18 Mar Property sellers beware + Chinese buyers get a BIG bonus
Did you know that investing interstate is something that few Australians do? No matter how much research you do, there is always the concern that the property you invest in won’t perform. Add an interstate location to the mix – meaning you’re not able to see, visit and drive by, can create enough ‘fear of the unknown’ to stop investors from taking any action at all. It leads many investors to only invest in their own backyard. How can you make sure you’re not one of these who lose out? Michael Yardney helps with some solid suggestions.
Rob Balanda from MBA Lawyers sees many inexperienced developers come to grief over easements. They may sound innocuous but they can mean the difference between making money and not or even being able to develop the site. Rob talks about what you can and can’t do with easements.
You might have seen the ads on TV that promote a website that offers sellers the opportunity to get assistance to select the best agent to sell their property. Mixed with that is the inference that if you go with them you will get up to $100,000 over your reserve. The site is Open Agent. There a number of similar sites offering the same inducements. We look at those promises today, talk to an agent about them and ask the Open Agent CEO to respond.
Chinese property buying power in Australia has surged over the last five years. Even though we are paying more for property, mainland Chinese are paying less – up to $70,000. Hear why as we talk to the chief of the biggest Chinese buyers website in the world.
We talk to an interior designer who shares some do’s and don’ts if you are preparing to sell a property.
Also hear that Chinese are not the only overseas buyers eyeing off Australian property and why Tim Lawless says lot sizes are reducing.
Kevin: Hi once again. Of course, despite rising property prices in most Australian capital cities, the Juwai.com Chinese purchasing power index for Australia shows that buyers holding yuan in the first quarter of 2016 have the equivalent of more than $70,000 (AUD) in increased purchasing power when buying an average priced Australian home, compared to four years ago. That’s staggering information. Joining me to discuss that is the CEO for Juwai.com, Charles Pittar.
Charles, what impact is this having – that you’re seeing – for the popularity of Australian property?
Charles: Price is always important for a Chinese investor. Australia has been a very popular destination for a number of years, and now with a currency devaluation and the corresponding increase in purchasing power from the Chinese consumer, it essentially makes Australian property more affordable and more attractive.
Kevin: What sort of affordability levels are the average Chinese buyers looking at? What sort of purchasing power do they have, Charles?
Charles: It’s a good question. I think there is a tendency for people to assume that every Chinese buyer is looking for a multimillion dollar, very expensive property, but the reality is at Juwai, we’re getting 2.5 million unique visitors to our site every month and on average, 70% of our visitors are looking between $500,000 (USD) and $1.5 million (USD).
Obviously, that means 30% are looking for more, so luxury properties are still very appealing – there is demand there, clearly – but $500,000 to $1.5 million corresponds to 70% of our audience.
Kevin: What are you seeing through your website as to what makes a property popular for Chinese buyers? Is it the location?
Charles: Over the years that we’ve been in operation, we’ve found that there are four main motivations as to why people come to us. The first motivation is investment, and clearly as the Australian dollar devalues, that becomes more attractive.
Lifestyle is very important. Outbound travel from China internationally is at record highs, and clearly, we get a lot of visitors to Australia. As they visit destinations and fall in love with them, they want to buy in that location, so lifestyle is very key.
I think that education is probably the one that Australians are still getting their head around. Education is now Australia’s second largest export, second only – obviously – to resources. It’s larger than tourism. As Chinese parents are sending their children to Australia, they need somewhere safe and clean near a university where their child is going to be studying, and so looking for a property – whether it’s a new home or even rental accommodation of a sufficient standard – is a really key motivator
The fourth one is immigration. Around the world, there are a number of countries now that have residency status coupled in with an investment. Australia has that to a certain extent, as well, so immigration is really the fourth motivation.
Investment, luxury, education, and immigration are the reasons why our Chinese consumers come to us.
Kevin: Let’s have a look at a few of the areas that you’ve probably detected on your site are the most popular areas in terms of where they’re searching. Do you have any statistics to tell us about or any suburbs in particular?
