We never hear from the good estate agents – they never attempt to “cross the line” by meddling in legal matters or seeking guidance because they are not sure about their role. The good estate agents are are professionals who know their industry, the laws that govern and regulate their industry and the norms and procedures required to ensure that all parties’ interests are protected. Our policy for dealing with estate agents is not directed at the good estate agents. Rather, it has been adopted out of necessity, to protect our clients from commission-driven and non-agent employees of estate agents, who use titles such as “Sales Consultant” or “Property Executive” or “Sales Manager” or “Residential Real Estate Specialist”.
The good estate agent
There are good real estate agents, and then there are bad estate agents. The good estate agents are easy to identify, simply because we never hear from them.
How the good estate agent works with us and with our vendor client:
1. No attempts to “refer” the client to a favoured lawyer or conveyancer
2. No false sense of urgency or pressure to act impulsively
We have to “keep them on the boil” is a comment some estate agents use.
3. Referring consumers to their legal representatives for legal advice, rather than offering their own opinions or understandings
Not criticising sale documents to the client. [Example GRASBY matter where Carter agents wanted auction conditions – see emails and eventual backdown]
Not drafting special conditions.
Not attempting to “salvage” a problematic sale.
4. Allowing the conveyancing process to proceed unhindered
Not arranging changes to the contract
Not negotiating changes to the settlement date
The unhealthy relationship between estate agent and legal representative
Conspiracy against the client
Over the past twenty years we have noticed that the relationship between the estate agent and the person providing legal services in a real estate transaction often becomes what could be described as a conspiracy against the client. In any other industry such conduct would be branded as “anti-consumer”, but in real estate it has become regarded as something of a necessary evil.
How we avoid pressure from estate agents
[Mention section in the legal profession act that prohibits influencing an incorporated legal practice]
The vendor is the boss!
The person who has to make the most important decisions for the outcome of a real estate sale is not the real estate agent, but the vendor. In other words, the vendor is the boss. Typical situations where a vendor may have to make an important decision include the following:
- The real estate agent feels that information in the Vendor Statement may affect your sale, and wants to have it removed or deleted.
- You are concerned about the truth or accuracy of information in the marketing material provided by the estate agent.
- The agent wants you to include additional information in the Vendor Statement or contract.
- The property has not sold as quickly as anticipated, and the real estate agent advises lowering the price.
- You feel that the real estate agency is not performing well enough, and you want to engage a different agency or agent.
- The purchaser wants to include onerous special conditions in the contract, and the agent wants you to allow this rather than lose the sale.
- The purchaser is struggling to obtain finance in the time allowed, and the agent wants you to agree to an extension of time.
What often makes these decisions all the more difficult is that they also affect both the real estate, and the agency that employs the agent.
Vendor interests vs real estate agent interests
The owner of a leading real estate agency described the relationship between the agent and the vendor quite succinctly when explaining real estate sales to a newcomer to the industry:
“Once you sign the vendor up, the only thing standing between you and the commission is the vendor himself. You have to learn to condition the vendor.”
In other words, a vendor can become an impediment to the real estate agent’s goal of securing a commission. The dot points above are just some of the decisions that can affect an estate agent’s commission. “Conditioning the vendor” is the term used by real estate agents to describe the process of manipulating the vendor and the sale transaction so that a sale can take place and a commission paid before the agency contract expires. The problem that this creates for the vendor is that it sets the real estate agent against the vendor.
Most real estate agencies operate on a “no-sale, no-commission” basis. This means that the real estate agent has only a limited period of time in which to make a sale, or risk the vendor appointing another agent. Obviously, the pressure to achieve a sale, any sale at any price, is quite extreme. It is this pressure that often forces real estate agents to go to extraordinary lengths to have a contract signed, and to ensure that a commission will be paid.
The imperative to ensure that a sale takes place, and to make the vendor liable to pay a commission creates a further conflict – with the vendor’s legal adviser.
