Dealing with Canberra’s undesirables

There’s quite a funny song that appeared on the British TV comedy show ‘Spitting Image’ many years ago, entitled ‘I’ve Never Met A Nice South African’ and it provides a suitable backdrop for the trouble I’ve had with writing this post.

Originally, this piece had an introduction along the lines of: “Every city has their undesirables and Canberra is no exception. In London, it’s investment bankers, in Copenhagen, it’s the hipsters, while in Canberra, it’s estate agents.”

But, just like the Spitting Image song, this sweeping claim troubled me. For the record, I’ve met plenty of lovely South Africans. I actually know an investment banker who’s a pretty good guy. And I even know an estate agent whom I believe to be ethical and principled.

To help you understand why this is all relevant, I should rewind a few weeks to a quiet afternoon when I was browsing the internet for houses. We aren’t officially house-hunting yet. We originally planned on renting for two years before starting our search for a permanent home. But on this fateful afternoon, my mouse cursor hovered over and then clicked on a property that seemed to meet all our requirements.

 

A screen grab of the Allhomes homepage for the ACT.

Allhomes.com.au is the main website for house-hunting in Canberra.

It was spacious, modern, with a large garden, and an energy efficiency rating that was better than an igloo’s. So we started to talk about the ‘what ifs’ of buying a house earlier than planned.

First off, we went to an open house viewing, and the property was every bit as nice as it seemed on the internet. The estate agent sounded us out about our thoughts, our preferences and our rough budget. We were pretty forthcoming too – after all, we wanted a house that matched our needs and were looking for expert advice.

The house-buying process in Australia would seem quite odd to most Europeans. In Europe, if you want to sell a house, you get it valued, you advertise it at close to that price, interested buyers make offers and you decide who you want to sell it to. Usually, if you get 95 to 98% of the asking price, you’re happy. Apparently, it used to work that way here too, until the housing market started booming and many estate agents worked out how to game the system to their advantage.

The Canberra Weekly property section.

For those who like to browse home listings the old-fashioned way, Canberra Weekly magazine has a huge selection of property ads.

Here, there are three different routes. A seller advertises their property at a price with a plus sign after it – meaning that the price advertised is the starting price for offers, not the target price. Alternatively, a house can be offered for auction, where no valuation is offered and the seller just tries to get the highest price they can on a given day. Finally, there’s a silent auction process whereby prospective buyers submit their highest bid in sealed envelopes and the highest offer wins. Again, no attempt at a true market valuation is made.

If this all sounds a bit mad, and open to the sort of abuses that saw many investment bankers confirm their rhyming nickname by selling junk investments to each other in such a rampant period of cannibalistic capitalism that it nearly felled the western banking system, then your thoughts would be similar to mine. It does seem that this is not an area where ethics and fair play are much use, so my estate agent friend is probably deserving of a good chunk of my sympathy here.

The house we were interested in was offered for auction and, realising our lack of experience here, we decided to hire a ‘buyers’ agent’ – someone who advises you on a fair value for the property and who represents you at the auction and bids on your behalf. Meanwhile, you pay a solicitor to look over the documentation relating to the sale and check for any concerns.

A screen grab of the Domain homepage.

Domain.com.au is another site popular with house-hunters.

So, here’s how it went. The ‘poor family who had to move and so sell their dream home’ turned out to be a guy working in the same office as the selling agent, who had only bought the place six months before as a development project. The guide price given to us by the agent turned out to be $100,000 lower than the auction reserve price. Meanwhile, in another quirk of this system, the auctioneer, on behalf of the seller, is allowed to throw in a dummy bid – that is, a bid that no-one has actually made – to push the price along. He has to declare it, but even so. The dummy bid at this particular auction pushed the price up by $45,000.

In the end, only one family were bidding, against themselves, to reach the reserve price, which was above our budget and actually way above what our buyer’s agent suggested the property was actually worth. And, as I said, $100k above the guide price we’d been given at the open viewing.

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Market research firm Roy Morgan Research publish an annual barometer of the Australian public’s trust in professions. Since 2001, estate agents have never finished above third from bottom (scores shown are percentages).

Clearly, we didn’t get the house. An outcome we are actually fine with because we were determined not to overpay and saddle ourselves with debt. But a couple of things irked us about the process.

First, had the guide price borne any relation to the reserve price, we probably wouldn’t have gone along. We certainly wouldn’t have incurred the costs of hiring an agent and a solicitor. Second, if the guide price had been accurate, we’d have compared the house with those of a similar value rather those at $100k less, and we’d have had a better idea of the market and whether the house was fairly priced. But there I go again, using that word ‘fair’, and I realise what a silly thing that is when dealing with the hyenas of home-selling.

On the positive side, our buyers’ agent was knowledgeable, professional and wise to all the usual estate agents’ tricks. It was she who uncovered the fact that the seller actually worked in the same office as the agency doing the selling.

And here’s the rub. Home sellers get to choose which agents they choose to do business with – in Denmark, we discounted several ‘sharks’ in favour of the agent we actually used – but as buyers, we have to deal with whoever is selling the property that we like. In such circumstances, all you can do is arm yourself in the best way possible.

Next time – and I suppose there has to be a next time, whether sooner or later – I’d hire our buyers’ agent again in a heartbeat because, when you’re dealing with hyenas, there’s nothing like having a lion on your side. Meanwhile, we’ll take future advice from any selling agent with a sizeable pinch of salt.