Charles: I think it’s interesting that over last year, we saw Queensland actually become the most popular state. Actually, it’s jumped ahead of New South Wales for the first time. We found that to be a pretty interesting broad assessment of where the Chinese are looking.
Clearly, Victoria, New South Wales, and Queensland are the three most popular states. We are seeing an increase in Western Australia – North Coogee, South Perth, and other locations that potentially have seen a decrease in home value evaluations as resources has come off. I think the Chinese are looking at those locations as a potential opportunity because clearly, everything’s cyclical – resources will come back – so I think there’s potentially some bargains to be had in those areas.
Home and land packages – either outside of Melbourne and certainly in Sydney and western Sydney – are very, very popular, which is probably connected with an education motivation. In New South Wales, it’s not all about Mosman and Vaucluse. Obviously, they remain very popular. Waterloo, Collaroy, Port Macquarie and Bankstown are locations that we’re seeing quite a bit of interest in, as well.
Kevin: You mentioned that Queensland for the first time, I guess, is outstripping New South Wales in terms of its popularity. Does that come down to affordability? Is New South Wales becoming less affordable for Chinese buyers?
Charles: Look, I think it is partly to do with affordability, but there’s also just that Queensland is such a wonderful destination. Yes, for sure, I do think that low home prices are important. There’s a lot of new construction going on in Queensland. While secondary property in Australia is obviously always popular to a certain extent, the Chinese do love to buy new homes and new apartments. The construction that’s going on in Queensland, particularly on the Gold Coast and on the coastal areas, is really driving significant demand.
It really comes down to lifestyle, as well. As I said, they travel to Queensland, they fall in love with certain locations, and they want to buy there as a holiday or a lifestyle destination.
Kevin: Charles, thank you once again for joining us today and giving us a bit of an insight into those Chinese buyers. Of course, we’re very, very interested in anything they’re doing. It’s always good information. Thanks very much for your time.
Charles: It’s a pleasure, Kevin. Thank you.
Kevin: I want to read you a post that I read on Facebook regarding what I believe could be very misleading advertising. That’s actually the way it’s purported in this article, too. I’m going to introduce the writer to you in just a moment.
Mark Dwyer writes: “I’ve seen the same advertisement appear at least 20 or 30 times with the same subtext: Hear how Wendy sold for $100,000 above her reserve price with the agent recommended to her by, in this case, it was a company called Open Agent. You might have also seen the television ads that say exactly the same thing.
“Curiously, the image always changes from one property to another, so they can’t all possibly have belonged to Wendy. But it appears that they – that is, Open Agent – would like you to think so.
“The Wendy text clearly suggests that Open Agent recommended the agent. Yet, in the following text, it now reads ‘Compare local agent sales and reviews, and see who is best. Sell faster and at the best price free and independent service.’”
There are a number of those words in this post by Mark that have been treated with an asterisk. I’ll give you an example of a few of them: best, sell, faster, best price, free, independent and service. He makes the point that these are onerous, and in his opinion, a real estate agent making these suggestions would be held accountable for this type of advertising.
Mark Dwyer joins me. Good day, Mark.
Mark: Hi, Kevin. How are you?
Kevin: Good, mate. This is not something where we’re picking just on one website because there are a number of websites like Open Agent, aren’t there?
Mark: It’s almost like an awakening commercially for a number of ventures where they’ve realized that agents, for years, have paid each other in kind and reciprocated with referrals and paid each other 20% of the fee gained. They’ve taken advantage of this, really. I can’t think of any other way to say it.
They’re kind of taking advantage of agents by recognizing that there is an in for business and they’re doing it under the pretense of referring people or trying to portray to the public that they’re referring them, knowing them on the same sort of basis that agents know each other, for commercial gain.
Kevin: I think Troy makes a very good point. He responded to your post and said one of the things that they don’t say is that they’ll only then refer you to one or two agents who are prepared to pay them their referral fee. They’re aiming for 20%, which is industry standard.
