules pertaining to this in
New South Wales?
Just so everyone's got theirhygiene right.
Tim McKibbin (13:12):
Yeah, I guess it starts, john, right back at
education, because there aresome people that have come
through the training, theeducation and I'll use that
loosely and get spat out theother end and then they're put
out into the field to startpricing property and they have
no idea what they're doing.
(13:33):
It's always amazed me thatprior to 2002, if you wanted a
career in real estate, you wentto TAFE for three years.
Then in 2002, you went to TAFEfor three years.
Then in 2002, you can be a realestate agent in a week or
something stupid like that,depending on which RTO you go to
.
So there's a big competencyissue and I'm on my high horse
(13:56):
now.
But excuse me, but we have an80% churn in New South Wales.
People coming in realising theindustry is not all Ferraris and
fat wallets and then they exitout 80% churn.
So we've got to start, I think,with education.
You've got to show people howto price property properly and
(14:22):
that's got to be our startingpoint.
You can't expect somebody toget it right when you haven't
trained them on how to get itright.
I'll tell you one story, andit's just one.
There was an agent that pricedthe property I think it was
around about two and a half mil.
It was on a corner and went toauction and it sold for $5
(14:46):
million and he went.
What happened?
What happened here?
Why did it go like that?
What have I done?
I'm great, but what did I do?
And what he didn't know was thelatent possibility of that
property from a developmentpoint of view.
Possibility of that propertyfrom a development point of view
.
So we had two developers thathad read the contract, two
(15:10):
developers that knew what wasgoing on, and they bid it up to
the $5 million, with a viewersmashing the house over and
doing some stuff with it.
But the agent didn't read thecontract, didn't know how to
read the contract and thereforewasn't able to price that
property properly.
John McGrath (15:27):
The product knowledge they hadn't done their
homework.
Tim McKibbin (15:29):
Product knowledge.
Well yeah, well summarised,that's exactly right.
But people.
John McGrath (15:33):
So the obligation though, tim, as I understand it
is, you must provide writtencomparables, and I think it's
three or more, but is that thenumber that actually, when you
list a property, three or more?
But is that the number thatactually, when you list a
property, that are the best,closest comparisons in your mind
?
Is that?
Tim McKibbin (15:50):
Yeah, look, it isn't that heavily prescribed.
But there is an expectationwell, no, there is a requirement
that you would price theproperty properly, that you
would get that right.
That's part of the expectationsof being an agent that you
would be able to price theproperty correctly and then take
(16:13):
that price to market.
That is the expectation.
John McGrath (16:17):
Robert's just going.
Robert, thanks for that.
That's music for my ears, tom,if you can see in the chat line.
Tom Panos (16:23):
Yeah, is that what you're saying, john?
Um, that's music for my ears,tom, if you can see in the chat
line.
Yeah, it's just an advertisedprice.
Is that what you're saying,john?
Should there be an advertisedprice on all properties?
John McGrath (16:31):
on all properties which, tim.
As you know, I went to war withthe reiq, your counterparts in
queensland, because they werethe opposite way.
They said oh you know, we knowhow we'll clear this up.
We won't let agents quoteanything.
And I thought either thoughteither I'm an imbecile or they
are, because I would havethought the opposite, which is
what Robert's saying.
If at least you have the agentshave a requirement to put their
(16:53):
money where their mouth is andsay price guide one to 1.1
million.
Well, that's now documented.
And you talked before aboutresources, tim and evidence and
so forth.
If you did require agents tomake known more publicly and
transparently their pricerecommendation expectation, if
you will, to me that would be astep in the right direction to
(17:17):
actually to do that.
But, as I said, somejurisdictions have deemed it
appropriate to remove everythingas well, have deemed it
appropriate to remove everythingas well.
Tim McKibbin (17:25):
We should have said I mean, queensland's
approach is a bit like throwingyour teddy out of your cot.
They're just saying, well, wecan't fix it, so we'll just stop
everyone talking about prices,which I find a bit odd.
I mean, if I walk through thedoor and I like the property,
the first thing I'm going to doto the agent is say I don't want
to waste your time, you don'twant to waste mine.
What do you think this is goingto go for?
John McGrath (17:47):
So, Tim, there's a 10% limit, right?
Sorry, 10% range.
So you cannot quote to a buyer,either verbally or in writing,
a range that's more than 10%.
So you can say 1 to 1.1, butyou can't say 1 to 1.2, correct?
Tim McKibbin (18:03):
That's right.
Yeah, You've got a maximum of10%.
John McGrath (18:07):
Yeah, and look, I guess that might play a role.
Otherwise people could say it's1 to 1.5, you know, and that
really doesn't help anyone.
That gives everyone an out.
So I guess having a sort of a10% range may be okay.
The other thing is if at anypoint my understanding, tim and
I'm not expert, you are if atany point during the sale
(18:28):
process and a lot of agents askme about this one, tom if there
is an offer that is rejected bythe vendor, my understanding is
the price quote cannot be lessthan that offer.
Tim McKibbin (18:40):
That's right.
