A leading industry body has warned consumers are becoming increasingly more vulnerable to potential conflicts of interest through real estate agencies that have “double agents” offering to act for both sellers and purchasers.
According to Real Estate Buyers Agents Association (REBAA) president Rich Harvey there was growing concern within the industry that major selling agencies were opening up ‘buyer’s agency’ divisions, misleading clients to believe they were offering buyers independent real estate advice.
“Any selling agency purporting to be a buyer’s agency or offering buyer’s agents services needs to be carefully questioned,” said Mr Harvey.
“An independent advisor cannot operate on both sides of the transaction. Professional advisors, such as licensed independent buyer’s agents, have a fiduciary duty to put their clients’ interest first.”
Several major real estate brands have recently launched their own dedicated buyer advisory service offering clients ‘a complete real estate experience’.
According to REBAA there are three key reasons why double agents will find it challenging to provide independent advice:
1. Buyer’s agents within selling agencies will possibly encourage buyers to choose the stock their business has listed (potential conflict of interest).
2. Independent buyer’s agents pride themselves on having good relationships with local agents and would be given access to off market and preview listings whereas a buyer’s agent from a rival sales agency would likely be seen as a threat and less likely to canvass the broader market (which is essential).
3. Buyer’s agents have a different approach and skill set to sales agents. Buyer’s agents act as a trusted advisor, researcher and negotiator and must have excellent listening skills and patience. Sales agents typically work on a shorter time frame toward a specific sale process and while they too are a trusted advisor, are much less likely to work with clients for several months.
The recent Royal Commission into banking has exposed serious flaws in the financial advice sector and put the spotlight on the provision of independent advice that is tied to commission.
Ultimately the way that a buyer’s agent is remunerated will be a major factor driving their behaviour.
The same scrutiny could be applied to the property sector where consumers were vulnerable to inappropriate advice from any advisor operating in the sector, said Mr Harvey.
“Real estate purchasing is typically the largest transaction consumers undertake in their lifetime and doing this alone, without professional independent advice, is fraught with danger and costly mistakes,” he said.
“Homebuyers and investors should not need to be detectives to try and understand if conflicts of interest arise from their advisor – they simply need someone they can trust.
“Australian consumer law is very clear that it is illegal for a business or individual to engage in conduct that misleads, deceives or creates a false impression of a specific service.
“Agents need to decide which side of the fence they are acting on – for buyers or sellers- but not both. A buyer cannot be guaranteed a pure and exclusive service when using an agent who is selling property or accepting incentive payments from sellers.”
REBAA is Australia’s largest professional body representing independent buyers’ agents. Its members are licensed professionals who specialise in searching, locating, evaluating and negotiating the purchase of property on behalf of buyers. They are engaged independently and only paid for by the buyer to act on their behalf.
Here are REBAA’s tips for choosing an independent buyer’s agent:
Field and experience
Ask for references from at least three recent clients who you can contact to discuss their experience with the buyer’s agent. REBAA members have a minimum 24-months experience as a requirement to full membership. Our junior members are also well-supported through an ongoing mentoring program.
Check with the relevant state’s department of fair trading to ensure they are appropriately licensed and insured.
Membership of REBAA
If they aren’t a member of the largest professional body of buyer’s agents in Australia, ask why not. In order to become a member, agents must be vetted. Once an agent is a member they are expected to adhere to a strict code of conduct.
A good buyer’s agent will have a wide network of selling agents to access properties off-market and earlier than the general public. Often the best person to ask about a buyer’s agent is a selling agent.