It’s a case of not necessarily referring them the best agent for the job – that is, for the seller – but only the best agent for the middle man – that is in this case, Open Agent. While they purport to give you a list of all of the top agents in an area, they’ll only ever refer you to someone who commercially has said they’ll pay them a referral fee.
Mark: This is where the onerous part comes in because the inference that they created is that they’re referring people as a free service to a commercial service, and what they fail to disclose is that if the agents refuse to agree to their terms and conditions – in other words, sign up for them – then they’ll be precluded from being referred.
Ostensibly, what that then means is if I’m getting a referral from an agent and the best agent in that area has decided not to participate in this particular service offered, then they’re not referred. Again, I say how can they say that you’re getting the best agent in the area if that agent decides not to participate?
Kevin: The other thing that I really take exception to is the style of advertising saying that because Wendy, in this case, took the advice and took on one of their agents, they actually got $100,000 over their reserve, which, really, is one of the things that in a lot of states around Australia, agents are being castigated for because they’re being accused of low-balling.
Mark: Precisely. The thing that prompted this post on social media in the first place is that for all intents and purposes, these particular companies are operating outside of the very guidelines that estate agents would be required, whether it be by internal regulatory bodies like the institutes or, indeed, the regulators themselves in each state.
We would just hit all sorts of trouble if we were making these claims. Yet, for want of a better way of saying it, these organizations are not licensed real estate agents, but they’re behaving or operating as such and there is no regulation whatsoever as to what they do and say whereas the real estate agent would be absolutely, as you say, castigated.
Kevin: What reaction have you had from the various institutes around Australia about this issue?
Mark: Aside from social media, I did call upon them to make comment. Thus far, they haven’t. They should. In the protection or the interests of the members themselves, they should be saying something because certainly, if this was actually happening between two members inside the institute, I would suggest here that they would be intervening almost immediately.
For some bizarre reason, because these third-party referrers are operating not as real estate agents but just as standalone commercial ventures, they’re getting away with it.
I think it’s also important that we recognize exactly what they are. All they’re really doing is bringing inquiry in, they’re collating data, and they’re just grabbing that data and seeing who is making sales in the area.
Their first priority is making sure that that agent has signed on with them and agreed to pay the 20% referral. In the second instance, they’re looking for the best, but they’re not actually referring the agent; they’re referring several agents, three, four, five, or as many as it takes. For want of a better way of saying it, they’re hedging their bets.
Kevin: Yes, leaving it up to the individual to make the decision, but they’ll only ever recommend anyone who has agreed to pay them the 20% in this case.
There are so many issues. We’re out of time on this, unfortunately. Many, many issues. I want to canvas it. Have you had an experience with one of these organizations? Give us a call and let us know. We’d love to have your feedback on it, too. You can do it through our website if you like. Kevin@RealEstateTalk.com.au – that’s the e-mail address – or just go to RealEstateTalk.com.au and give us some feedback. We’d love to get your comments.
We are going to actually canvas a number of these questions directly with one or two of these. I’ve mentioned Open Agent. There is another one that’s called Sell My Castle. Are there any others that you’re aware of, Mark?
Mark: Rate My Agent is purporting to just, as its title suggests, rate agents, but they’re eventually going to move into the same space. There are any number of companies now that are eyeing off an opportunity to cut into 20% of agents’ fees.
Kevin: As a consumer, it certainly looks very attractive, but I think you really have to ask some questions about what sort of agent they are referring to you and how they are deciding that it’s the best agent to suit you.
Mark: This is what is not understood. It is actually costing the consumer because the money that is being paid to these third-party referrers must come from somewhere, and it’s originating from the consumer. You, as a consumer participating in this, are actually putting more pressure on the agent to charge you more money. That needs to be understood.
Kevin: Be aware. Question it, by all means. If you want to contact Mark or read a little bit more about this, just go to his Facebook page, Mark Dwyer Real Estate Sales Trainer.
Mark, thanks for your time.
Mark: Thank you very much, Kevin.