So that's right, but I've gotto put a caveat on that.
That's right.
So that's right, but I've gotto put a caveat on that.
It has to be an offeracceptable to the vendor, and by
that I mean, let's say, theproperty was a million dollars.
That's what we wererepresenting it to be.
And somebody came in and said,well, I'll give you 1.2.
(19:01):
However, I want a 0.25% depositand I'll settle in two years'
time.
Now, yes, you've got your 1.2offer, but the rest of the money
money-wise, 1.2,.
But the rest of the conditionsthat the purchaser is putting on
(19:22):
you are not acceptable.
So that is not an offer that Iwould view would change the
estimated selling price.
John McGrath (19:31):
Which is a hard one, tom, because I mean, let's
just say, for example, the pricewas acceptable but the terms
weren't.
So I said I'll give you 1.2,but I want six months to settle
and the vendor says no maximum.
I'll give you 1.2, but I wantsix months to settle and the
vendor says no maximum I'll giveyou is three months.
So what you were saying, tim ispotentially there, or probably
in that instance the agentwouldn't have to change the
(19:54):
quote because it had a termattached to the monetary offer
that was unacceptable to thevendor, correct?
Tim McKibbin (20:00):
That's right, that's right.
The terms weren't acceptable tothe vendor.
The vendor correct.
That's right, that's right.
It the the terms weren'tacceptable to the vendor.
But here is.
I like to use this examplebecause it demonstrates what the
the offense of underquoting is.
So let's start and we look uh,we price the property, estimate
selling price of a milliondollars, and the um.
(20:21):
The vendor says I want 1.1,that that's my bottom number,
1.1.
So if we're going out into themarket, we have to be
representing a price that isgreater than the 1.1, because
the vendor has said I'm nottaking anything.
Listen, even though we thinkthat the estimated selling price
(20:43):
is going to be about 1, we havehave to go with $1.1.
All right, so that makes sense.
You can't offer the propertyfor less than what the vendor is
going to say.
Let's spin that around.
John McGrath (20:56):
Can I just stop there, tim?
What you just said, there neverhappens, never happens.
There is never well, sorry whenI say never, that's a strong
word Generally what would happenthere is?
An agent would say yeah, lookto you, I know you'd like one
one.
As you know, the comparablesare closer to a million.
I think we have to get peopleinterested at around the million
if we are to have any chance ofachieving your 1.1, because
(21:20):
that would be a great price.
That's what would likely happen.
I'm sure most people on the callwould agree with me.
You wouldn't generally say,okay, I'll quote 1.1 because
that's what you want.
And if you did, your clearancerate at auction would probably
go down a long way because mostvendors would say I won't take a
cent less than 1.1.
On auction day they hand you areserve of a million and 50 and
they'll take a million and 20because they've been convinced
(21:42):
through the process that theprice that you originally quoted
may well be the price.
So just legally here this isvery interesting.
So if the vendor says, john, Idon't think I'll take under one
one, you know, give it a go, butI think unless you get me one
one, I'm unlikely to be a sellerand the comparables are at a
million.
Is there any legal obligationon me to have a price that
(22:07):
either is at or even straddlesthe 1.1, even when I know it's a
dream price?
Tim McKibbin (22:15):
If the vendor is saying to you that they will not
take a price less than 1.1, sothey've made that clear.
You can't go into the marketand say that the estimated
selling price here is going tobe 1, because you know that your
vendor is telling you theywon't sell it for 1.
John McGrath (22:34):
Doesn't happen, Tommy, doesn't happen like that.
Tim McKibbin (22:37):
So let me spin this around, though, and I like
doing this because itdemonstrates what the offence of
underquoting is.
Now let's assume that Tom is insome financial difficulty and
the estimated selling price ofthe property that Tom owns is $1
(22:58):
million.
We'll stay with the sameexample, and so I say to Tom
look, I reckon that thisproperty will reach a million
dollars at debt sale.
Tom says that's fascinating,tim, but I need money and I need
it now.
So I've got the bank breathingdown my neck.
I want you to take this out at$800,000.
(23:19):
That's my instruction.
That's what I'll take, but getit sold Now.
Can I take that out at $800,000?
No, I can't.
I am not allowed to represent aprice less than my estimated
selling price.
Now, my estimated selling priceis a mil, so what Tom wants is
(23:45):
less than that, but I can't dothat.
I can't take it out at thatprice.
John McGrath (23:49):
But on the previous example and I could be
wrong, but I thought you weresaying the exact opposite that
the comparables your estimatedselling price is a million but
because the vendor said I'm notgoing to sell under a million
one, you've got to take it outat their.
Let's call it inflated for aminute or optimistic price.
You've got to take it out oftheir.
(24:09):
Let's call it inflated for aminute or optimistic price.
Tim McKibbin (24:12):
So that almost sounds counterintuitive and this
is the reason I've done it.
The reason I've used thisexample is to demonstrate what
the offense is.
