REIV Pricing Ploy Relies On Lies

Comments

# John Clarke said on October 26, 2009 11:01 AM:

When my wife and I were looking to buy a house a few months ago and were negotiating on price and had made what we considered was a fair offer and the Vendor was not willing to budge, the Vendor's agent suggested we should pay for a valuation so the Vendor could see we were offering a fair price.  Of course this was offered by the agent on the basis that even if the valuation came in at the price we offered the Vendor could still not sell to us.

As a buyer I am quite confident that after looking in an area for some months and using other data that I am quite capable of judging the market price within a few thousand.

Most vendors have not done anywhere near as much homework in setting a selling price and where it is their home, often tend to overestimate the value.

I would think from a Vendor's point of view that obtaining a valuation would have a number of advantages:

1. They can concentrate on choosing an agent who will best market the property

2. A purchaser's mortgagee is likely to get a valuation in a similar range

# Peter Mericka said on October 26, 2009 11:10 AM:

Hi John,

You're right.  Those who run the real estate industry fail to understand that vendors and purchasers are not stupid, but they can be misled.

When a vendor has access to good and reliable independent advice, be it legal advice or valuation advice, that vendor will make good business decisions.  The same goes for the purchaser.

Introduce a commission-hungry real estate agent with a "whatever it takes to win a commission" attitude coupled with the commission mentality, and everything changes.

# Penelope said on October 26, 2009 11:37 AM:

it makes sense when you explain it like that because the seller should be telling the real estate what to do and not the other way round.  so if the real estate tells me i can not advertise the way i want i can tell him to get stuffed

# Peter Mericka said on October 26, 2009 11:40 AM:

Hi Penelope,

Yes, that's right.  The REIV can't tell you how to advertise your price, nor can it punish a real estate agent who does what your direct.

The REIV relies on lies to have its rules accepted and to enforce them.

# Hector said on October 26, 2009 11:52 AM:

I feel like I have had the blindfold taken off.  Great article!!!!!

# Mauzie said on October 26, 2009 4:50 PM:

What do you all think about "Buyer Inquiry Range" style of marketing? I hate it.

# Peter Mericka said on October 26, 2009 5:00 PM:

Hi Mauzie,

A range is OK, so long as purchasers know how the range has been established.

In my posting "SLOD! - Best Price Negotiation Strategy" I demonstrated that using a price range based on an objective, independent valuation prepared by a professional valuer keeps everyone happy.

The SLOD! strategy starts with a formal valuation, and a range from 5% below the valuation, to 5% above the valuation is set.  Bids are then invited from purchasers.

The benefit to the vendor is that the range builds some tolerance into the valuation, which may be a little too conservative or a little too ambitious.  It also ensures that negotiations commence within realistic parameters, and competitive bidding may take the sale price higher.

 The benefit for the purchaser is that the purchaser knows that the vendor has obtained a valuation, and knows what the vendor has been told by the valuer.  The purchaser also knows that the property would not be on the market with the range as set if the vendor had not been prepared to consider an offer within the range.

Real estate agents have corrupted the price range process by telling lies, plucking the range figures from the same places dummy bids were plucked from. 

So long as there is a valid starting point for a price range, and everyone knows what it is, there is no problem.

# Agent said on October 28, 2009 6:11 PM:

The REIV can stop you. They have the ability to fine members for non complience of their codes of conduct. Roughly 80% of Victorian agents are members of the REIV. That means only non members can now use the + price.

It doesn't leave the Vendors with a whole lot of choice if they are determined to use a + price. My understanding is that consumer affairs will shortly ban + price advertising across the board.

# Peter Mericka said on October 28, 2009 8:30 PM:

Hi Agent,

Do you tell your vendors that THEY are bound by the REIV's rules? (If you do you are telling a lie.)

What do you tell the REIV if a vendor client tells you to disobey the REIV rules.  (If you tell your vendor clients that you must obey the REIV ahead of your own client you are telling a lie.)