Kevin: Quite often in the show, we talk about the pros and cons of buying inter-state, buying almost without seeing the property. There are people who believe it’s a good idea and other who don’t think it’s such a good idea. But, you know, there are some common mistakes that property investors make when they’re buying inter-state, whether it’s sight unseen or not.
Let’s have a look at a few of those. Michael Yardney from Metropole Property Strategists joins me.
Michael: Hello, Kevin.
Kevin: I know you’ve been looking at this and you’re always giving advice on it. Let’s quickly run through your thoughts on buying inter-state.
Michael: First of all, I think it’s a good idea to consider investing outside your backyard because we know that different property markets around Australia are at different stages of their own cycle.
I think one of the things that holds a lot of investors back is not buying inter-state, so it’s definitely something to be considered. But then again, a lot of those who do buy inter-state make some common mistakes we’ve found, so maybe today is a good time to alert people to these.
Kevin: One of the big pluses of buying in your own backyard is that you know the area. That’s probably why a lot of people do it, Michael.
Michael: It’s in your comfort zone. You’re right.
Kevin: Exactly. Let’s have a look at a couple of the issues if you are buying inter-state and things you should be aware of. What’s the first one?
Michael: I think one of the traps people fall into is buying off the plan. They’re buying inter-state and maybe they can’t afford in their local state at the moment, so they’re putting a smallish deposit down and hoping that the property market is going to pick up. Also, they feel a bit more comfortable because they couldn’t really even see the property anyway. It’s not built, so they don’t feel that bad buying something sight unseen.
I think we’ve discussed before the tsunami of problems that are going to occur with people buying off the plan with finance problems, with completion, problems with levels of finish. One of the big mistakes to avoid is don’t buy off the plan.
Kevin: You do end up paying a premium in a lot of cases, as well, Michael, don’t you?
Michael: Rather than the discount you’d expect for the uncertainty of completion of standards, of finishes, of how the market is going to be, or what interest rates are going to be – you should be getting a discount for all the uncertainty – you’re right, Kevin, people are paying a premium.
Kevin: In a similar vein, I guess, buying in master plan communities, house/land packages, traditionally, you have to go into some of those outer suburban areas?
Michael: A lot of people buy inter-state because the entry level is cheaper and they think, “For my X amount of dollars, I can buy a house and some land” – a landed property as some people call it – rather than the apartment that they may only be able to get in the more expensive capital cities of Melbourne and Sydney.
The trouble is that while that may seem like a nice idea – getting something new with some land – these outer suburban segments of the market have historically under-performed, and they’re likely to continue to do so in the future because of the typical demographic of people who buy there. Young families who are price- and interest-rate-sensitive are likely to continue to do so, so they don’t make good investments.
Kevin: In the introduction, I mentioned about buying sight unseen, and I guess that’s always a temptation if you’re going to be buying inter-state, as well. Is it such a good idea?
Michael: Just recently there has been publicity in the current affairs programs about a property that were sold with photos where this huge water tank behind it wasn’t shown. Yes, despite the concept of you can have all of the photos, the videos, and the walk-throughs, it’s interesting how you can actually hide unsightly features using a good camera and exploiting the right camera angles. I’m not even suggesting Photoshopping.
I’ve heard horror stories of people who bought sight unseen thinking the investment property had an incredible view – and it actually did if you were looking out of the laundry or somewhere like that – or they didn’t realize that there were power lines that dominated the streetscape because they relied on the agent’s photos only.
The moral of the story is don’t risk purchasing sight unseen unless you have a trusted representative such as a local, not an inter-state buyer’s agent, somebody local who knows what is going on.
Kevin: One of the other temptations in buying inter-state is that you would actually buy from a marketer, that is someone who will come to your area and tell you about properties in other areas.
Michael: You’re right. I’m not saying all property marketers are trying to scam you, but there are a fair few rogues out there who add a significant premium to the property sale price that basically accounts for their commission. There is only one person likely to make a decent profit out of this transaction, and it’s not the investor. There are far safer, easier, smarter ways to invest in property than this.