Because when you're looking atthe first example, where the
price that the vendor wants andthe vendor's made it clear I am
not going to accept anythingless than 1.1, and we all know
(24:33):
how these things change over thetime then 1 million isn't going
to buy it.
We know that it's not going tobuy it.
But in the other example thatI'm giving you is that the
offense of under quoting is istake it, taking a um, a price
(24:54):
out to the market, arepresentation to the market
that is less than the agents,the agents estimated selling
price.
So when tom wants his 800 000,it's an offense for me as the
agent to be going out theresaying you'll buy this for
$800,000.
John McGrath (25:13):
Tony's just made a comment and I was going to go
there myself, tony.
So if on that $800,000, tom'sdesperate for cash, he said,
mate, I'll take $800,000 plus,just get me out of here.
And I've said, look, comprowill say we should be able to
get a minion.
Why could I not say thevendor's reserve at auction will
be 800?
I personally think it's worthmore than that.
(25:35):
But if the highest bid on theday is 800, it'll be selling.
So you're saying that would be?
Yep, that's wrong.
I couldn't say that.
Tim McKibbin (25:44):
No, you can't represent a price that is less
than your estimated sellingprice, and your estimated
selling price is a milliondollars.
We've all agreed that.
So it is an offence to go outthere and do it, to actually
offer the property to the marketfor less than your estimated
(26:05):
selling price.
John McGrath (26:06):
There's a few questions there.
Tom anything you want to.
Tom Panos (26:09):
Yeah, can I just, tim , picture this scenario?
Owner wants one point.
Owner is hoping to get 1.2.
Hoping to get 1.2.
Your estimated selling price is$950 to $1,050,000.
(26:34):
So it's within the 10% range.
You wrote on your agencyagreement $950 to $1,050,000.
Yep, your owner has said to you1.2.
The conversation you had withyour owner is listen, 1.2 is
(26:55):
very aggressive based on mythree comparables.
But I'm letting you know.
If it's out there I'll get it.
And I'm also letting you knowthat in real estate I've learned
there's no recommended retailprice, that sometimes properties
sell above, lower, but I'mletting you know these are the
(27:16):
comparables Now at the buyer'stable.
Can you be saying this whenthey ask you?
Can you be saying this whenthey ask you, what's it going to
go for?
You say my estimated sellingprice is $950,000 to $1,050,000.
Tim McKibbin (27:40):
Is that allowed?
If I followed you with that,tom, if the vendor is in
alignment with the agent aboutprice, then yes, that's fine,
but if the vendor is looking youup and down and going, no, I
want this, I want this price.
Tom Panos (28:00):
That's my bottom number.
Okay, but if that's the case,what you're saying then is
you're not quoting the estimatedselling price that you've said.
You're quoting what my vendorwants.
That's a different number.
Tim McKibbin (28:12):
Correct, correct.
And you notice that in doingthat.
It's the reason I use thatexample of the $800,000, because
the offense is quoting a pricethat is less than your estimated
selling price.
Now your estimated sellingprice is $1 million.
The vendor wants $1.1.
So you've got to go out thereat the vendor's price because
(28:35):
the vendor is telling you that'swhat they want and you've
noticed here that the price thatthe vendor wants is greater
than your estimated sellingprice.
So on the agency agreement,it's done for this reason, on
the agency agreement, you haveto put in your estimated selling
price and you also have to putin there what the vendor wants.
(28:58):
That's the reason it's in there.
Tom Panos (29:01):
Okay, but my reading and, by the way, while I've got
everyone online, let me just sayeveryone here nearly everyone
here is New South Wales.
Could I urge you to actuallysit through this course?
It's an online course, it's 75bucks.
It's actually mandatory anyway,so you've got to be using it.
(29:23):
It's mandatory and it's acollaborated course between the
Office of Fair Trading and NewSouth Wales TAFE, I believe, and
it forms part of your CPDrequirements.
But I'm still so, tim, I'mstill so.
Here is where I think we havean issue right, Because often,
(29:49):
and you'd agree, most owners atthe beginning of a campaign are
aiming for a number that'shigher, just like my wife thinks
we've got the best two lookingkids and my wife thinks our
house is probably worth amillion more than what it is.
That's a lie.
Tim McKibbin (30:05):
I accept it, right , I'm not going there, tom,
you're on your own.
Tom Panos (30:13):
But what I do know and you see this in the full
sales space, like I've looked up, the data's clear 75% to 85% of
properties that get sold asprivate treaty sell lower than
the list price.
And that shouldn't come as asurprise, right?
Even if it's five or 10 grand,they sell lower than the list
price.
So what I'm thinking to myselfis, if you're saying to me, on
(30:37):
an agency form you might have950 to a million and 50, your
owner has says I really amhoping to get 1.2.
Tim McKibbin (30:46):
Yeah, but there's nothing wrong with aspirations.
But I mean, as the agent, you'dbe explaining to your vendor
that on the day, if we do ourjob well, we will attract a lot
of competition here and thecompetition drives the price up.
Tom Panos (31:06):
Can I ask you this Do you feel like this kind of
dialogue and approach will fitthrough the framework to the
buyers?
