Amendments to the PAMD Act 2000 are effective today (21st August 2006). Fair Trading Minister Margaret Keech claims that the amendments will make property buyers and sellers more confident of getting value for money and improved consumer protection.
We are not so sure these amendments will work in achieving those aims. The basic changes to the PAMD Act 2000 are effectively;
A) Bidders at Auctions will have to register prior to Auction, including providing suitable identification and receiving a marker to identify when they make a bid.
B) Any Market Opinions an agent provides to a property seller will need to be substantiated by a comparative market analysis (CMA).
Now call me a cynic about the behaviour of real estate agents, but these are really not going to achieve the goals of cleaning up the behaviour of dishonest real estate agents.
These legislated changes really only make the honest hard working agents, and yes they do exists, more honest. The dishonest agents will get around this in no time, whilst buyers and sellers believe the system will protect them.
Consider these approaches to both of the above changes.
A) The dishonest agent can still get a friend or an associate to register at an auction. That person can be informed of how high to bid – so that they bid just below the reserve, to try and get the potential real buyer to increase their bids. Even if no-one bids after the friend or associate bids – they are still below the reserve price, so it just looks to all and sundry like there were some serious buyers interested in that property. Additionally did you know that the Auctioneer can bid on behalf of the Vendor. This is called a vendor bid, and the way an auctioneer does those bids can still influence a potential buyer into believing they are bidding against a genuine bidder.
B) A market opinion is not a property valuation. It’s the opinion of the real estate agent on what the likely sale price of a property will be. They now must substantiate his opinion by comparing similar type properties that sold within 5km of the property in question. Now I reckon 5km covers quite a lot of ground, in-fact it could cover suburbs that have a significantly lower average price. Additionally what about the time frame – is last 6 months a good indication. Last 12months. The market opinion is simply not a valuation done by a professional independent valuer. The agent has an agenda, they will substantiate to their hearts content and legitimately under the PAMD Act, to get the result they are after.
Sorry Mrs Keech we don’t believe either of these changes do anything to address the dishonest agents, and the process they employ.
If a property seller wants to feel truly comfortable they should seek an independent valuation. Then they can decide whether they need to use an agent or not.
As for auctions, considering current auction clearance rates in Queensland, forget the dummy bidder, you’d be a dummy seller.
Michael Eroz
Property Analyst
Zeroagents.com.au
Monday, August 21, 2006
Friday, August 11, 2006
Agents get trips to Cuba – You get expensive Advertising
Recently it was reported in The Australian that Real Estate Agents in Melbourne who spent a minimum of $250,000 a year on real estate advertising in The Age Newspaper were gifted an all expenses paid trip to Havana, Cuba.
It’s all courtesy of a reward program The Age has implemented for Real Estate Agents.
The Victorian Government outlawed rebate schemes which at some stages were as high as 40% of advertising paid for by property owners.
The Age wants to reward Real Estate agents for revenue it generates for their paper. When you consider we are talking 120 Million or so in real estate advertising revenues, we are talking lots of money.
It’s not just Havana. Agents have been taken to Tuscany, Dubai, Thailand and Las Vegas.
Whilst The Age considers this to be a reward program for clients who spend serious money with them, consider whose money the Agents are spending.
You guessed it. It’s the money they extract from property owners for vendor paid advertising.
Not only do the property owners have to pay huge commissions to these agents – they are also indirectly funding their overseas junkets.
So if you want to pay thousands in commissions, plus sponsor an agents overseas trip, we suggest you select an agent who is very prominent in The Age Newspaper.
If you want to put your money back in your pocket, sell your property yourself. 70% of all property is sold as a result of internet advertising or a “for sale” sign. You can easily do this yourself.
And when you do……. buy a big Cuban Cigar for yourself.
Michael Eroz
Property Analyst
http://www.zeroagents.com.au
e: michael@zeroagents.com.au
It’s all courtesy of a reward program The Age has implemented for Real Estate Agents.
The Victorian Government outlawed rebate schemes which at some stages were as high as 40% of advertising paid for by property owners.
The Age wants to reward Real Estate agents for revenue it generates for their paper. When you consider we are talking 120 Million or so in real estate advertising revenues, we are talking lots of money.
It’s not just Havana. Agents have been taken to Tuscany, Dubai, Thailand and Las Vegas.
Whilst The Age considers this to be a reward program for clients who spend serious money with them, consider whose money the Agents are spending.
You guessed it. It’s the money they extract from property owners for vendor paid advertising.
Not only do the property owners have to pay huge commissions to these agents – they are also indirectly funding their overseas junkets.
So if you want to pay thousands in commissions, plus sponsor an agents overseas trip, we suggest you select an agent who is very prominent in The Age Newspaper.
