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Real estate scams

By screaming banshee - 6 April 2009 18

Sister banshee called me with her woes of looking for property that I thought I’d share with Rioters.

 I’ll stop short of identifying the agent but she looked at a very popular unit in Deakin which is currently being rented for a phenominal all-inclusive rent.  Based on the pricing of the other units around it and the quality she described the asking price is in a reasonable region but the agent is expecting to sell it for “well above asking price” and explained that all parties would be considered at the asking price, then they would go up in $5k increments until they find the buyer.

Now I’m no lawyer but that sounds dodgy to me, like a silent auction perhaps where interested parties keep getting told that someone else is willing to pay more so are expected to keep jacking up their offer.

Another agent said if they had several offers under consideration they would ask everyone to complete “best and final” offer statement which also identified where they get the money from etc to ensure that the offer won’t fall through.  That sounds fair and reasonable and the other agent sounds like a complete scammer.

So tell me rioters is the practice identified above illegal or just the dodgiest legal method re agents use in Canberra?

What’s Your opinion?


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18 Responses to
Real estate scams
VYBerlinaV8_the_one_ 11:14 am 06 Apr 09

I thought the offers absolutely had to be in writing; I’m sure this was the case a few years ago, unless it has since changed? Can anybody confirm?? If offers are not required to be in writing, then buyers are certainly not protected from dodgy agents!

I’ve bought 4 properties in ACT over the past 5 years, and none of the offers were in writing, and on only 2 occasions was I required to leave a holding deposit (typically $1k).

In reality, it’s a bit wild west when buying a property. It comes down to the behaviour of the individual real estate agent. I’ve dealt with some really ethical, quality agents, as well as some absolute dogs.

djk 11:00 am 06 Apr 09

There was legislation introduced in 2003/2004 to (among other things) supposedly stop gazumping. Essentially what it did was to allow agents to exchange contracts at the point of sale once an offer had been accepted. Buyers would then have a 5 day cooling-off period in which to obtain legal advice and their finance approval.

However in reality, this option (which exists in NSW and the ACT) is used probably less than 0.01% of the time. The main problem with the 5 day cooling-off period for buyers is that it is just not long enough, as there are pretty much zero lenders who can obtain an unconditional finance approval within 5 working days. The main problem for sellers is that an exchange is not final until 5 days later, which leaves uncertainty and confusion when something happens.

RandomGit 10:54 am 06 Apr 09

I have no problem with any sort of auction process as long as all parties bidding and all bids are made known. Also, A bid should only be binding once you sign the paper, you can’t be held to a second chance bid if you have already moved on from a lost auction, for example.

deezagood 10:36 am 06 Apr 09

http://www.ors.act.gov.au/fairtrading/pdfs/Industries/Guides/REALiTY_Check.pdf

Found some good info at the site above; specifically pertaining to ACT rules. Gazumping is allowed right up to the exchange of contracts and buying by tender is allowed too.

deezagood 10:26 am 06 Apr 09

I thought the offers absolutely had to be in writing; I’m sure this was the case a few years ago, unless it has since changed? Can anybody confirm?? If offers are not required to be in writing, then buyers are certainly not protected from dodgy agents!

screaming banshee 10:20 am 06 Apr 09

deezagood said :

Also, in Canberra buyers are protected against ‘fake’ offers, due to the legal requirement for all offers to be in writing. From my understanding, this system is designed to insure against agents falsely stating that offers were made to bolster the price – thus protecting the buyer in the situation outlined above.

Just to clarify, I have no problem with an open auction, but if the auction is silent how do the bidders know whether the offers they are being told about are real. There are laws that prevent auctioneers from pulling bids out of the trees but if an agent has a particularly interested buyer whats to stop them from telling them they have higher offers and they will have to increase their bid if they still want it when really they are the only party involved.

Re #8, I purchased a property 4 months ago and everything was done over the phone until the contract was signed some 3-4 weeks later, there was never anything in writing and my understanding was that this was not required in Canberra.