Mr and Mrs Buyer, I'm lettingyou know our owners have gone to
auction.
They're hoping to get as muchas they can, like everyone else.
I've got an estimate of $950 to$1,050,000.
I'm letting you know they'vecommitted to this auction
(31:28):
campaign.
They're hoping to get $1.2.
I do think they are the peoplethat will respond to market
value.
I do feel that if they see 40or 50 groups through that, they
(31:48):
yeah, let's say I pull it upthere.
John McGrath (31:50):
Let's assume you finished the sentence.
But the owner would like to geta 1.2.
But the owner would get.
I think based on comparables,it's worth around a million.
My client would like to see 1.2, but they've told me to take it
to auction to see what it'sworth.
I'm looking, tim.
Is there a distinction betweenan owner and I think the answer
(32:10):
might be yes that says I willnot sell under 1.2, as opposed
to an owner that says I reallywould like to get 1.2.
Tim McKibbin (32:19):
Yeah, of course, of course.
I mean, if the owner is sayingto you that I'm selling the
property, I'm realistic.
You're telling me it's amillion bucks.
If you can get me a mill, thenyou've done your job.
But you've taken it to market,you've got me in the market
price, but there's nothing wrongwith them saying if you can
(32:40):
generate a bit more interest,I'm not opposed to you setting a
suburb record here.
You know, knock yourself out,that'd be great, uh.
But you know, you, if the vendormakes brutally clear that
they're not going to accept theprice below something, then as
the agent you have to make adecision as to whether or not
(33:01):
you want to represent thatperson.
I don't, I don't.
Um, an auctioneer told me oneday that the vendor said to uh
him, I'm thinking about askingfor two mil on this property,
and the uh and the.
The auctioneer said well, whatabout three mil?
And he said you know, will Iget three?
And he said you got as muchchance of getting three as
(33:23):
you're going to get it gettingtwo.
So you, you know you've got to.
You need to have thoseconversations with your vendors,
you know, and you'd be sayingto them you're not realistic,
mate.
John McGrath (33:34):
Another question here, chris.
Thanks for that.
Chris has just written in aboutwritten adjustments.
What is the protocol?
So we've gone out, we'requoting a minion.
You've said, yeah, okay, that'sabout right, we go there.
The market's actually coming inat under that, saying it's
probably $9,950.
And I say, tim, I think if wewant to have competitive bidding
, we've got to adjust our pricedownwards because we got no
(33:55):
interest, no contracts.
All the interest are $9,950.
I think you need to beresetting your expectation.
What do I need to do?
Because I get a lot ofquestions about this too,
because people talk about I needto get it in writing.
I need to do, because I get alot of questions about this too,
because people talk about Ineed to get it in writing.
I need a form signed.
Will a text message do?
Will a diary note do?
What do I need to do in orderto satisfy any OFT investigation
(34:18):
down the track if I am tochange the price guide, either
up or down, I assume, during theprocess?
Tim McKibbin (34:27):
What's the-?
So the estimated selling priceis the agent's number.
All right, I think people get abit confused here with this.
They think that they have toget the permission of the vendor
to change the estimated sellingprice.
They don't.
They simply advise the vendorthat they are moving the price
(34:47):
because that's what they thinkthe price is.
So normally, as the interestgenerates, the price would be
going up.
If you are to express price inthat market as it's moving up,
you have to adjust your price,your estimated selling price, to
(35:08):
be reflecting the market.
So to stay with our earlyexample, imagine somebody's come
along to the vendor and saysI've got 1.2.
You know it's standardconditions, 1.2.
And the vendor looks around andsays I think things are hotting
up here.
I won't take 1.2.
So you can't go out in themarket and say 1.2 because the
(35:34):
vendor's already turned it down.
So you would have to be comingback out there saying it's going
to be a price above 1.2.
John McGrath (35:44):
So even if that buyer has now bought something
else, and even if that buyer wasa standout buyer for whatever
reason and you knocked it backas the vendor, they have now
bought the neighbouring property.
Are you saying?
I still have to quote the levelwhere the offer happened?
Tim McKibbin (36:02):
Well, now you're getting.
This is where we spoke aboutearlier, about the art and the
science.
I mean, if you've got apurchaser that was, you know,
out there on their own and thevendor turned it down, you'd be
saying to the vendor like youknow, you should take this, this
is good.
But if the vendor says no, wellthen they say no.
(36:28):
But as far as the price isconcerned, the estimated selling
price, you would have to belooking at all the facts here
and saying to yourself, if thisgoes to auction, um, we, you
know, we're not going to get 1.2, we're not um, we're only going
to get 1.1.
So you know, I'll stay with theone point.
I'm happy, happy to back myselfthere.
The vendor's made a horriblemistake.
John McGrath (36:48):
If you've got it, because I don't.
If there's been a 1.2 offerrejected by the vendor, that
buyer is no longer in the marketbecause they bought the
neighbouring property.
All the other interest prior tothat offer was at a million to
a million, one which is what Iwas quoting.