Kevin: Remember the days of the white shoe brigade on the Gold Coast?
Michael: Yes, they were and unfortunately, they got a bad reputation – white shoes, gold chains, and selling properties in a two-tiered way, something that the locals wouldn’t or couldn’t afford to pay for, but making it sound good to inter-state clients because the price point is lower, so people thought, “Oh, it must be a bargain.”
Kevin: To sum it up, Michael, if you’re going to be looking at any kind of an investment, you really need to make sure that it aligns with your own goals and investment strategies and do your homework.
Michael: It does, Kevin. One last mistake people are making is actually buying advice from out-of-town advisors. We, with officers in three states of Australia, see some inter-state buyer’s agents who fly up, see a few properties, make an offer, and fly out again.
They don’t have the perspective. They don’t have the depth of experience that you need to understand what makes a good investment property in a particular location, why one side of the street is worth more than the other or one particular street is worth considerably more than the next one. You really need to rely on on-the-ground experience to ensure you minimize your risks.
I agree with you, Kevin. Buying inter-state can be a savvy, financially rewarding way of growing your portfolio, but you have to make sure it fits in with your long-term strategy.
Kevin: Absolutely. Always good advice, as usual. Michael Yardney from Metropole Property Strategists.
Thanks for your time, Michael.
Michael: My pleasure, Kevin.
Kevin: I guess one of the most asked questions of me is what do we do when we want to sell our place? What works? What doesn’t work? Let’s tap into that. Naomi Findlay is from Silk Home Staging and Styling and knows a lot about what it takes to sell a property.
Good day, Naomi.
Naomi: Good day, Kevin. How are you?
Kevin: Good. It is one of the most asked questions. What are your dos and don’ts if someone wants to sell their place and get the most for it?
Naomi: I think my number one do is make sure that you meet the market’s expectations. I think that’s an absolute first and essential thing that you need to do when you’re thinking about putting your property on the market. You need to do some research. You need to do some due diligence about where your property fits in the market and what the market’s currently expecting from your property in that price range and in that location.
Kevin: That’s pretty important, isn’t it? I’ve seen it happen so many times. If you’re asking $1 million dollars for a property, and it only has a couple of bedrooms, you’re just never going to make it. It just won’t happen.
Naomi: Absolutely. And it works both ways, Kevin. A lot of people feel that sometimes they over-meet the market. They invest too much in making their home award-winning or luxury, and the market in that area is not actually after that.
It’s about just making sure that you’re meeting the market’s expectations, with a little bit of a buffer zone on either side. That way, you’re not either, one, over-capitalizing or, two, missing the mark and – as you’re saying – asking $1 million dollars for a two-bedroom property, for example, when there’s a four-bedroom property that’s potentially a great comparison next door for the same price.
Kevin: That’s a big one. What else do you have?
Naomi: This one’s an old one but I can’t stress this enough. Having your property maintained and repaired is a huge, huge one. It’s a huge do. There’s some great evidence around to say that 90% of buyers will actually pay above and beyond to have a property where they don’t need to go in and fix other people’s lack of maintenance. A poorly maintained property isn’t really a renovator. It’s more fixing up what other people haven’t had an opportunity to attend to.
Make sure that your property is well-maintained and in good repair. Making sure that the downpipes aren’t rusted, making sure the decks are oiled, making sure that the grout’s cleaned, those sorts of things are essential to making sure that you leverage your value in the property.
Kevin: Get someone in who can help you with that, too. Quite often, we live with something and we make allowances for it and say, “It all looks fine to me,” but then someone who comes in and has never seen it is going to pick up on those things – dirty grout and stuff like that.
Naomi: Absolutely. A deck doesn’t become in bad shape overnight; it becomes in bad shape over the course of a year or two years. Grout doesn’t become discolored overnight. When we’re living in the house, it’s not that we’re dirty or that we don’t care; it’s that we don’t actually see it, and you need those fresh eyes.
Bringing someone to help you identify that, and also – as you said – bringing someone in to help get on top of that. There are so many people who specialize in domestic services nowadays that if you don’t have time, for a very small investment, you can absolutely take care of those things.
