Escorted inspections are little more than a control device used by commission estate agents. They serve no genuine purpose, they separate the vendor and the purchaser, and they add to the expense of real estate sales.
Escorted inspections don’t make sense
Let’s examine the escorted inspection from a common-sense point of view:
The block of vacant land
No-one needs assistance from commission estate agent, or anyone else, to walk onto a vacant block of land.
Vacant land with an open shed
If the block of land has an open fronted hay shed on it the situation would be the same. There would be no point in having a commission estate agent drive to the block, simply to tell the purchasers that they are looking at a hay shed on a vacant block.
Derelict house on land
A property is for sale for land value only, because the old house has fallen into disrepair. The house is structurally sound, but has no doors or windows, and is easily accessible. Again, there is no need for the involvement of a third party if potential purchasers would like to examine the land and look inside the house.
Vacant house on land
A property is on the market, and prospective purchasers would like to look inside the locked but empty house.
A commission estate agent may be of some assistance in unlocking the house so that the purchasers can look inside. However, the commission estate agent would have
difficulty in providing full and accurate answers questions about recent renovations and cosmetic work performed by the owners.
Because the owners themselves attended to all of the works, they decide to provide access personally. The owners are able to answer a variety of questions about the age of the home, the origin of some of the building materials used, and the reasons for the works.
Nobody knows a property like the owners.
Given that there has been no reason to involve a commission estate agent in any of the previous examples, what possible reason could there be for using a commission estate agent to show potential purchasers through an owner-occupied home?
Does it make sense to have people who don’t know the home shown through the home by another person who doesn’t know it?
The commission estate agent can only relay to the purchaser what the vendor has told her, so why not have the vendor answer the purchasers’ questions? Wouldn’t the purchaser prefer to deal directly with the person who is giving the commission estate agent the information she is passing on?
Who is the commission estate agent supposed to be assisting? Is she trying to convince the purchasers to buy the house (purchasers hate being told what they want), or is she helping the vendors by acting as a usher and messenger (at a huge and unnecessary cost to the vendors).
Usually the vendors will never know exactly what the commission estate agent is contributing to the sale, because they will have been ordered out of house. (Commission estate agents don’t like vendors to know what goes on during inspections. Why? Because there is nothing of value that the commission estate agent adds to the house inspection.)
Having a commission estate agent involved in the inspection process simply does not make sense. Escorted inspections are an unnecessary imposition on both vendor and purchaser.
The hidden cost of escorted inspections
Escorted inspections are extremely expensive to the commission estate agent. The cost in time and fuel to the commission estate agent, in driving visitors back and forth to properties can reach the point where a property becomes a liability.
What is a commission estate agent to do when a property generates a high number of visitors, but does not attract any offers? The commission estate agent must either direct enquiries to other properties (in which case the vendor’s advertising dollars will be wasted), or convince the vendor to lower the sale price in order to make a quick sale.
In all cases, the escorted inspection becomes time-based. The longer the property remains on the market, the greater a liability it becomes, particularly if there is also a risk that the vendor will put it into the hands of a rival commission estate agent.
As the sale progresses, so too does the pressure to sell. This pressure may eventually result in commission rage.
The cost of the escorted inspection eventually becomes a cost to the vendor in terms of a lower asking price, particularly where commission rage becomes a factor.
How escorted inspections impede the sale
Escorted inspections actually impede sales by restricting the opportunities for purchasers to view the property.
Any inspection requires a coincidence – the vendor must be ready to receive the purchaser at the same time as the purchaser is able to visit. When a third person in the form of the commission estate agent must also be included in the arrangement, it must be a three-way coincidence.
Commission estate agents cannot know every detail of every house, and so a great deal of time is wasted in contacting the vendor with purchasers’ enquiries, and then getting back with answers. It is not uncommon for commission estate agents to simply guess or even make up answers on behalf of vendors, particularly when parties are becoming impatient.
Theft – a major problem
The risk of theft is a major problem in escorted inspections. The lack of security, the pressure on agents to preserve the integrity of the procedure, and the undesirable consequences associated with becoming involved in the criminal justice system all work against the vendor and in favour of the thief.