One which is what I was quoting.
Do I have an obligation, ifthat offer is no longer valid,
(37:09):
even though it was at the time,to keep quoting that offer, or
can I revert back to the offer?
Tim McKibbin (37:16):
Well, again, this is where the art and the science
come in.
The vendor in this example,frankly I think, is being stupid
.
They should have taken theoffer.
It was the best they're goingto see.
The agents advised them that,but they've said no, so that's
fine if they haven't and theybought the neighboring property.
Well, you've got a couple ofproblems.
(37:36):
Firstly, you've been offeredthe 1.2.
The market has clearly gone upbecause they just bought the
property next door at 1.2.
John McGrath (37:45):
That was a better property.
That was a better property.
Tim McKibbin (37:47):
Oh, a better property, it's fine.
They bought the property.
If, in all the circumstancesaround you, all the data that
you have indicates to you thatwhen you go to auction, that
it's going to sell for 1.1, not1.2, that's fine, that's fine.
1, not 1.2, that's fine, that'sfine.
It's your estimated sellingprice, not the Vendors, not
(38:12):
anybody else's, it's yours.
So if you're happy to backyourself at 1.1 and you're
saying, vendor, you made ahorrible mistake.
That's life.
But when we go to auction, it'sgoing to be 1.1.
It's not going to be 1.2.
, that's fine.
John McGrath (38:28):
Tim.
Back to the question, because Idon't think we actually ever
finalise it.
So if we adjust the price guidedown during a campaign because
feedback is that it's not worthwhat we had hoped and the vendor
is understanding of that and mybelief is you need to get that
instruction in writing.
(38:49):
I could be wrong.
Do you have to get thatinstruction?
Could I have a chat and say andyou say yeah, john, whatever,
if you think, put it down to 900, I agree, I just want to sell
it.
Do I need to get that inwriting from you?
Do I need a form?
Tim McKibbin (39:02):
Well, that figure, that figure it would be in the
agency agreement.
When Tom signs me up and says,and I say it's one mil, tom, and
he says, fascinating, get me800k.
And I'm happy he would put thatinto the agency agreement.
But the reason I use thisexample is because it
demonstrates what underquotingis.
(39:22):
The fence of underquoting iswhen you take a price to the
market that is less than yourestimated selling price and
that's an example.
And, in addition, if the vendoris saying I want this, I want
1.2, well, you've got thosedecisions to make.
Tom Panos (39:46):
If you're looking at a vendor that's saying I'm
unrealistic, I'm not going tosell unless I get this price,
you've got to say well, so Timso I'm clear If you go out in
the first one or two weeksthere's no feedback or low
feedback, you sit with yourowner and you say listen, I'm
making a recommendation, we'vegot an auction in a week or two
(40:08):
weeks time.
We're halfway through thecampaign.
We have no one Based on marketconditions, based on buyer
feedback.
I'm suggesting that we realignby 5%.
The owner agrees and says yep,okay, you go back to your form.
(40:29):
I know some agents do itdigitally.
I think companies like Ethantold me he does it on real-time
agent.
You go on real-time agent, youdocument it.
You actually put the reason whyright, that's not underquoting.
Then is it when you go outthere, because you've got the
approval of?
Tim McKibbin (40:47):
your-.
That's right and I thinkthere's probably.
It's probably a decision thatyou make with your owner when
the price is coming down,because they need to be on that
journey.
But when the price is going up,if the owner has said, no, I'm
not going to take any less thanthis, and then no to that price,
(41:08):
then you have to push thatprice up, whether you like it or
not, because the owner has saidno.
Tom Panos (41:14):
Quick question, john.
I've got to ask this becausetoday I was bombarded by around
five text messages on the samething.
They said I think what happenedis some people didn't want to
ask the question publicly, sothey've come privately.
Right, and they turned aroundand they said Tom, I'm getting
all these savvy vendors rightthat are saying oh, by the way,
(41:39):
what price are we going to quote?
Because I think if we quote itlow, we're going to get a lot of
people interested.
Now you must have heard, tim,this come from agents that are
yeah yeah, yeah, and I have.
Tim McKibbin (41:51):
The vendors are thinking that the best way to
get the best price for theirproperty is for the agent to
underquote, and this is reallythat's come because other agents
that have gone to the listingand may have actually suggested
it to them or they've heard it.
Yeah, they're seeing it in themarket every day.
They're reading it innewspapers.
That was the reason I startedthis conversation where I said
(42:15):
is it the case that you will geta better price, better sale
price using underquoting as atactic?
Now I know I put to one sideall of the misleading aspects of
it.
Is it the case that you will?
And you would have heard theold sayings quote it, what was
(42:35):
it?
Quote it low, watch it grow,watch it grow.
Quote it high, watch it die,watch it grow.
Yeah, quote it high, watch itdie.
All of that sort of stuff.
But I've never seen anyevidence that underquoting
delivers a better price and Idon't know whether or not it
does, and that's a question I'dlike answered.
I'd like to know whether or notit actually does drive a better
(43:00):
price.
