Vendors and buyers should be wary of certain practices that may be employed in a negotiation.
In Britain and the US they call it ‘‘gazundering’’. It’s when a buyer makes an offer on a property that is accepted but then reduces that offer. Gazundering is just one of the pitfalls of buying and selling residential property.
With so much money changing hands in a single transaction, vendors and buyers alike have much to lose if there’s not open and honest dealing by all parties. And an estate agent who fails in their duty to their client puts their reputation and business at stake.
An estate agent for many years and former president of the Real Estate Institute of Victoria, Adrian Jones, hasn’t heard the word ‘‘gazundering’’ but is familiar with the practice.
‘‘It’s a tactic that’s been around forever; it just didn’t have a name,’’ Mr Jones says. ‘‘You learn from bitter experience, as I did. It works like this: a young couple negotiates the purchase of their first home and makes an offer.”
“In good faith the agent puts it forward. In good faith the vendor, a little disappointed, agrees to a lower-than-expected offer to get the business done.
‘‘They make a time to sign the contract but between the verbal offer and the signing, some allegedly more-knowledgable third party comes along and says to the young couple, ‘You’ve paid far too much,’ and they withdraw the offer.
The owner is devastated but then the buyer comes back and says they’re still interested if the vendor’s prepared to sell at $10,000 to $15,000 less than the original offer.
‘‘It has led to the commonly held view that a verbal offer isn’t worth the paper it’s written on; consequently, many agents insist an offer be submitted in writing. The problem is, an agent is required to put all offers to the vendor, unless otherwise instructed. That’s the law.”
‘‘If a vendor has been burnt by this they may instruct an agent not to advise of verbal offers — the buyer’s still got the cooling-off period”
‘‘[Gazundering] is a function of a tighter marketplace where buyers perceive they have the edge.’’
Ray White Heidelberg agent Darren Pearce had a similar experience recently. ‘‘We had a property for auction and the week before, a couple put in an offer of $475,000,’’ Mr Pearce says.
‘‘They said they didn’t want to go to auction. The vendor accepted the offer but on the last day of the cooling-off period the buyers indicated they were withdrawing the offer. But
they then said they were still prepared to buy it at a lower price and put an offer in at $460,000.”
“It may not have been malicious but the lower offer was on the table and the vendor did consider it.’’
Mr Pearce points out that vendors who have prematurely celebrated a sale that falls through like this may be more inclined to lower their price because they have already suffered one disappointment and are keen to get the stressful business over and done with.
His clients chose instead to go to auction and sold for a higher price.
Some house-seekers employ a buyer’s advocate to facilitate the process and protect their interests. Buyer’s advocate Ian MacKinnon says advocates research and analyse the true value of properties to keep the agent and vendor as accountable as possible to make sure no ‘‘false markets’’ are created.
‘‘False markets can be created by underquoting the true value of a property to increase the volume of people attending inspections and auctions,’’Mr MacKinnon says.
‘‘Underquoting is the difference between the advertised quote and an agent’s estimate, as stated on the sale authority contract. It’s hard for buyers to prove this because they don’t have access to the contract.”
‘‘A property that recently went to auction in Prahran was quoted in the $800,000 to $850,000 range. It was passed in for $985,000 and later sold for $1.01 million.”
‘‘Although the agent achieved the desired result for their vendor, genuine bidders left this auction in disgust. Many were disappointed with the way the campaign was conducted from a pricing perspective.”
‘‘Now this may not be the fault of the agent- at times the vendor can force the agent’s hand – but it’s the agent’s role to control the auction campaign and its pricing.’’
Mr MacKinnon says agents can also pressure buyers by advising that offers exist before sale or auction. ‘‘There’s no transparency on whether these are legitimate offers. This pushes buyers into making a quick decision and sometimes a higher-than-necessary offer.”
‘‘Laws are in place to ensure that agents conduct themselves in an honest and professional manner and we work with many extremely professional agents. Unfortunately, some agents use certain methods to blur the lines of communication to the buyer to achieve the best possible result for the vendor.”
‘‘[It] can be an emotional process and the buyer must have the all the resources and experience at hand to get the best possible result for themselves”
‘‘As buyer’s advocates, we don’t get emotionally involved in the negotiation process. There’s no doubt agents treat buyer’s advocates differently to the general public, purely because they know we have motivated buyers.’’
Consumer Affairs Victoria handles inquiries and complaints from the public regarding the conduct of estate agents. CAV spokeswoman Heather Abbott says when it comes to real estate it’s a case of both buyer and seller beware.
Problems arise when an agent doesn’t provide the promised level of service to the vendor, when communication breaks down between agent and client or when an agent fails to follow instructions, provide feedback or pass on offers from potential buyers.
‘‘Estate agents must have a complaints-handling procedure and this should be explained to their clients when they accept their business,’’Ms Abbott says. ‘‘The client should seek to resolve the matter with the agent in the first instance.”
“If a consumer [buyer] makes a complaint to the agent, they too must be told about the complaints-handling procedure. If the client or consumer isn’t satisfied, they should contact Consumer Affairs Victoria for further advice.’’
Other common complaints submitted to CAV include agents making false or misleading representations to buyers about the price, location, features, land size or development potential of a property; agents exaggerating interest in a property to the vendor; or agents advising buyers that their offer has been successful when the vendor has not countersigned the contract.
In such cases the property then goes to a buyer who has made a higher offer. CAV also receives complaints about certain vendor practices. ‘‘CAV is aware of instances where vendors haven’t been entirely truthful about their property’s features,’’
Ms Abbott says. ‘‘Some vendors hide faults by painting over dry rot, others tell their agent the property’s equipment is fully operational when it isn’t and some vendors replace expensive appliances such as dishwashers with a lesser-known brand before settlement.”
‘‘While the agent is responsible for the accuracy in the property’s advertising, they are reliant on the vendor to tell the truth about their property.We recommend agents give vendors a checklist to complete, detailing the condition of the property, the items that are remaining at settlement and the working order of equipment or appliances.
‘‘A residential property purchase is a private contract between two or more individuals. If a new owner believes the vendor misrepresented the features of the property or hid defects, they should seek legal advice.’’
Ms Abbott also recommends that buyers get a pest and building inspection. ‘‘The main message is to make sure you’re well armed with information.’’
Mary Costello, domain.com.au