Pricing Propaganda From REIV

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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In his weekly propaganda piece in The Age newspaper (The Age “Domain” 29 September, 2007 p.3) CEO of the Real Estate Institute of Victoria, Enzo Raimondo makes something of a Freudian slip when he says, “Agents should ask for a single price for properties sold privately.”  Like so many of his type, Enzo Raimondo seems to believe that the pricing is a matter for the estate agent.  But what about the vendor and the purchaser?  If we remove the estate agent from the pricing equation we also remove the problems.

In a typically arroagent approach to real estate sales, the REIV ignores what consumers want, and tells estate agents:

“The REIV recently issued guidelines for the advertising of property for private sale.  the guidelines advised member agents that a single price should be displayed on advertisements for property sold in this way.”

No mention of what the vendor may want, or how the “single price” is to be arrived at.  No mention either of what is to happen if 5 people submit identical offers.  How does the vendor, (or should I say, the estate agent) choose which one gets the property?  An egg-and-spoon race?  A bribe?  It’s not hard to see how quickly such a situation would be exploited by the estate agent, particularly where the estate agent controls the transaction by keeping the parties apart.

Despite the immediately obvious flaws in such a silly proposal, Enzo then goes on to say:

“A single price gives prospective purchasers certainty anjd provides transparency.”

Now this is not just wrong, it’s profoundly ignorant!  The concept of transparency is obviously lost on Enzo and the REIV.

Let’s get straight to the point here.  We’re talking about corrupt real estate practices, such as under-quoting and over-quoting, dummy bidding, and general criminal deception.  Enzo’s solution is to simply introduce a new scam to replace the old.

If Enzo and the REIV were serious about corruption in the real estate industry they would not allow it to be perpetuated through yet another “sales method”.  Rather, they would actually examine the concepts of transparency and pricing, and conclude that there should be no role at all for the estate agent in determining value and price.

 

Transparency vs Conflict of Interests

The concept that Enzo and the REIV have tocome to grips with is that of conflicting interests. Whenever the estate agent has anything to do with determining the value of the property the estate agent has been engaged to sell, a conflict of interests arises. Why? Because the estate agent has an “interest” in the property, created by the contract between the agent and vendor known as the Exclusive Sale Authority.

Any conflict of interests creates a further problem with transparency.

Click here for a full examination of the concept of transparency in real estate.

Determining Price

Price is not a matter for the estate agent, acting in accordance with guidelines issued by the REIV. Price is a matter for the parties who matter – the vendor and the purchaser.

Price is determined through genuine negotiation, a process quite foreign to the estate agent. That’s right, the average estate agent never properly negotiates a real estate sale. This is because the estate agent actually acts for both parties, in circumstances of conflicting interests. The estate agent “assists” the purchaser to prepare an offer, and then the estate agent “assists” the vendor in assessing the offer and determining whether it is a “good” offer, usually by reference to the asking price or reserve price. And who “assists” the vendor in determining the price? That’s right, the same estate agent.

 

Conclusion

When the estate agent is involved in determining the value of the property, the asking price or reserve price, the pricing method, and the best price, the only person who will benefit is the estate agent.

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