I’ve said it before the QLD system I feel is much fairer where when the buyer makes an offer it is a signed contract and when the seller accepts and signs that contract both parties are bound to the terms which typically include finance and building reports. While I agree that providing building reports upfront is a good thing the ability to be ‘gazumped’ under the current system is ridiculous. Similarly a buyer could easily make offers on several properties and a seller might think they have the thing sewn up only to find that the buyer has found a better deal elsewhere.

ant 10:11 am 06 Apr 09

It has been widely reported that Peter Blackshaw Real estate have pioneered the practice of holding silent auctions for rental properties. Some other agents are also doing this.

deezagood 9:59 am 06 Apr 09

Also, in Canberra buyers are protected against ‘fake’ offers, due to the legal requirement for all offers to be in writing. From my understanding, this system is designed to insure against agents falsely stating that offers were made to bolster the price – thus protecting the buyer in the situation outlined above.

Clown Killer 9:56 am 06 Apr 09

It’s worth remembering that the real estate agent is being paid by the vendor to achieve the highest possible price for any given property. The agents actions are therefore driven, by and large , by the contractual relationship the exists between them and the vendor.

dvaey 9:50 am 06 Apr 09

Does an auction cost anything extra, or require special qualifications? Maybe the reason for doing it this way, is to have the same effect for the seller as an auction, without worrying about any legalities that are involved in an auction? I suspect this is simply a way for the agent to conduct an ‘auction’ for the property, without incurring additional costs or responsibilities.

deezagood 9:40 am 06 Apr 09

In some ways, this is actually more ethical, as at least all buyers know the deal (ie. the agent is being open and honest about the process). We were bitten a few times in the past (not in Canberra) by dodgy agents who played buyers off each other to try and up the price. We were gazumpted at the last minute on quite a few occasions; a terrible feeling if your have your heart set on a particular property.

Property is worth what people are prepared to pay for it, and at the end of the day, both the vendor and agent will try to get as much money for a property as possible. An auction would achieve the same thing (and would be a lot quicker and less painful for the buyers) but some vendors don’t like the auction process.

Clown Killer 9:18 am 06 Apr 09

If you make your best offer – i.e. what you are genuinely prepared to pay for the property then I don’t see a problem. If the vendors agent believes that they can do better than your offer then let them try and find another buyer – it shouldn’t worry you because the property is obviously worth more than you are prepared to pay for.

VYBerlinaV8_the_one_ 8:40 am 06 Apr 09

What I find objectionable is when real estate agents gather multiple offers at once. I think it’s much fairer when an offer is made for that offer to be considerecd, and either accpeted or rejected.

If the agent thinks they can achieve a better than expected price, send it to auction.

trevar 8:32 am 06 Apr 09

No idea about the legality of it, but it does sound fair, as long as everyone knows that is how it works.

There is no pre-determined way to determine the value of real estate. The value of any commodity can be found by identifying the highest price a buyer is willing to pay for it, as long as that price is equal to or higher than the lowest price a seller is willing to accept for it, and the method you describe sounds like a reasonable way of finding that value.

Maybe legally this should be described as an auction, and I am usually the last person to defend the practices of real estate agents, but morally I can’t object to it without undermining the principles of a free market.

TP 3000 8:29 am 06 Apr 09

After spending some time working with Real Estate agents, are you able to only say if the company in question is big in Canberra or a small one? As I’ve dealt with some Real Estate Agents that put pressure on those responsible for pre-selling Building Inspections (that are required before they can list the property). This includes attempting to get you to “remove” items that are wrong in the building & pointed out in the report. Usually, all I had to do was a stern no & phone hang up, but other times they would never listen & a word with my manager stopped them.

What people have to remember that some Real Estate Agents get a percentage of the sale of the property & if I was faced with this deal, I would just find another place, as I would never be that desperate to pay more then $10,000 or more for a $200,000 unit with a real estate agent. When there could be someone out there who is selling their own home for $190,000 & trying their hardest

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