11 thoughts on “Dealing with Canberra’s undesirables

  1. Trish says:

    I’m sorry you’ve had such a bad first experience, but I’m not at all surprised. I went along to an auction once, just out of curiosity. The auctioneer (also the dealer principal at the real estate agency named after himself) started the auction at $650,000 and nobody moved. For a solid three minutes, he tried to talk this run-down, battle-axe block house up, hoping to get a bid. He used all the cliches in the book about how it was a ‘renovator’s delight’ and ‘in a tightly held street’ etc etc. Eventually he realised nobody was going to better his opening bid and so in exasperation he said “Ok, can I get anyone to start? Who’ll start the bidding?” and someone put their hand up and offered $500,000 which was the current Unimproved Value of the land. And then the real estate agent said “Oh, come on people, I told you this place was worth at least three quarters of a million!” at which point I was dying to point out to him at at an auction, it’s the bidders who get to tell you what the house is worth. The agent then put in a Vendor Bid at $750,000, and five minutes later the house was passed-in without another bid made.

    Friends of mine bid on a house at auction (it was at a function centre and was one of several auctions), and they had decided beforehand what they were prepared to pay for the house. During the auction it was clear that they were the only serious bidders and when bidding stalled with my friend’s highest bid, the agent put in a Vendor Bid that was well above what my friends were prepared to pay. So they dropped out. Then they were set upon by the real estate agent, who kept trying to get them to bid higher (ie bid against themselves). They refused. The house was passed-in. They didn’t stick around to negotiate (as is the highest bidder’s choice) because the agent was asking too much. It wasn’t until they were out in the carpark, getting into the car, that the agent suddenly appeared, desperate to make a sale, and offered to sell the house at their price.

    Both of these examples have convinced me not only do I not want to ever buy a house at auction, but I don’t want to have to deal with the agent either. A buyer’s agent is an excellent idea. Good luck!

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    • I think we were prepared for a certain amount of ‘creative’ behaviours, but what surprised us was out and out lying. I understand that the agent is basically on the side of the seller and charged with getting as much as they can for any given property, I was just surprised by the lack of any kind of professional ethics. I think it surprised me because I do a lot of work in corporate reputation and, clearly, by inference, most of my work is with companies and industries who care about their reputation. To encounter a firm (and possibly industry) with no such concerns really caught be by surprise. We too will be favouring non-auction listings in future, but that probably just exposes us to a different bag of tricks altogether.

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  2. Welcome to Australia!

    I remember when we bought our house in 2005, the house was on the market for 10 weeks before we saw it and made an offer. The sale process was protracted, I have to say from our end unfortunately. Nevertheless, one day I phone the real estate agent to advise something new and am told that the house is being opened for inspection that weekend….without our knowledge whilst we are endeavouring to progress the sale. Needless to say I told them it was all over if they did that. Her response I recall was some nonsense about how they would tell the viewing public it was already under offer. Yeah right!!

    I also worked for an agent when I first came to Canberra. A reputable brand (from the outside), with some borderline practices. Your post reminded me about the ‘tightening’ of the regs surrounding various agent practices, in particular the one about the dummy bidder. I thought it was not allowed at all, even if they declare it (which seems even more odd). I recall that the agent I work for used to use a mate – another agent from across the border – to stand in the crowd. Always made me feel very uncomfortable. And yes, they will always get you to the auction with estimates below what they will eventually push the bidding up to. I’m not sure that’s legal either.

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    • It is strange that in an era where dishonest practice in the name of greed has brought down several companies and a number of industries, that so few lessons have been learnt by those who watched it all unfold. Invariably when a collapse occurs, all manner of tales emerge about ‘toxic cultures’ and ‘disregard for ethics’, and yet the story is repeated again and again. As an observer of such things, I do wonder whether this isn’t the big payday before the downfall. Estate agency is an industry that looks ripe for disintermediation by the internet — a relatively simple task, with minimal effort required, conducted by unprofessional people for hugely inflated fees. It would be hard to weep for them if this happened and the world would probably be a better place for it.

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  3. The last time we sold and bought in Canberra was in 1997. It was such a bruising process (at both ends) – and that was by the old suggest a price, and expect to get an offer close to your price, days. Auctions were just starting but not common. In the next few years we will want to downsize but I am so dreading this whole process. We went to an auction back in 1997 to get a sense of how it goes, just in case we ended up wanting to buy a house that was being sold that way, and we have been to a couple in our street since as interested neighbours. I’m not much into spending my time looking at houses for fun, but both these were close to us and so we thought we’d join the neighbourhood. Both times the houses were passed in. The whole thing is very unpleasant if you ask me, and I don’t plan to attend many more if I can help it.

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    • I hope we are witnessing the peak of such behaviours and that they are either curbed or rendered redundant by a change in regulation or process. It’s hard for me to see how the current setup actually benefits anyone except the agents (because their tactics are inflationary, any benefit to the seller it automatically negated by the same practice being applied when they purchase their next home). I guess I just like to see immoral behaviour held to account at some point in proceedings and I live in hope. For now, we’ll content ourselves with only looking at non-auction listings.

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    • Thanks. We’re in no rush and our first experience means we’re certainly not eager to repeat the experience quickly. Such a system feels unsustainable but maybe the change won’t come quickly enough for us to avoid dealing with it in its current form.

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  4. This is pretty much why I bought off the plan – I picked the apartment I wanted, for the price I wanted to pay. It was pretty much pain free. I dread ever having to go through the auction/offer process!

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    • That sounds like a smart move Erin, especially with the stamp duty benefits too, but my observation is that if you want a garden of any size, the newer developments aren’t the solution, which means looking at older houses and dealing with the agents. If the LDA released plots for properties with bigger gardens, they’d have no end of takers (although I realise that everything they release gets snapped up immediately anyway in the current climate).

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