Estate agent vs vendor’s legal adviser
Real estate agents don’t like it when the vendor’s legal adviser keeps the vendor in control. Here are some examples:
Awakening the sleeping dogs. You may be familiar with the saying, “Let sleeping dogs lie.” This old saying has application in real estate transactions when it comes to alerting the local council to building works completed without a permit. Some real estate agents like to see Section 32 Vendor Statements padded out with as many certificates and documents as possible, usually for no better reason that to give the impression that the purchaser will not need to check anything beyond what is in the sale documents. However, it may be detrimental to a vendor’s sale if unnecessary documents are added, and the building approvals certificate is just one example. We would often receive letters from real estate agents listing the documents and certificates they wanted included in the Section 32 Vendor Statements, but with little understanding of the problems that their demands could create. Lawyers and conveyancers are advised against including a building approvals certificate in Section 32 Vendor Statements unless specifically instructed to do so by a vendor, and then only after advising the vendor of the problems this can create. Ordering one of these certificates can trigger a building inspection by the local council, and if non-permitted building works are discovered, the council may be duty-bound to issue a demolition order. Even a perfectly built structure that has been in place for decades could be affected, just from ordering a certificate. In the past we have experienced real estate agents who, instead of passing on the explanation we have given, simply tell the vendor that we are not being co-operative.
The $50,000 electricity connection. We were acting for a purchaser, who told the real estate agent that it would be a condition of purchase that the vendor should have electricity connected to an outbuilding on the vendor’s property. The real estate agent contacted the vendor’s lawyer and told them that the vendor had agreed to the special condition, but required the lawyer to provide appropriate wording. The special condition was prepared and inserted into the contract. The vendor simply signed the contract at the agent’s request, but later realised that connection of the electricity would cost $40,000 because a power pole had to be installed. The vendor could not afford the cost, and eventually agreed to a price reduction of $50,000 so that the purchaser would settle and attend to the power installation himself. Had the vendor’s lawyer refused to deal direct with the real estate agent, the vendor could have avoided this problem.
The building inspection. The purchaser wanted an special condition inserted into her offer so that the sale would be subject to a building inspection. The real estate agent wanted to replace the purchaser’s special condition with one limiting her right to end the contract to a situation where there was a “major structural defect”. We advised the vendor that doing what the agent wanted could result in a legal dispute over the meaning of “major structural defect”, and that the purchaser should be permitted to use the special condition of her choice. The estate agent contact us and demanded that we advise the vendor to use the “major structural defect” special condition because he did not want to have to sell the property again if the purchaser cancelled. We referred the agent back to our client, but advised our client to stay safe by refusing the agent’s request.
Change of settlement date. The real estate agent entered the wrong settlement date into the contract, but told the purchaser he could change it later. The agent then told us and the purchaser’s lawyer that the parties had agreed to a change of settlement date, but when we checked with the client she informed us that she had not agreed. The purchaser’s had relied on what the agent had told their lawyer, and cancelled their lease and moved their belongings from interstate. The agent tried to fix things behind the scenes by again telling the parties’ lawyers of negotiations he had supposedly made. As a result, our client was threatened with court action and damages in excess of $20,000. The situation was saved only because the change of settlement date required the vendor’s signature, and the the real estate agent’s emails were not sufficient to bind the vendor.
Estate agent gives false information to vendor. The purchaser had not paid the deposit, but the real estate agent did not follow up. In order to cover up this failure, the real estate agent told us that the vendor had agreed to allow the purchaser an extension of time, both to pay the deposit and for the purchaser’s home loan to be approved. In fact, the home loan condition had expired and the deposit was well overdue. To further cover up his mistake the real estate agent contacted the purchaser’s conveyancers and advised them to write to us seeking an extension of time for the loan condition and payment of the deposit. When we checked with the vendor it was revealed that there had been no agreement, and the vendor knew nothing of the real estate agent’s communications with us or with purchaser and their conveyancer.
Mistakes and cover-ups
Estate agents regularly make mistakes when dealing with vendors and purchasers before the sale, preparing and receiving offers and conducting post-sale negotiations. When mistakes are made the most common approach adopted by the agent is to attempt to blame someone else – usually the vendor or the vendor’s lawyer. Examples of estate agent mistakes include the following:
- Missing page from the contract. The real estate agent had concluded the sale, but an important page was missing. The real estate agent attempted to blame us for preparing the contract without the page, but had to accept responsibility when it was confirmed that he had received a single PDF document which included all pages. The real estate agent then attempted to blame the client, who had printed a hard copy and delivered it to the agent. However, the agent had used the PDF document to print his own hard copy for use in the sale. Only when undeniable proof was put to the agent did he admit that the mistake was his.
