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If Governments Trust Estate Agents, Why Shouldn't Consumers?
 
To my mind agents particularly
should be prohibited from giving buyers so much as a bus timetable,
and from recommending even the local Chinese restaurant. Needless to
say, solicitors and other service providers to residential buyers
should also be prohibited from acting if they are not independent of
everyone else involved in the transaction. A recent edition of Australian Property Investor Magazine ( http://www.apimagazine.com.au/ ), on sale at newsagents across the country, included a case study on victims of a real estate scam. Cassie and Luke were buyers from out-of-town. They were told by a Queensland agent that the sellers of a certain property would refuse to accept anything lower than $420,000. So the buyers offered this and were pleased when it was immediately accepted. Less than a year later they needed to sell and discovered, to their horror, that the best price they could get was $400,000. Moreover, they found out that their sellers had listed the house for sale for $350,000. So Cassie and Luke had paid $70,000 more than the sellers' (undisclosed) asking price. Queensland's Fair Trading Minister commented in API on how these buyers might get compensation from a Claim Fund on account of the licensed agent's conduct. Here are the essence of my comments which API published for balance: Wouldn't you love an agent to sell your property for $70,000 more than you had listed it for? It beggars belief that in this case the agent was not also rorting the seller in some way. Whatever, this sort of despicable scam can happen anywhere in Australia. Crooked estate agents are not confined to Queensland. If you have lost money as a result of being misled by an agent this way (or in any other way), every State and Territory has a government-established fund from which you can claim compensation. Whether you get any compensation, however, is another question. As well as making a claim on the relevant fund, ripped-off property buyers also have the right in every jurisdiction to take appropriate legal action to sue dishonest and deceitful agents (and the agencies for whom they work) for the damages they have caused. Whether your legal action will be successful, however, is also another question. But the more defendants you sue, the better your chances generally are. The best protection (for buyers and sellers alike) against the rorts of real estate racketeers will always be to obtain sound legal advice from an independent conveyancing solicitor before signing anything. After the event you will need to seek out an experienced litigation lawyer before jumping from the ripped-off frying pan into the damages/compensation fire. Courts and Tribunals can be good places to stay out of, unless you are aware of the financial and emotional costs involved.and appreciate the importance of legal representation at every stage. It is easy to point the finger at out-of-towners like Cassie and Luke for foolishly not following the recommendation in the Queensland government's pre-contract Warning Statement about getting independent legal advice and an independent valuation. No government has yet worked out how to protect consumers completely from their own trusting and often reckless natures, but to date most efforts have been pretty lame. In Queensland the statutory Warning Statement is overly wordy (more than 1,000 words filling two standard pages), it looks little different from the other forms and papers buyers are given and have to sign for. And guess who is permitted to prepare and present this crucial warning to buyers? You guessed it: the real estate foxes are permitted to give the consumer chickens this "Beware of the Foxes" warning! That's right - the very foxes which consumer chickens are being warned about are incredibly expected by a dopey government to assume this critical consumer protection role. No matter that the words of warning can be easily covered up by a fox's paw when buyers are asked to sign. If a government foolishly trusts agents to properly warn consumers, then why wouldn't simple folk also trust the same licensed agents to deal fairly and honestly with them? Consequently in Queensland, despite the intent of the Warning Statement (which must be attached as the first page of the contract), the vast majority of residential contracts are duly signed by buyers in the presence of sellers' agents without any independent legal advice. And you could count on the fingers of one hand the number of buyers who, as a result of reading the warning, have obtained pre-contract valuations. Frankly, oblivious buyers are not the only ones at fault here. Governments which reprehensively green-light estate agents to prepare and sign up contracts seem unaware to the mischievous tendencies of many in the real estate industry. Lenders as well should always, in my view, be culpable if their valuations show properties being purchased are overpriced yet this vital information is not disclosed to customers. Unfortunately the Federal Court has ruled in a marketeering case that lenders do not have to reveal to customers the good, the bad or the ugly of their valuation reports. No government, Federal or otherwise, has since bothered to bring in laws to impose such a fiduciary obligation on lenders. Blameworthy also are governments which pay lip-service to consumer protection while happily permitting real estate agents and marketers to refer buyers to pet solicitors, tame building/pest inspectors and friendly finance/mortgage brokers. To my mind agents particularly should be prohibited from giving buyers so much as a bus timetable, and from recommending even the local Chinese restaurant. Needless to say, solicitors and other service providers to residential buyers should also be prohibited from acting if they are not independent of everyone else involved in the transaction. In the meantime I hope that any compensation claim made by conned consumers like those in the case study would be competently investigated by the relevant regulators. Across the nation, and over the years, the record of the handling of real estate consumer claims and complaints has often been woeful. For instance, the Queensland Ombudsman some time ago found not only that Fair Trading's investigation of a particular marketeering victims' claim was disgracefully inadequate, but also that the administrative actions in the matter constituted maladministration. The Ombudsman firstly required the Office of Fair Trading to apologise to the claimants for the mishandling of their claim. Fair Trading was then asked to immediately review its procedures and provide training for investigators to address the serious "investigative process" deficiencies identified by the Ombudsman. Needless to say, in recent months I have lodged a number of complaints with the Ombudsman about Fair Trading investigations which seem to indicate that those deficiencies still exist. Watch this space! To post your comment on this item, please return to
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OPINION