John McGrath (43:01):
Look, it doesn't.
In my opinion it doesn't.
And by definition underquotingis deception the word
underquoting, now, it'sdifferent if you say he's
quoting the right price, if thevendor is hoping for one too,
but the comparables are at amillion.
Quoting a million in my worldwouldn't be underquoting.
But here's the other thing, tom, that you know a lot of agents
(43:22):
are doing.
They're saying, tim, look, yeah, look, I think one, two, it's
possible, yeah, it's possible.
It's a really good home.
But here's what I'm going to do.
I'm going to put a lower figureon the agency agreement,
because whatever I put on here,I have to quote, and I think if
we, the one too, we might kindof be a little bit high to start
.
So what I'm going to do is I'mgoing to put $950 to $1.5
(43:44):
million on the agency agreement,just so you know.
The reason I'm doing is a lot ofagents, tom, they're actually
colluding, if you will, with thevendor to get around this legal
requirement to not quoteanything other than what you've
got on your agreement.
So they're having these nod anda wink conversations, which
(44:05):
again I think is terrible, andthen I'm all for transparency,
whichever I know is just havethe damn conversation with the
vendor hey, tim, if we can getone, two we will.
That'd be a record.
I can't guarantee you thatbecause all the comparables are
a million, a million and 50.
However, let's give it everypossibility.
We'll do an amazing marketingcampaign.
We've got the best auctioneerin Sydney booked to do your
(44:26):
auction, but I think we've gotto go out there and get interest
at where I think it's abankable price a million, a
million and 50.
If we get enough interest andthey get emotionally connected,
I think that gives us the bestchance to get the next figure.
To me that's a goodconversation to have, because I
can't guarantee you we couldn'tget the 1.2, but I can also tell
(44:47):
you the comparables above that,tim.
There's another thing that andagain I'm sort of coming in
third hand because I'm notday-to-day selling every day.
I list it quite a bit but I'mnot selling every day.
But they tell me now thattechnically, every time in New
South Wales you have aconversation with someone and
you quote price, you're meant todocument it.
Yep, I spoke to Tim McKibben at3.40 on Tuesday, the 4th of
(45:09):
August, and I told him I thought1 to 1.1.
I mean, is that the caselegally?
It's just not how the industryworks.
We're doing things Yep, yep,yep.
That's just not how theindustry works.
Tim McKibbin (45:18):
We're doing things .
Well.
This brings me back to what Isaid, that government and I'm
fearful this time around becauseit's all through the newspapers
, it's on the news, all the restof it so government will feel
the pressure to do something.
They've got to be seen to bedoing something and this is what
happened last time, when therewas a lot of media about it,
Government stepped forward andactually introduced the things
(45:41):
that John has just said You'vegot to make filenames, You've
got to do this, You've got to dothat, You're not allowed to use
words office over, office aboveand plus signs and all of these
things.
They did that in response.
My fear is they're going to dosomething equally stupid and let
me call it what it is this timearound.
That's my fear.
Can?
Tom Panos (46:02):
I ask does the REI NSW do you feel like for me?
I feel it needs to be acollaborative but industry-led
solution, because the industryis at the front line sitting
there talking to the buyer andthe seller right, and I just
(46:23):
feel just what John just saidthere.
Now I can tell you I'm not evenafraid of saying this, every
agent in New South Wales wouldbe in breach of that.
No way in the world.
Tim, you're telling me thatthey're getting email inquiries,
phone inquiries.
I mean, we're talking.
(46:43):
Some properties are gettingthousands of buyer inquiries in
the first two weeks.
You can go look at the data onrealestatecom and domain.
I think the compliance level ofthat there is close to
non-existent.
John, you'd agree with that,wouldn't you?
I?
John McGrath (46:59):
mean A hundred percent.
And that's why I asked thequestion, because when I heard
that was the legislation Ithought that's just unworkable.
Because I'm in the car and I'myou know, I'm walking down the
street, I'm at an open.
We're doing so many things atonce in this industry because
it's a mobile industry, asopposed to accounting where
you're in the office, meeting aclient every time pretty much.
(47:20):
Where we're not in the office,we're out and about and in cars
and so forth.
But it comes back to my mypoint about price guides, tommy.
I mean that would clear it upif, if there was a price guide
that at any point in time wasyour best estimate on price and
it was published.
That would probably clear up alot of this Again, opposite of
what Queensland is saying.
(47:41):
So you alluded to before, tim,it didn't sound like you wanted
to say too much, but you alludedto before.
There might be some discussionshappening that may involve the
industry, is that?
Tim McKibbin (47:51):
Yeah, no, we're at the table now.
We're sitting down with FairTrading.
We've got a group of peoplethere.
I won't go into who's there,but I think we've got a good
cross-section watch the industry, using technology to be able to
(48:22):
watch the industry more.
Because in being able to watchthe industry do what they do, it
will send that message outthere.
So my go-to example, John, isthat if I went up on the weekend
, up to see my latest grandsonup the M1.
