Estate Agent Theft Threat Increasing

Peter Mericka B.A., LL.BOPINION
by Peter Mericka B.A., LL.B
Real Estate Consumer Advocate
Real Estate Lawyer
Qualified Practising Conveyancer Victoria
Director Lawyers Real Estate Pty Ltd
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The threat of theft by deception perpetrated by estate agents increases when times are hard in the real estate industry
According to Chris Vedelago, writing for The Age newspaper, “Falling sales levels and the prospect of a weaker market has led more than one in 10 real estate companies to consider selling up…The number of companies looking to move out of real estate has quadrupled…The Real Estate Institute of Victoria says agency revenues have dropped 20%.” When things get tough for estate agents consumers must be ever more alert for crooked behaviour.

Times are hard for estate agents

“Softer market has estate companies ready to pack it in” is the title of the article by Chris Vedelago (The Age Wednesday 20 August, 2008 p.9).

According to Vedelago,

“Last month, the Real Estate Institute of victoria said that agency revenues may have fallen by as much as 20% across Melbourne in line with a decline in the number of transactions.”

According to the CEO of the REIV, Enzo Raimondo:

“The good ones will survive and get stronger, while the marginal operators will disappear. That’s not necessarily a bad thing, either.”

What was left unsaid is the likelihood that these “marginal operators” will not leave this normally lucrative industry without a struggle, and there is nothing more dangerous for real estate consumers than desperate estate agents with cash-flow problems.

The cash-flow vultures are circling

I was alerted to the desperate plight of many estate agents, not only by Chris Vedelago’s article, but also an SMS message I received from a commission factoring business called “Paid-On-Exchange“. The unsolicited SMS, apparently broadcast to real estate agents across Melbourne, trumpeted:

“We advance commission on exchange! Why wait? Join 100’s of agents! Go to PaidOnExchange.com.au to find out how or call 1300667286.”

We have discussed the role of the likes of Paid-On-Exchange in previous blog postings. Clearly, Paid-On-Exchange can see an opportunity to boost business in the current climate. The vultures have arrived on the scene are a looking for desperate, cash-strapped estate agents.

Theft by deception – a constant danger for consumers

When times are hard for estate agents, consumers had better watch out. While we know that the the perennial problems of underquoting, dummy bidding, conditioning etc. remain, desperate estate agents will be more likely to resort to them more often in the present climate. Even the REIV has attracted unwanted attention regarding the sale of one of its own properties in recent weeks.

But the greatest problem is that of estate agent theft. Neil Jenman’s article about an estate agent thief who sold a client’s property for less than the property was worth (see The Conviction of John Talia) is but one example of a very common problem in the real estate industry. Estate agents regularly sell clients’ properties for less than their true worth in order to get a commission they would not otherwise be able to win.

The problem stems from the ease with which the estate agent can trick the vendor through the manipulation of property value information. Most estate agents hold themselves out as valuers, offering property owners “free appraisals” as a marketing ploy. Many estate agents falsely inflate the “appraisal” figure in order to win the listing, a form of criminal deception. Others, knowingly advise a figure that is below market value in order to ensure a quick sale, another form of criminal deception. And then we have the traditional estate agent tool known as “conditioning the vendor”, whereby the estate agent talks down the value of the client’s property in order to convince the vendor to sell.

What all of these deceptions have in common is control of price/value information by the estate agent. In the case of John Talia the unfairness of the estate agent’s behaviour was underlined by the fact that he was also the purchaser of the under-valued property. But it really doesn’t matter who buys the property. If the estate agent has tricked the vendor as to the value of the property, in order to gain (whether the gain takes the form of cash, commission, an extended sale period, or a quick sale), there is likely to be a criminal deception involved.

Precautions against estate agent theft

Preventing estate agent theft is really quite simple. The golden rule is ALWAYS OBTAIN AN INDEPENDENT WRITTEN VALUATION FROM AN ACCREDITED PROPERTY VALUER. Every vendor should keep the estate agent and the property valuer separate.

An independent valuation allows the vendor to:

  1. Determine whether the property should be sold in the current market;
  2. Avoid being caught up in illegal underquoting;
  3. Take control of the sale when the estate agent is desperate to secure a sale; and
  4. Obtain guidance from the valuer if the estate agent attempts to “talk the property down”.

There is no doubt that times are hard for commission-based estate agents and the risk of estate agent theft is increasing. The taking of a simple precaution may make the difference between vendor and victim.

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