[Author – Tim ODwyer]
My blood pressure rose a tad when I read a purportedly helpful article in The Courier Mail’s weekend real estate supplement.I still don’t know if the piece was intended to be helpful to consumers or agents. Certainly the very caption (“Good advice for buyers”) made me suspicious straight away.
The un-bylined article began by asserting that, with demand for South-East Queensland homes apparently outstripping supply, multiple offers to sellers (or early offers in an “auction program”) had become a “problem for some would-be buyers.”
The Real Estate Institute of Queensland had reportedly warned (consumers or its member agents?) that prospective buyers were walking away empty-handed because they had been out-manoeuvred — or were too slow — in battles of multiple offers. According to the REIQ, “multiple offers” occurred when more than one prospective buyer for a particular property made offers on it by submitting contracts of sale.
REIQ managing director Don McKenzie explained to The Courier Mail that agents were obliged by law to submit all offers to sellers “if they (the agents) comply with the seller’s instructions.” At least that is how The Courier reported it. This, in fact, is the law in Queensland:
“A real estate agent appointed to sell…property for a client must keep the client informed of any significant development or issue in relation to the property…(and) must immediately communicate to the client each expression of interest whether written or oral…(unless) the client has directed otherwise in writing.”
Note that this obligation on agents to “keep the client informed” is not confined to offers. All expressions of interest must be “immediately” communicated subject to the client’s directions. But what sensible seller, wanting to be kept fully informed, would direct an agent “otherwise in writing”? Yet most sellers here do exactly this when they appoint REIQ agents to sell their properties.
Why? Because, tucked away in the REIQ fine print on page 8 of the 9 page listing agreement, is this cunning “cop out”:
“…the client only requires the agent to communicate to the client all written offers…and only those expressions of interest which the agent determines in its discretion are to be communicated to the client…”
The result is that discrete Deep North agents rarely tell their seller clients about all buyers’ expressions of interest, and invariably convince sellers and buyers alike during the sale process that nothing less than a written offer (on a contract of sale form) will be taken seriously.
Interestingly, there is a case on the books in Queensland where an agent was found in breach of his duties to a seller when the seller was not told of at least one prospective buyer interested in the property but who first had to sell an interstate property. Hence the REIQ’s “discretion” loophole. More interestingly, perhaps, earlier this year I acted for clients who had accepted a rather low contract offer confidently presented by their agent. They later discovered to their dismay that an earlier buyer introduced by the same agent would have made a significantly higher offer. (Another time I relate how this matter was sorted out to the extreme satisfaction of the sellers and the misfortune of the agent.)
For now, there’s more to tell now about The Courier Mail article. The REIQ seems concerned that buyers should not miss out in the “battle of multiple offers”. Because agents had what Mr McKenzie described as “a statutory obligation to attempt to get the highest possible price for the seller”, he offered this solution to the problem: “When a seller is to be presented with multiple offers, a prudent agent will inform prospective buyers, in writing, and obtain a written acknowledgement. This gives potential buyers an opportunity to submit an offer if they have not already done so, or to revise an existing offer that has not yet been accepted by the seller.”
This also gives rise to several questions. Why should buyers believe sellers’ agents when they claim other offers are being made? If there really are better offers in hand, should agents disclose details of those to prospective buyers? In any case, should agents get authority (in writing?) from their seller clients to follow this course? How appropriate is it for agents to take the somewhat intimidatory approach recommended by one real estate authority whereby buyers are required to certify that their offer is their best offer?
Nary a mention, by the way, in The Courier’s report of the importance for buyers making offers by signing contracts to understand that, once accepted-signed-by-sellers-and-delivered, those contracts will become legally binding. Nor of the vital need for buyers making offers to first obtain independent legal advice on the legal documents they are signing.
Not many agents appear to know it, but the common law across Australia has long provided that they owe fiduciary duties to their seller clients, that the relationship between agents and their clients is one of “utmost good faith” and that full disclosure must be made to sellers of any information obtained by agents (from buyers particularly). At the same time agents must keep confidential (from buyers particularly) any information about the sellers and their properties unless suitably authorised.