Kevin: Yes, getting your property market-ready is a big one. What other tips do you have for us, Naomi?
Naomi: This one is, again, based on numbers. I’m sounding like a bit of a numbers geek here. The evidence shows us that the biggest turnoff in a property is a dark property or a property that smells. Ensuring that you have adequate light in your spaces, and ensuring that if you have pets, or if you cook lots of curry, or if you are a smoker, that you get on top of those odors.
That’s not something that you get rid of overnight, so you need to identify early on that you’re going to go to market and be honest with yourself about your home. Spend some serious time making sure that you have adequate light in spaces and that they’re odor free, because it is absolutely number one and two in the top turnoff list for buyers when they’re looking at properties.
Kevin: If you’re looking at selling your property, Naomi, I need to ask you about staging, too. Does it work, and how do we go about doing that?
Naomi: You know what? It absolutely works. There are some great statistics around the return on investment that you can get when you’re staging a property. Staging a property is all about showing people how to live in the space.
With many of the smaller studios or apartments or even our big, open-plan spaces, only 10% of people can visualize what to do in a space with furniture. So you want to make sure that you demonstrate that for the potential buyer. In the 6 to 12 minutes that they’re looking at your property during an open inspection, you need to make sure that they can easily identify how they would live in that space. That just lets them connect to it really well.
Kevin: Naomi, thanks for your time. If you want to contact Naomi, just go to her website, NaomiFindlay.com.
Naomi: Just .com.
Kevin: Just .com. Naomi “Just dot-com,” thank you for being with us.
Naomi: Thanks so much, Kevin. Talk to you soon.
Kevin: A couple of weeks ago, we had a chat to Rob Balanda from MBA Lawyers about some of the legal things you should be considering prior to becoming a developer or moving into developing a site.
Rob, there are a couple of other considerations, too. One in particular is easements. Let’s talk that one through.
Rob: They seem pretty innocuous, but they’re what lawyers call a classic defect in title. When I see easement, I mean the right to use a property without taking something from it. For example, a right of way or a drainage easement to the local council or an easement to the energy authorities. They’re classics. The big thing about them is you cannot build over them.
Secondly, they often seriously affect the value of the property. I’ve seen even humble drainage easements running around the boundary in the setback area, which you can’t build over anyway, Kevin. I’ve seen valuers value a property down 10% to 15% because of the existence of that easement. If you buy a property, you must do proper searches and check out the existence of any easements. The thing is you buy it subject to the easements.
Things to check are, how wide is the easement? If it’s a right of way, for example, is it gated off? Do you have the right to gate it off? Does anyone have the right to lock it up? Who repairs it? I was looking at one recently where a battle-axe block, a rural property, had a 500-meter concrete easement leading to this property. That was really important. Could anyone gate it off or lock it? Who repaired it when it needed repair? Even concrete drives need repairing eventually.
Easements are a really big thing, and if there are any doubts, you should add a clause to the contract… You would expect me to say this, Kevin.
Kevin: I would.
Rob: …Add a clause to the contract making the deal subject to you checking that out.
Kevin: I know there’s another thing that we’ve discussed in the past, too, and that is getting access to the site to do some of the work that you’re talking about.
Rob: Yes. If you’re going to redevelop the site, time is money. It’s really crucial that from the date that you settle, you’re in a position to proceed immediately – you’re out of the blocks – because run-ons and time delays can be very expensive.
Include a little clause in the contract – sellers never object to this, Kevin – that says you are allowed reasonable access at a reasonable time to go onto the property to do surveys and checks and anything you need so that come settlement, you’re out of the blocks.
Kevin: Would you need to quantify that, Rob? Would you need to say how many times you need to have access?
Rob: That’s a good point, Kevin. Sometimes you need to tweak the clause. Sellers might be a bit anxious. They might push back and say, “That means you can come in at any time, any day.” You might say something like “Access hours will be Monday to Friday only, 9:00 to 5:00, and the buyer will have a maximum of six accesses during the term of this contract.” Something like that.