If you want to put your money back in your pocket, sell your property yourself. 70% of all property is sold as a result of internet advertising or a “for sale” sign. You can easily do this yourself.
And when you do……. buy a big Cuban Cigar for yourself.
Michael Eroz
Property Analyst
http://www.zeroagents.com.au
e: michael@zeroagents.com.au
Saturday, August 05, 2006
Conditioning Property Owners
Conditioning a property owner is one technique real estate agents use to try and get a deal.
This is a very manipulative technique many agents use. More distressing is the fact that as an industry many of the franchise groups actually run structured training courses for their staff on this technique. The basics of this technique are;
The way an agent may condition you is quite simple.
a) They accept the price you want to list the property at. Their goal over the next 4 weeks is to condition you to accept far less money as a cheaper sale price always makes the agents job simpler.
b) They then work on providing feedback to you from any open homes or inspections which basically says that everyone who has inspected the property believes that it is overpriced. They may convince a few potential buyers to submit offers which are significantly less than what the owner is after. They do this - knowing the owner won't accept it, but nevertheless will convince some buyer they may have a chance with that offer.
c) The agent has built a relationship with the property owner that is far stronger than any individual buyer who may make an enquiry. It is easier for them to condition the property owner to accept a lower price than it is for them to get a better price from the potential buyer. (Even when the buyer could have been very prepared to pay more.)
d) Now that the owner has received a really offensive cheap offer or offers, the agent hopes that the property owner will now accept less than what they originally wanted because the owner will see any subsequent offers as being considerably better than what they were offered previously.
e) Its deceptive behaviour designed to make the property owner accept less and therefore the agent gets a sale and gets paid.
No wonder nobody trusts real estate agents.
Michael Eroz
Property Analyst
http://www.zeroagents.com.au
This is a very manipulative technique many agents use. More distressing is the fact that as an industry many of the franchise groups actually run structured training courses for their staff on this technique. The basics of this technique are;
The way an agent may condition you is quite simple.
a) They accept the price you want to list the property at. Their goal over the next 4 weeks is to condition you to accept far less money as a cheaper sale price always makes the agents job simpler.
b) They then work on providing feedback to you from any open homes or inspections which basically says that everyone who has inspected the property believes that it is overpriced. They may convince a few potential buyers to submit offers which are significantly less than what the owner is after. They do this - knowing the owner won't accept it, but nevertheless will convince some buyer they may have a chance with that offer.
c) The agent has built a relationship with the property owner that is far stronger than any individual buyer who may make an enquiry. It is easier for them to condition the property owner to accept a lower price than it is for them to get a better price from the potential buyer. (Even when the buyer could have been very prepared to pay more.)
d) Now that the owner has received a really offensive cheap offer or offers, the agent hopes that the property owner will now accept less than what they originally wanted because the owner will see any subsequent offers as being considerably better than what they were offered previously.
e) Its deceptive behaviour designed to make the property owner accept less and therefore the agent gets a sale and gets paid.
No wonder nobody trusts real estate agents.
Michael Eroz
Property Analyst
http://www.zeroagents.com.au
Thursday, August 03, 2006
Interest Rate Increase Sucks
But consider the longer term position.
Statistics can often be quite confusing, and whilst we will take some liberties with the following examples, the picture that evolves is still quite reflective of the net effect to property owners over a longer term.
We can’t offer any help with rising interest rates, increasing petrol prices, general inflation and a stagnate property market, but we can make suggestions for how you could put money back into your pocket.
And when you turn us all upside down and shake the money out – isn’t that what we all want.
So firstly we will deal with some of the basic statistics we are going to use in this comparative analysis.
1. Average Australian Mortgage = $220,000
2. 0.25% increase in interest rates = $36 month extra repayments
3. Annual increase in repayments = $432 per year
4. Average property price Australia = $ 400,000
5. Average life cycle of property ownership = 7 years
6. Average household income = $60,000
Now the following data has been rounded to make the presentation of the analysis easy, but sources of this data include, Australian Bureau of Statistics, Australian Property Monitors, Real Estate institute of Australia and various other publications and sources.
We start with the approximate median property price within Australia of $400,000 (it is slightly less – December 2005 weighted average all capital cities $394,531). This is what the average sale price will be for a property throughout Australia.
Now statistics suggest property owners sell their property roughly every 7 years. In 2004/2005 there was around 500,000 dwelling sales. This doesn’t include sale of land, which is roughly 70,000 parcels per year sold.
Traditionally these sales would have occurred by the property owner employing a real estate agent.
The costs associated with selling a property are approximately 2.5% of sale price for the agent’s commission and 0.5% of sale price for advertising costs charged by the agent. On a $400,000 property sale this means you would incur costs of $10,000 for commission, $2000 for advertising for a cost of $12,000. Now you must add GST because the government wants their bit and the total cost to you for selling is $13,200. Approximately 3.3% of the sale price.