Commission estate agents are not permitted to take responsibility for security (they would have to be registered as security guards, and wear identity numbers if they did).
Workplace safety and personal insurance issues also prevent estate agents from having any role whatsoever in providing security during property inspections.
Security remains the responsibility of the vendor, and the only way a property owner can prevent theft is to be physically present each and every time a visitor is given access to the property.
Misleading & Deceptive Conduct
A commission estate agent who leads a vendor client to believe that security is provided during inspections may be engaging in misleading and deception conduct, contrary to the Trade Paractices Act. Further, the commission estate agent risks breaking the law by allowing the vendor to believe that her home and personal property are being protected during escorted inspections, even though the commission estate agent may have said nothing to create this impression. In its publication “Fair and Square: a guide to the Trade Practices Act for the real estate industry” the ACCC states:
“Remaining Silent – For real estate agents silence is not golden – on the contrary, you should be open and frank with clients and customers. By remaining silent where you have a duty to disclose something of concern to a client or a potential buyer, you risk breaking the law.”
An estate agent is unlikely to volunteer as a witness if anything is stolen during an inspection. Consider the following:
- Is the estate agent likely to accuse a visitor of theft, particularly when there are no other witnesses, and where the thief may have a witness of his own present?
- How does the estate agent prevent the thief from leaving? Does the agent make a “citizen’s arrest”, and risk being charged with the criminal offence of “False Imprisonment”, or being sued for making a false arrest?
- If a local newspaper reported that an estate agent had caught a thief during an inspection, how would other vendors feel? Would they allow estate agents to take potential thieves into their homes? Would the estate agent’s boss praise his actions, or criticise him for being foolhardy, and for making escorted inspections appear risky?
- The agent accuses a woman of theft, and the police are called. The woman denies everything, and accuses the agent of having behaved improperly with her when they were alone in the vendor’s home. What damage could this do to the agent’s reputation and that of the agency he works for.
- Estate agents don’t want to become involved. They won’t be paid for time spent making police statements and attending court hearings.
- It may be impossible to know exactly when a theft has occurred. There may have been other inspections between the time of the theft and the point at which the vendor realised that the theft had occurred.
- When told that a theft has occurred the estate agent is unlikely to say, “It wasn’t me, but it may have been one of the visitors I took through the house.” Rather, the most likely to response will be, “Well it didn’t happen while I was there, and if it did I would have reported it.”
Protecting the thief
Reluctance to assume role of witness is likely to develop into a form of protection for the thief. Whether he was aware of the theft or not, the estate agent is likely to declare that it was not possible for any visitor of his to have committed the theft because all visitors were under strict observation for the entire time they were in the home.
Because the estate agent has the vendor’s permission to invite people into the vendor’s home, such people are regarded by insurance companies as “invitees”. Insurance does not cover thefts committed by invitees.
Conclusion – Who’s Responsible?
Just think about the situation where a commission estate agent escorts strangers through a vendor’s home and the vendor subsequently discovers that something is missing. The vendor may simply accept that items may go missing during inspections, or may blame the commission estate agent. Both the vendor and the commission estate agent may blame the visitor. What if the theft is not discovered until the second visitor is shown through?
Everyone is at risk – the vendor risks the loss of personal effects, while the commission estate agent and the visitor both risk loss of reputation.
Visitors are entitled to believe that they are being properly invited into a home, and that the person inviting them has the authority and the responsibility to protect them from being wrongfully accused. Only the true owner of the property has such authority.
Other risks associated with escorted inspections
The risks associated with escorted inspections include the lack of security and insurance, the opportunity for estate agents and purchasers to collude against the vendor, and illegal conduct on the part of commission estate agents acting as unlicensed security guards.
Liability for unlicensed security guards
An estate agent whose role includes watching over a clients’ belongings during inspections must hold a security guard licence under the Private Agents Act 1966.
Where an estate agent acts as an unlicensed security guard, the vendor may be liable for the behaviour of the estate agent when dealing with a person who is in the vendor’s home as the vendor’s invitee.