Kevin: It’s a funny thing with negotiations. There’s always a way around it if you just become specific. That could be an objection easily overcome.
Rob: Easily, but you have to be flexible. As an investor/developer, you have to understand you have to bounce back. Unless you educate yourself about these things, they might seem pretty trite, but they’re not really. As I’ve said to you before, it’s the micro-skills in life that are most important, rather than the macro-skills. Knowing things like that if you’re a developer can save you a lot of money and a lot of pain.
Kevin: What’s another one of the considerations, Rob?
Rob: More properties are being sold now with development approvals already open. Somebody decided a couple of years ago that this was a good idea. Now, the GFC has really hit and they don’t want to proceed or can’t proceed, I see people picking up properties now with DA approval.
A big thing about that is, make sure you have clauses in the contract that say that they guarantee that they have paid for all of the work to get that DA approval, especially the consultants, that they own the plans, and that they have copyright in any building plans or development plans, otherwise, they’ll stay with the architect and the builder – people don’t realize that – and that the benefit of all of that stuff, reports and plans and everything, gets assigned to you and the originals of all of the copies and evidence that they paid for it get delivered to you on settlement. That’s very important, Kevin.
Kevin: Yes, very important. That can actually go in as a clause in the contract.
Rob: Yes. You’d probably have a due diligence clause in the contract, as well, where you would have checked all of that stuff out. You check it all out that it’s all valid and paid for, and then the seller has to give you the originals of all the stuff on settlement.
Kevin: Rob, I want to thank you for coming along and giving us so much sound advice.
Rob: Thank you, Kevin.
Kevin: Earlier in the show, I played an interview that I had recorded with Mark Dwyer about a website called Open Agent, which is one of many of the websites that are popping up now – there are quite a few of them – that purport to work with sellers to help them find the best agent.
You would have heard some of the concerns expressed by Mark. In fairness, we’ve asked one of the CEOs from Open Agent, Marta Higuera, to join us to answer some of those questions. She joins me now.
Marta: Good morning, Kevin. How are you?
Kevin: Very well, thank you. What are the qualifications of the people who are working in your site in terms of working with potential sellers to help them get the best price? Are they qualified agents?
Marta: No, they are not qualified agents. We don’t try to replace agents here. Open Agent was born to try to help the consumer. In some suburbs in Sydney, there will be hundreds of agents in a given location, and consumers are trying to figure out which ones are the best, which ones are just coming to the industry, what they have done and what their customers have to say.
We try to provide that information to consumers, which we believe is in the best support of the industry and the best agents out there.
Kevin: On that point, you say that you’ll help them get the best agent. How do you assess the best agent? From what I can see, it’s purely on the number of sales they make. What other measures do you use?
Marta: Last year, we helped more than 10,000 people find a real estate agent.
Kevin: That wasn’t my question. What I asked you is how do you assess?
Marta: I was trying to answer your question. By talking with these 10,000 people, we know what they think about their agents. There are 30,000 or 40,000 agents that those people have worked with and we’re trying to gather the reviews. These people are telling us whether the agents are actually doing what they are telling them they are going to be doing, what kind of service they are getting on top of the sales data, which is not easily available for the average person on the street.
I think it’s a combination of sales and also their past customers experiences. We work with the top 15% of agents in the country.
Kevin: Sorry, let me ask you a question about what you said just then. You’re working with the top 15% of agents in Australia. Is that correct?
Kevin: Have all of these agents agreed to pay you their 20% referral fee?
Marta: That’s right. I know that was a concern, but referrals at 20% is industry standard.
Kevin: That’s agent to agent. That is not agent to third-party site, though.
Marta: The concern that Mark and you have, which is that agents refuse to work with us, that has not happened with those agents, because if you had worked with us… I encourage you…
Kevin: That’s not the feedback I’m getting, Marta. I’m getting feedback from agents who have said they wouldn’t deal with you for that very reason.