If Consumer Affairs Victoria introduces its own rules, who will be bound by them?  (If you tell your vendor clients that they will be bound, you will be telling a lie.)

If any vendor client of yours seeks my advice, I will tell them the truth.  The truth is that neither the REIV nor CAV can make rules that bind vendors.

The REIV pricing ploy relies on lies!

# Agent said on October 29, 2009 9:29 AM:

I will also tell them the truth, which is that I am unable to advertise their property with a + price.

They obviously have the option of choosing someone who can, however I am not allowed to use it and if they wish to engage my services and those of my company then I am forced to abide by the new rules in place.

It will be a case of them either accepting this or looking for an alternative. I will not lie, however this mess is not of my making and I can only work within the parameters imposed on me by others.

# Peter Mericka said on October 29, 2009 9:49 AM:

Hi Agent,

Do you not feel that it's rather arrogant for a real estate agent, who is obliged to do as his/her client instructs, to refuse to act on that client's instructions, simply because the agent wants to follow the REIV's invented procedures?

How do you deal with the conflict between a rule that requires you to advertise in a certain way, and a law that requires you to act in accordance with your client's instructions? 

Would you cheerfully release a vendor client from the Exclusive Sale Authority if they directed you to obey them, contrary to the directives you (not the client) have received from the REIV?

I note that you refer to "a mess (that is) not of my making".  Can you suggest who it was that made the mess, and why the went to trouble of making it?

# Agent said on October 29, 2009 10:00 AM:

Peter,

They are not my client until they sign an authority. I will provide them with full disclosure prior to the signing.

I don't agree with the new rules and I feel your previous point that the purchaser is responsible for making their own investigations in regards to price is spot on.

However, if a Vendor choose to enlist our services I am left with no option other than to comply with the new rules of conduct.

The choice still lies with the Vendor.

# Peter Mericka said on October 29, 2009 10:47 AM:

Hi Agent,

I suppose what I'm putting to you is that you owe a greater duty to your client than you owe to the REIV.

You have no right to do anything but to follow your client's instructions, even though those instructions may put you at odds with the REIV.

If you tell the client that you MUST follow the REIV rules, rather than CHOOSING to follow them, then you are telling your client a lie.  The REIV relies on such lies to make its rules work.

Why can't you simply tell the REIV that the client rules?

# Agent said on October 29, 2009 11:17 AM:

Peter,

I have just spoken to the REIV and they have advised me that I am liable for hefty fines if I do not comply.

Remember they are not my clients until they have signed an authority. They will be given full disclosure prior to signing so as they can make an informed choice.

I am simply not prepared to wear thousands of dollars in fines.

I will not put myself in a position where I am at odds with the REIV. Once a client signs with me or a member of my company, they do so knowing how we plan to market their property. If they disagree, they do so prior to signing which allows them the choice of pursuing other options.

I can't do any more than this.

Your are wrong on one point, I must follow the REIV to remain a member however that does not mean the potential client has to agree or sign with my agency.

# Peter Mericka said on October 29, 2009 11:43 AM:

Hi Agent,

So, if I'm hearing this right, you will be telling the vendor that he/she must comply with the REIV's rules on price advertising, failing which you will refuse to accept them as clients.

So, by bullying you into doing as it requires, the REIV is able to impose its will on consumers who might otherwise tell it where it can stick its dumb rules.

I suppose this is one of the problems with having a real estate monopoly.  Not to worry though, the informed consumers can come with me, because I will always put them first.

Of course, there is another way, and that is to prohibit real estate agents from having anything whatsoever to do with the pricing of real estate (which is as it should be anyway), and to allow the vendor to accept ultimate responsibility for what is really a matter entirely for the vendor anyway.  Putting the vendor back in control - now there's something novel for the REIV to consider!