Agent integrity issues (collusion)
Some purchasers will prefer to be escorted through a property by an estate agent because they know that the estate agent can be used to their advantage. Secret conversations between purchaser and agent can lead to improper collusion, resulting in the purchaser buying the property for a lower price, while the agent gets a sale.
This is known as turning the vendor’s agent into a buyer’s agent.
The violation of personal property has been likened to rape. The knowledge that a stranger has rummaged through personal effects in a person’s own home can leave that person severely traumatised.
In an article in The Age’s Sunday Life magazine (March 3, 2002 p.12) Melinda Houston writes of estate agent Claire Upton:
“She’s constantly amazed and sometimes distressed by the behaviour of people during inspections: they have no qualms about sitting on the furniture, handling various objects, having a squiz in the bedside drawer. ‘We’re always very mindful of the fact that we’re in someone’s home, but purchasers rarely are’ she says.”
The fact that the commission estate agent is constantly amazed indicates that this kind of behaviour happens a lot when commission estate agents are showing people through homes. It also indicates that agents don’t do anything about such behaviour (they really don’t want to get involved in any trouble between visitors and the vendor).
But when the person visiting the house knows that the owner of the house is present, there is a natural respect that comes with being the owner’s guest. Our clients report that visitors always seem to be “on their best behaviour”, and like to have the vendor nearby as they look through the house.
Visitors feel comfortable when the vendor is present as they inspect the house; not only because they can ask questions as they look, but also because they feel safe knowing that they really can’t be accused of anything if they’ve stayed in sight. (It’s a bit like counting money in the presence of the person who hands it to you – you know that it’s all there, and the person who gives it to you is satisfied that you have accounted for the full amount.)
This is one of the major reasons why visitors actually prefer to inspect homes with the vendor rather than a commission estate agent.
We advise our clients to allow people to look through the property, but to be nearby to answer any questions. Genuine prospective purchasers expect the owner to be nearby during inspections, and will be more courteous to the owner of a home than to a commission estate agent who lives somewhere else.
Inability of purchasers to obtain accurate information
The estate agent is never able to provide all the answers to purchasers’ questions, and this can annoy purchasers. The vendor should always be available to answer questions about the property, and to confirm any preliminary comments made to the purchaser by the agent.
Exploitation as “impressions parade”
Escorting one visitor to one property after one enquiry is expensive for any estate agent. However, by taking one visitor to a number of properties in one trip, the estate agent is able to impress two or more different vendors with her efforts.
The problem for the purchasers is that they are being taken to properties they have not enquired about. The vendor suffers the inconvenience of having his property used by the estate agent to impress people who may not be at all interested in that type of property.
The vendor whose property brought about the enquiry in the first place would also be disappointed to think that her advertising dollars were being used in this way.
Agencies as unlicensed security firms
Any estate agency that tells clients that its agents will “keep any eye on things” when visitors are shown through properties is, according to the Private Agents Act 1966 an unlicensed security firm. This put both the agency and the vendor at risk.
Agents as unlicensed security guards
An estate agent whose role includes “keeping an eye on things” during inspections becomes an unlicensed security guard under the Private Agents Act 1966.
Agents as unlicensed crowd controllers
An estate agent whose role includes ensuring that visitors and their children do not misbehave in the vendor’s home becomes and unlicensed crowd controller under the Private Agents Act 1966
Why do agents use escorted inspections?
You would think that the risks associated with escorted inspections would deter commission estate agents from using them. The problem for the commission estate agent, however, is that not using them means that it may be difficult to secure the commission.
It is extremely difficult for a commission estate agent to prove that she actually made the introduction, particularly if the purchaser does not want to become the “meat in the sandwich” during a legal squabble between vendor and commission estate agent over the payment of commission.
How should inspections be conducted?
As discussed above, when the person visiting the house knows that the owner of the house is present, there is a natural respect that comes with being the owner’s guest.
Visitors always seem to be “on their best behaviour”, and like to have the vendor nearby as they look through the house. There is also much less pressure for all parties, because the vendor wants the visitor to take an interest in the property, while the visitor does not want to feel under pressure to move on to the next house on a commission estate agent’s list.