Now I'd sit on around about 130or 140 k's going up there, but
(48:47):
I don't, because I know thatthere are people sitting on the
road that might have a speed gunand I'd end up really bad.
So I think if the industryknows that fair trading has the
tools to watch more closelythose people that participate in
this and I'm a realist, I knowthat people do I don't think
(49:11):
it's the majority of people.
I don't think that's the case.
The majority of people.
I don't think that's the case.
But those people who doparticipate in it, like speeding
they won't be interested indoing it if they know that
somebody's over their shoulderand they're watching.
John McGrath (49:29):
Why is this working group and I'm not being
critical of you, I'm justinterested why is it so
clandestine?
Why don't we know who's on itand what's the discussion and
get the minutes of the meetingand recommendations?
I mean, it seems to me.
I mean Tom and I and I'm notsaying we're any gurus, but we
do speak and coach and train alot, and that's the first I've
heard of it.
I would have thought, if we'retrying to reach transparency
(49:49):
here, there should be a processto debate this, and in fact
debate's probably a pretty goodword, because I'm guaranteed
that we'll have a slightlydifferent view as an industry
over the governing body.
I mean, surely we should havesome level of transparency.
Tim McKibbin (50:06):
Yeah, look, I understand what you're saying,
but it's very, very common, infact, pretty much every time, I
see all of the legislativeinstruments that come through
when they're in draft and wereceive them in what's called
cabinet in confidence.
So we put in a lot ofsubmissions and these sort of
(50:30):
things at that stage which we'renot allowed to talk about.
That's a frustration for us,because we do so much good work
in that space that we can't talkabout, um, one of the and you
know, that's a frustration forus because we do.
We do so much good work in thatspace that we can't talk about
it.
Uh, one of the things that whenI am speaking, I always say to
people that what we haveachieved is to take the
(50:50):
legislation from dreadful andmoved it to bad.
Now, if we weren't here it'd bedreadful, but it's a
frustration because we can'ttalk about that process and
internally, when you keep it inthat confidential, people can
throw ideas out there and letthem permeate around the room.
John McGrath (51:12):
Interesting Tim Doms from Blink Property.
Doms just said I agree with you, dom, if you call fair trading
three times, you're going to getthree different definitions of
underquoting, and I agree withthat.
And I don't think you and Iwere talking, tom.
Well, tim said that to me thismorning.
Yeah, I was talking to someoneearlier today and they said oh,
it was actually someone told meWas it you?
It wasn't you, tom, it wassomeone else.
(51:33):
I, it wasn't you, tom, it wassomeone else.
I remember what it was, butthere was something that they
said to Cindy Kennedy, who's oneof our best agents, and I will
guarantee you what they said isabsolutely not right.
But you and I weren't talking,tom.
Sorry.
Tom Panos (51:53):
It was about price adjustments that you couldn't
actually you're not supposed todo a price adjustment in the
first two weeks.
That's right, which I find hardto believe.
Tim McKibbin (52:14):
She was told by someone from the.
It's wrong.
Your obligation is to representto the market the estimated
selling price at that point intime.
That's what I said, that's all.
So if you've gone to your firstopen first week in and the
interest is such that it'sdriven the price up, you know
(52:37):
you're going to do better thanwhat your estimator's selling
price is on the agency agreement.
Then you move that up.
Tom Panos (52:42):
But, tim, this is the problem, same with down.
Tim McKibbin (52:45):
Yeah, same with down.
John McGrath (52:47):
This is the problem that you know.
A representative of fairtrading told one of our best and
most articulate, mostsuccessful agents you can't
change the price in the firsttwo weeks of a campaign.
You have to wait until thefirst two weeks.
That's not true, and so, as Donsaid, you're getting all of it.
Tom Panos (53:06):
I think what was said was you can't rely.
I actually did check it out.
Sorry, John, I did check it outafterwards with Michael Carolyn
.
If you know, he's a goodauctioneer and a Dubbo guy.
He said his understanding wasyou can, based on buyer intel
and things that have happened inthe market, but you've got to
(53:30):
be able to justify it.
John McGrath (53:32):
Yeah, but the RFT's told you you can't right.
Tom Panos (53:35):
They can't right.
She led me to believe that youcan't do it in the first two
weeks, taking the price downbased on buyer feedback alone.
It has to be another thing aswell.
Tim McKibbin (53:51):
No, I don't agree.
I don't agree.
If the vendor has said no to aprice that's higher than all
agreed, the estimated sellingprice said no.
You can't go out to the marketand keep pushing that price in
the knowledge that the vendorhas said no.
That's right and that doesn'tmatter.
If that happened before the inkis dry on your agency agreement
(54:16):
, all right, you don't have towait two weeks.
100%.
Tom Panos (54:19):
Okay, I'm just going to finish on this note.
This is a hot topic, tom.
This is a hot topic, johnny.
We could talk here for ages,and I'm having a look here.
I reckon there'd be 400, 500people on here, but for some
reason, I don't know why, I'msure I've got the maximum
subscription.
It says maximum.
