The following article was written by Tony Braziers from Braziers, and is relevant to both buyers and sellers.
What Buyers Like
What feels like a good ten years or so ago, (probably more,) an American Realtor came into town and spoke at a meeting of local Real Estate Principals. A little like the Mel Gibson movie of the time, “What Woman Like,” he professed to tell us that what buyers like is to have one place they can go to, to have access to all available listings in any given town, suburb or area that they chose. A visit to one agency should net an opportunity to see everything that islistedand not just what that agency had to offer on its books. What this required was a healthy multiple listing system that all agencies bought into with an obligation, not just a willingness, for any Listing Agent to ‘work-in’ with the agency inquiring. At the time, here in Christchurch, our own Multi-Listing Bureau, (MLB,) had only just started to fall to pieces after many years of co-operation. Some more active agencies who wished to, ‘take over the world’ didn’t see the need to support others who relied on shared listings. The MLB had also just had a disastrous entry into the world of the internet, proving too early for some Principals to get their heads around, a little bit like when EFTPOS was first trialled, socially, we weren’t ready for it.
Subsequent years have seen the, ‘we don’t need anyone else,’ mentality between agencies grow to the point where, in an attempt to look to have an ever greater point of difference between agencies, we have inadvertently shoved a hand in the face of 50% of the people that make the property transaction happen, i.e. the buyer. Traditionally the real estate industry has hung very heavily on the fact that ‘we work for the seller.’ All decisions were made as to what was in the best interests of the seller as he/she is the one who pays us and the buyer can look after themselves, (Caveat Emptor/Buyer Beware.) The new Act has changed that slightly and swung the pendulum very close to middle, left only slightly in favour of the seller due to greater disclosure requirements,(it is now Agent Beware.) Yet, we treat our buyers so appallingly, still.
If you haven’t had to recently, ask someone who has been trying to buy a property. As a buyer you are on a hiding to nothing a lot of the time. Firstly, a growing trend not to put a price on anything means that 72% of buyers, ( Australian statistics,) are put off from even calling because they have no yardstick as to whether they are wasting their time. Secondly, if one has to go to auction and presuming one can get adequate pre-approval through the Kiwi-Saver/Bank myriad, there are only just so many failed times where a buyer can afford to pay their solicitor to check all pre-auction documents in the hope that the bidding will actually start/be at the levels indicated. Thirdly, there is generally a major lack of listings to choose from unless you are in the new subdivision market of $450,000 plus. Unlike pre REAA 2008 agents are not to quote anything that is not fully listed in writing, therefore taking out the vast opportunities held by those specialists that, ‘know whose got it and know who wants it.’ Fourthly, if a buyer wants to include a trusted agent to find a property for them they are often stopped by the fact thatthe Listing Agent won’t ‘work in,’sometimes due to the fact that they are only receiving minimal commission in the first place. ( Many potential work-ins don’t get to the phone-call stage denying buyers, and thereby sellers, of a potentially successful outcome.)
The most prolific salespeople in NZ are often not the most visible, however, the new Act put a stick in their spokes when it negated the ability to quote a property that they knew the owner would sell but did not want listed. What is not that widely realised is the fact that the same Act has given not only permission, but also guidelines, as to how a salesperson can now act in order to work for the buyer, not the seller. What our American friend was trying to introduce a decade too early has now been recognised by the REAA as being another EFTPOS, i.e. now socially palatable and ready for introduction. Simply put, Buyer’s Agency, as it is called, gives representation to the buyer in the same way as the seller has enjoyed all of these years. In the US,a massive 65% of commissions earned by realestate salespeople are through Buyer’s Agency. In this process the buyer pays the agency to; find properties that suit the criteria given, advise them on the process, order the property checks needed and will even include negotiating or bidding at an auction for them amongst other services. The objective is to buy the property as cheaply as the agent can, in order to justify the fee. This is a total mental flipfor, in this case, the Fiduciary Duty goes to the buyer as they are the one paying the bill.(This Buyer’s Agent is not to be confused with the misplaced use of the term by some agencies whereupon that person, often a Personal Assistant, will search out properties for a buyer to consider but then the salesperson will work for the seller to get the highest price.)
The advantages to buyers are; no property is ‘out of bounds,’ as any Listing Agent is dealing with just another buyer, not a ‘work-in’ agent. Private sellers will not spurn, as no commission can be asked for by the Buyer’s Agent. Even properties that aren’t for sale are potential purchases. Even the lower commission agent will welcome the inquiry from the Buyer’s Agent as it is another opportunity to earn their full commission. No property is off limits negating the low numbers of listings. Having no price advertised won’t matter as the price expectation is set by the buyer after consultation with their experienced salesperson,who cangive honest appraisal with no constrictions of duty to the seller about price. Also, at auction, the Buyer’s Agent will not be badgering the buyer to go higher, quite the contrary, instead they will be advising more on how ‘the game’ is best played.
The hardest part will be for the real estate Principals to turn all they’ve set up for the sellers to an equivalent service for the buyers, for an agency cannot be both the Listing Agency and the Buyer’s Agency in the same transaction, for obvious reasons. (You cannot serve two masters.) However, the day is coming that the same agency will offer both services and complete the package of choices that our American friend tried to tell us about. Which hat the agent wears will depend on who inquires, the buyer or the seller. With a stadium of only 4 million plus, just one common website will act as our MLB.
One thing is plain. New Zealand real estate has offered only half a service in its first 100 years. This REAA change will go a long way to free up transactions for both buyers and sellers and not be restricted to methods that sometimes seem set up to suit the agency’s risk management than the client/customer’s needs.