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.
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.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.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.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.