Yeah, we have.
John McGrath (54:35):
Yeah we have.
We've done that.
Okay, we've done it.
Okay, tell me there's anotherTom Panos on here.
Yeah, that's Susan.
By the way, that was someinvestigation into that.
Timmy, just before we wrap up,before you do, tell me, does REI
and NSW have trainingspecifically around this?
Tim McKibbin (54:49):
Yeah, yeah, we do about pricing property, yeah,
yeah we do.
John McGrath (54:55):
Is it webinar like this, or is it in room?
Tim McKibbin (54:58):
No, some of it's in room.
Yeah, we teach how to go aboutit.
But again, you know if you canget into this industry in, you
know, in a few days, as peopledo, you just don't have the
skills.
You don't know your product,you can't read the contract, you
know.
So pricing property is one ofthose skills that takes time to
(55:22):
develop and you're not going tolearn that.
You're not going to learn thatthat way.
I mean, the latest idea that wehave now is, if you go and get
your license in, let's sayVictoria, all right, and the
education down there is lessthan what it is in New South
(55:42):
Wales, okay, yep, and you aretrained on Victorian legislation
, all of that, okay.
You know nothing whatsoeverabout New South Wales
conveyancing practice, law andpractice.
Know nothing about agencypractice in New South Wales,
conveyancing practice, law andpractice.
Know nothing about agencypractice in New South Wales.
Now are you going to let thatperson come into New South Wales
(56:04):
and deliver, deliver realestate services?
Our current minister says, yes,they can come in.
John McGrath (56:11):
They know nothing about what it is everyone online
.
Just in case you didn't know,tim is also a lawyer as well as
or was a lawyer, or I guessstill he's as well as the ceo,
so this is coming from someonewho's the head of the best and
most authoritative body in termsof the industry representation,
as well as someone who's alegal, a legal scholar so well,
(56:34):
john, I've just got to say youknow what's fascinating.
Tom Panos (56:36):
Do you know?
In Australia, the totalproperties that are sold by the
auction system are under 15%.
So 85% of properties are notauction properties.
In Sydney, it's like 80% arenon-auction.
In Melbourne, it's like 78%.
Right, we are talking about asmall sample of properties, but
(56:58):
it's obviously an emotive issueif it's such a small amount.
And I think it's an emotiveissue, tim, because if you
fundamentally think about it,what has been the big burning
issue in Australia for some time, and now more than ever, has
been housing.
The whole federal election wasbased on a housing policy, the
(57:19):
fact that people are findinghousing, whether they're buying
or getting a challenge.
Tim McKibbin (57:25):
Yeah.
So you say, tom, you've hitonto something here that has
been spinning around in my mindand is the nuclear solution,
really isn't it?
And it is the nuclear solution,really isn't it?
You're saying 20% of themarkets is about auctioning, and
so if you just said no moreauctions, there's no more
(57:49):
auctions across the country,well, listen and be careful.
Be careful, because they mustbe thinking that way.
John McGrath (57:55):
No, they couldn't do that to me, but you're right
they might.
They might be that silly.
Here's the other thing, andwe'll finish on this, tommy,
because we're getting up to 5.30.
I know we want to let everyonego, either to close another.
Tom Panos (58:06):
This is the longest podcast we've done.
Tim, congratulations, we'regoing to.
John McGrath (58:10):
Here's what I reckon, just to let it, while
everyone's still here, the other.
The problem is, the buffoons inour industry are going out.
There's a housing crisis,there's a cost of living crisis
and we have buffoons going outthere showing they've got a
Rolex on each arm, they'redriving a Ferrari, they earned a
million dollars today becausethey sold 10 auctions.
(58:30):
We have caused a lot of thisourself from our egotistical
approach of going out andtelling everyone how much money
we're making, which is justabsurd.
So again, the industrysometimes is getting what they
deserve, and if I'm out thereand I've been under quoted an
auction or three times and allof a sudden I'm seeing the agent
(58:54):
that did it is flashing off,how much money they earn.
This stuff really irritates thepublic the non-real estate agent
public, which is a off.
How much money they earn.
This stuff really irritates thepublic, the non-real estate
agent public, which is amajority.
So, please, humility, please dothe right thing, please have
transparency, please haveintegrity.
Please get to the REI New SouthWales if you don't know this
stuff well enough, and learn it,because we've just touched the
(59:15):
surface here tonight.
Tom and we could have gone onfor another two hours debating
different scenarios.
So, yeah, please get along.
And Tim thanks for coming.
It's always a pleasure to speakwith you and the toy
stimulating conversation over toyou, tommy.
Tom Panos (59:28):
And listen, don't under quote, end the story Like
I think we all know what it isnow and I think we all know
there is no point having someoneat a $1.2 million auction that
thinks they're going to buy itfor $800,000.
No one's winning there, right?
No one is winning there, right?
(59:50):
Anyway?
John McGrath (59:51):
Thanks, tim Thanks .
Tim McKibbin (59:53):
John, good to see you.
Hey guys, see you, timmy.
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