Marta: Kevin. Every single agent that does say no to us gets escalated to me because we want to work with the top agents.
Kevin: I’m not questioning you about the relationship you have with the people who sell with you. What I am questioning is your assertion that you’re putting people in touch with the best agents. What I’m saying to you and what Mark is saying is that it’s not necessarily the best agents; it’s only the agents you’ll refer to someone who have actually agreed to pay you a fee.
Marta: What I’m saying is that the best agents don’t say no to our referral agreement, and when they do, we try to win them over. If they don’t want to work with us and it’s the best agent for that consumer, we still recommend them to that consumer.
Kevin: You will actually recommend an agent who won’t…
Marta: We tell them, “That is a great agent.” They tell me, “I’m talking with so-and-so in this suburb,” and I say, “That’s a great agent. Do you want a comparison or not? If you’re happy with that agent, carry on.” What consumers, though, are looking for here is the comparison. We would like that you guys get to know us. We are very little and we haven’t been reaching out…
Kevin: You’re actually quite big, Marta.
Marta: We are not [3:42 inaudible].
Kevin: I know you’re not. I’m trying to give you a fair go here, but I have to get through a few more questions.
In your television ad, you feature someone who says she achieved $100,000 over her reserve price. I’m not doubting that. That probably was her reserve price. It’s more a reflection of the fact that it was a low reserve and not necessarily a good agent. Would you accept that?
Marta: No, I don’t. When she actually went out with a great agent and she got a great result, that is not necessarily just the agent. What we’re trying to support here is that a great agent will get you more for your property compared with an agent who is not so good.
Kevin: We actually have an agent on the phone who has just called in. I wouldn’t have a clue what he is going to say, but I’m going to put him to air because he may have a question. I understand you want to use the name Phil, but it’s not your right name. Is that right?
Phil: Yes, Kevin. How are you today?
Kevin: Good, mate. You’ll have to be quick. What’s your point?
Phil: One, the commission they’re trying to charge is 20% plus GST. It’s not 20%. The other thing is that on the terms and conditions that they give you, the client they’re referring you to remains their client for 24 months.
In other words, if you get put up against four or five agents – as you were saying, not necessarily the best agents but the ones who will comply with their terms and conditions – if that property doesn’t get sold by the first agent and then one of your other agents in your agency picks up the listing, they’ll still claim the 20% plus GST 24 months down the track.
Kevin: Marta, is that right?
Marta: Yes, that’s right.
Kevin: How can you do that?
Marta: What’s the problem?
Kevin: Let me ask you this question. An agent will sign someone up. They can only ever sign them up for a period in Queensland of 90 days. You’re actually saying to that person that they are going to be your client for anything up to two years. Is that correct?
Marta: That is correct because there are a lot of people who come to us every year…
Kevin: But you’re not agents. You are not agents, Marta.
Marta: There are lots of people who come to us really early in the process. They are looking for a price and they are trying to meet the best agent. What we do is actually invest in following these people up for the agents, so when that 24-month clause is in there…
Kevin: Follow it up for the agent or follow it up for you? Let’s get real here.
Marta: We follow it up for the agent and we follow up for us. We are working together with our agents to do this. That clause is in there to take away a listing for an agent who has not managed to sell a house.
What we try to do in that case is actually work with the agent to educate the vendor as to why that property has not sold, which is in the case of a good agent, not because the agent has not done a good work or because of something that is happening in the market.
That is why the 24-month clause is in there. The other thing that we do is do the follow-up.
Kevin: I’m not finished with this, Marta, because I believe you are in breach of the act. I believe you’re actually asking someone to commit to you for two years. You’re telling agents the same thing. Agents can’t do that. You’re not agents.
Marta: How does that breach the act?
Kevin: You’re getting a commitment out of someone for two years to work with you.
Marta: I advertise on TV. I have a lot more regulatory bodies than any real estate agent.
Kevin: I will follow this up. I want to follow it through because I do believe you’re in breach of the act.
I’m going to leave it there, Marta. Thank you very much. We will follow it up with you during the week.
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