- Costly post sale negotiation. The agent prepared a contract for a sale at a higher price (see file 140909p1355N for full details……………………….)
The Chinese whispers game
Chinese Whispers is a game where a message is passed from one party to another through intermediaries, resulting in the final interpretation of the message being quite different from what was initially stated. The Chinese Whispers phenomenon often occurs in real estate transactions where real estate agents convey information supposedly gleaned from conversations with various parties to the sale transaction. While an incorrect interpretation may sometimes be the result of an innocent misunderstanding, all too often it can be the result of a deliberate distortion.
An alarming trend has developed in the real estate industry, with some real estate agents bypassing the vendor and making direct contact with the vendor’s legal representative. Clients who experience this often complain that the real estate agent is “treating me like a mushroom“.
We ensure that your conveyancing transaction is a mushroom-free zone, by preventing the real estate agent from
Instruct your agent NOT to make direct contact with the purchaser, and to communicate only through the purchaser’s legal representative. This is because the agent represents YOU, and not the purchaser.
Working with your estate agent but not for you estate agent
Some estate agents confuse the concept of working “with” the estate agent with working “for” the estate. The goal of the estate agent is to win a commission by assisting the vendor. Unfortunately, winning a commission often requires the estate agent to work against the vendor, particularly if the vendor is reluctant to accept a low offer and the estate agent risks losing the sale to a competing estate agency. Our policy ensures that we always work “with” the estate agent in terms of ensuring that your rights and interests are protected, while simultaneously avoiding any situation where the estate agent assumes control of your matter by making direct contact with us.
Seeking personal information over the telephone
Another common problem is where the estate agent calls on the telephone to ask for personal/private information about the client. Some estate agents want as much personal information as possible so that they are in a position to track down a vendor client if the commission is not paid. It is a form of pre-emptive intelligence gathering for the purposes of debt collection – the information is then passed on to a debt collector for use in locating a vendor who has sold their property and moved house without providing the estate agent with a forwarding address.
Estate agents wanting us to obtain floor plans
Estate agents wanting us to act as debt-collectors against our own clients
Adding special conditions and telling the client that we approved the wording
Negotiating a deal that generates a commission while generating anger as between the parties
Replacing our contract and claiming that we approved
Removing documents from the Section 32 Vendor Statement
What is an estate agent?
The average vendor is not aware that the person they deal with on a day to day basis during the advertising and marketing of their property is not really a real estate agent at all. In most cases the person handling the sale on behalf of real estate agent is actually an Estate Agent Representative, and not a fully qualified real estate agent.
No need for agent to contact us, as we always send the sale documents to the client for checking, and then delivery by the client to the real estate agent. We never send documents directly to the real estate agent without the client having had the opportunity to check and approve them first.
A client may change real estate agents numerous times. This can result in the changing of sale documents, and receipt of new requests for various certificates. In some cases real estate agents have wanted fresh documents simply to remove any trace of the previous real estate agent’s involvement – all at the vendor’s cost.
FTF (Frequently Told Falsehoods)
Too many disputes (examples)
Time for legal action – estate agent refused to follow up with purchaser to collect the deposit, telling the vendor that the lawyer should launch legal action immediately.
“My real estate agent told me that he will hold my deposit money (this is the purchasers deposit $) until I repaired the fence, which was damaged by third party, and I believed him until I asked Peter for advice. The ironic thing is that I hired this agent, to represent me in the sale of my house! I paid him $8K in commission, for creating unnecessary confusion and anxiety! And at the end, it turned out that the agent was not only wrong, but also became quite aggressive when he realised that he had been caught out giving incorrect advice. My advice to others is that they should never accept what the estate agent says without first checking with Peter. After all, Peter is a lawyer, conveyancer and licensed real estate agent all rolled into one.” G.E., Campbellfield