That’s $13,200 out of your pocket after tax. If you are selling your principal place of residence, you are not liable for any tax on any capital gains you may have achieved. This means any gains are tax free.
So how much would you have to earn in a taxed environment to give you $13,200 in your hand.
Based on the average household income of 60,000 – you would be in the 25,000 to 75,000 tax bracket which incurs income tax at the rate of 30 cents in the dollar. So the exercise becomes how much extra do I need to earn to put $13,200 in my pocket based on 30% tax rate.
The answer is $17,286 required to generate $13,200 after tax.
Now consider the cycle of 7 years for property. If you were paying the extra interest rate of 0.25% over that period the extra cost to you of $432 a year for 7 years would equate to an extra $3024 you would pay due to the latest interest rate rise.
Now we cannot control this cost. But if you were to sell your own property without a real estate agent you could save $13,200 ($17,286 if you had to work to pay for it)
You would be over $10,000 ahead. Which means interest rates could climb another 0.75% over the 7 years and you would still be in front simply by deciding to sell your property yourself.
So whilst we have no answers for Australian fiscal policy, rising inflation and other common ailments to your weekly pay packet we do know that if you choose to sell your property yourself you will be well ahead over the longer term.
It saves you thousands.
Michael Eroz
Property Analyst
Zeroagents.com.au
E: Michael@zeroagents.com.au
http://www.zeroagents.com.au
Statistics can often be quite confusing, and whilst we will take some liberties with the following examples, the picture that evolves is still quite reflective of the net effect to property owners over a longer term.
We can’t offer any help with rising interest rates, increasing petrol prices, general inflation and a stagnate property market, but we can make suggestions for how you could put money back into your pocket.
And when you turn us all upside down and shake the money out – isn’t that what we all want.
So firstly we will deal with some of the basic statistics we are going to use in this comparative analysis.
1. Average Australian Mortgage = $220,000
2. 0.25% increase in interest rates = $36 month extra repayments
3. Annual increase in repayments = $432 per year
4. Average property price Australia = $ 400,000
5. Average life cycle of property ownership = 7 years
6. Average household income = $60,000
Now the following data has been rounded to make the presentation of the analysis easy, but sources of this data include, Australian Bureau of Statistics, Australian Property Monitors, Real Estate institute of Australia and various other publications and sources.
We start with the approximate median property price within Australia of $400,000 (it is slightly less – December 2005 weighted average all capital cities $394,531). This is what the average sale price will be for a property throughout Australia.
Now statistics suggest property owners sell their property roughly every 7 years. In 2004/2005 there was around 500,000 dwelling sales. This doesn’t include sale of land, which is roughly 70,000 parcels per year sold.
Traditionally these sales would have occurred by the property owner employing a real estate agent.
The costs associated with selling a property are approximately 2.5% of sale price for the agent’s commission and 0.5% of sale price for advertising costs charged by the agent. On a $400,000 property sale this means you would incur costs of $10,000 for commission, $2000 for advertising for a cost of $12,000. Now you must add GST because the government wants their bit and the total cost to you for selling is $13,200. Approximately 3.3% of the sale price.
That’s $13,200 out of your pocket after tax. If you are selling your principal place of residence, you are not liable for any tax on any capital gains you may have achieved. This means any gains are tax free.
So how much would you have to earn in a taxed environment to give you $13,200 in your hand.
Based on the average household income of 60,000 – you would be in the 25,000 to 75,000 tax bracket which incurs income tax at the rate of 30 cents in the dollar. So the exercise becomes how much extra do I need to earn to put $13,200 in my pocket based on 30% tax rate.
The answer is $17,286 required to generate $13,200 after tax.
Now consider the cycle of 7 years for property. If you were paying the extra interest rate of 0.25% over that period the extra cost to you of $432 a year for 7 years would equate to an extra $3024 you would pay due to the latest interest rate rise.
Now we cannot control this cost. But if you were to sell your own property without a real estate agent you could save $13,200 ($17,286 if you had to work to pay for it)
You would be over $10,000 ahead. Which means interest rates could climb another 0.75% over the 7 years and you would still be in front simply by deciding to sell your property yourself.
So whilst we have no answers for Australian fiscal policy, rising inflation and other common ailments to your weekly pay packet we do know that if you choose to sell your property yourself you will be well ahead over the longer term.
It saves you thousands.
Michael Eroz
Property Analyst
Zeroagents.com.au
E: Michael@zeroagents.com.au
http://www.zeroagents.com.au
ZERO MAN
Zeroman is Australia's latest superhero.
He fights for truth and fair play in real estate...... and advises people to sell their property privately.
If you have a bad experience with any real estate agents you can call upon Zeroman.
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