# Agent said on October 29, 2009 12:10 PM:

Peter,

That is why an open, competative economy provides choice. I can't use a plus price. If a Vendor desperatly wants to utilise this style of pricing there are other options as I have already stated. We will not lie to our potential clients and they will have the option of choosing who they list their business with.

I cannot accept a Vendor as a client if they are adamant in using a pricing structure that I am prohibited in using. It is no more complicated than that.

I once again state that I can do no more than that.

# Peter Mericka said on October 29, 2009 12:27 PM:

Hi Agent,

If these rules are unpopular with real estate agents, and they have the potential to put real estate agents at odds with their vendor clients, why does the REIV impose them on its members and back them up with penalties?  After all, it's obvious that the REIV is not acting in the interests of vendors by doing this.

# Agent said on October 29, 2009 12:32 PM:

Peter,

You will have to take that up with the REIV, I don't pretend to know the inner workings of the Institute or how they come to their decisions.

# Peter Mericka said on October 29, 2009 1:12 PM:

Hi Agent,

It seems that, although this is your organisation, it is not interested in what you might want, and it's not interested in what consumers want.

Agent, let me ask you this:

All of the problems relating to the pricing of real estate (i.e. underquoting, overquoting, price description issues etc.) would all disappear immediately if real estate agents were forced by law to:

1. Have no part in valuing real estate for vendor clients (i.e. no more "appraisals");
2. Have no part in advising vendor clients on whether a price should be accepted (no more conditioning of the vendor);
3. Have no part in advising vendor clients about how asking prices should be advertised; and
4. Inform any vendor client who enquires about such matters to seek advice from an independent valuer (regarding property values) or an independent legal adviser (regarding legal issues such as laws relating to deceptive conduct etc.).

It would mean that you would not have to be bothered with any of these issues, the REIV would not be forcing its rules on consumers, and vendors would be back in control of their own transactions.

How do you, personally, view such a proposal?

# Agent said on October 29, 2009 5:07 PM:

Good in theory, however many theories didn't pan out. I would be happy with that outcome and would be pleased to remove ourselves from pricing however you will always get the agents who claim to be able to get a better price because they are better agents, which in turn will drag agents back into the pricing argument.

Pricing is the fundemental question all Vendors want to know.

An interesting point, we tried a couple of years ago to remove ourselves from the pricing question and we were met with hositility from Vendors becuse they believed we were not doing our job by trying to refer them to Valuers. They questioned our professionalism and ability to act on their behalf if we were reluctant to engage in the pricing conversation.

We were forced to revert to providing indications of market value and pricing sugestions.

# Peter Mericka said on October 29, 2009 5:18 PM:

Hi Agent,

It seems that real estate agents made a rod for their own backs (which has now become a massive girder) when they started doing appraisals.

Now we have the amazing situation where consumers have come to expect appraisals, so real estate agents feel compelled to give them.

And yet, real estate agents receive no formal training whatsoever in valuing real estate (whereas professional valuers are tertiary trained in the valuing profession), and they just fly by the seat of their pants.

To compound this ridiculous state of affairs, legislation has now been introduced whereby real estate agents, with no training or qualifications at all, are REQUIRED to give appraisals.  And valuers are just left on the sidelines.

See Modernising The Estate Agents Act 1980 - Submission to the Estate Agents Council for more about this.

# Agent said on October 29, 2009 6:28 PM:

Peter,

Your submission makes for interesting reading. I have no argument with any of it.

# Peter Mericka said on October 29, 2009 7:15 PM:

Hi Agent,

This is sounding too good to be true.

We have a real estate system beset with problems.

A way to eradicate the the problems has been identified and submitted as a formal proposal.

A  real estate agent who knows the industry independently supports proposal.

All we need now is for the regulators and decision-makers to act.

What are the chances Agent?

# Ray said on October 30, 2009 5:05 PM:

Hi,

I agree that we should not allow price plus adverts on property. Purchasing real estate is already difficult enough without more confusion to consumers. I am hoping their will be stronger regulation on the practices in real estate.