KEY POINTS:
Selling an Auckland home can cost more than the price of a new car. Or as Peter Gilchrist, director of real estate agency The Joneses, says, the cost of adding an extra bedroom to your home.
"Real estate agent" is just another name for "salesperson" and it's important to remember that they're paid by commission, which unfortunately doesn't always bring out the best in people.
The industry looks set to be regulated after one too many dodgy agents took clients to the cleaners. It's likely that will involve the setting-up of an independent body with the power to really hurt an agent financially for falling foul of the rules.
Even so, woe betide the naive homeowner who entrusts the sale of his or her cherished home to the wrong agent. Real estate is a cut-throat business and agents are schooled in how to extract the most money out of each deal.
Good agents can be worth their weight in gold. But the industry as a whole lacks ethics, says real estate maverick and presenter of television's The School of Home Truths Neil Jenman, thanks to the big money in the business, the fact that the industry currently controls its own complaints process and consumers' lack of knowledge in that buying or selling a home happens only a few times in their lifetime.
Jenman believes the average consumer loses about $10,000 when selling the family home. Some lose nothing, but others can lose hundreds of thousands of dollars.
What to watch out for:
Both buyers and sellers need to ensure that they're being told the whole truth. Tricks of the trade include:
* Agents knocking the price down to buy the property themselves or for their family trust.
* Conditioning: a process where an agent quotes a price to get the business, then starts to whittle down your price expectations to sell the property and take the commission.
* Failing to tell you of impediments to the sale, such as a block of flats being built next door, illegal extensions or basement conversions.
* Providing false information such as the suggestion that the sellers are divorcing or under time pressure to sell. You may be led into the false assumption that you're getting a bargain.
* Agents betraying your confidence. Send friends around to check out the agent at your open home. It may be that you are getting divorced, but you don't want the buyers to know that.
* Buyers need to be aware that the agents are working for sellers, not them.
Top tips for buyers and sellers:
* Get the price right by getting professional valuations. "It is amazing how hard it is to get that message across," says author of Real Estate without Agents Terry Ryder.
* Know your market. Shop around and also get familiar with actual selling prices by paying for a local sales report from QV.co.nz
* Read books about how to buy and sell a home.
* Get a builder's report.
* Always make sure your lawyer reviews the LIM report.
* Find out yourself the cost of improvements you plan.
* Knock on the neighbours' and vendors' doors and introduce yourself. You'll be surprised what they will tell you about the property.
* Consider selling your home yourself, it can save you many thousands of dollars.
A good way to throw money down the drain is with an inappropriate advertising campaign, says Gilchrist. Many agencies take 15 per cent from you on top of the real cost of the advertising. What's more, some encourage buyers to pay thousands of dollars to list their properties overseas at immigration or property road shows. "Buyers should ask the agent to show them the last 20 properties they have sold [in that country], because they may have never sold one." Instead the money funds the cost of the agency's marketing in that country.
Even if you do want an advertising package, you may not want to blow your budget in the first month, says Gilchrist. "Some franchises simply tell their offices they have to take five pages in a magazine and will pay for it regardless of whether they use it or not. You can imagine how those sales people are pressured into selling magazine space."
If you really want to get the best deal, then treat property buying and selling as a business, and take a leaf out of professional property investors' books. Good investors rarely get emotional. What matters is whether the numbers stack up.
Few would buy without doing their "due diligence", says Martin Evans, president of the New Zealand Property Investors Federation. Even experienced investors get "hit with shoddy deals" from real estate agents so the more research you do the better.
Dean Letfus, property trader and educator, who on a slow week puts in offers on 10 to 20 properties, says: "If I was to be brutally frank I probably met and spent time with 250 agents before I found one I could work with. The primary issue would be them telling lies."
Letfus said one of the worst examples he experienced was where an agent reassured him that the property would continue to have unobstructed views of the coast. Just before the contract went unconditional, Letfus received an unexpected call from the owner of neighbouring land telling him that he was about to build three townhouses that would completely destroy the view and that the agent knew this.
The cost of selling a home has doubled in recent years - thanks to the fact that agents still take the same percentage of the sale price as their commission, yet house prices have doubled. At 4 per cent that adds up to $18,000 for an Auckland home where the median house price is in excess of $450,000 and up to $40,000 for a $1 million house, Gilchrist says.
There is, of course, no rule that says you can't haggle with your agent. In the UK, where property isn't exactly cheap, it's possible to sell your property for 1-1.5 per cent commission. In Australia the going rate is around 2 per cent to 2.5 per cent. Not all agents would consider 1 per cent, but sellers could probably find an agent to handle their deal if they tried hard enough.
Letfus has learned over the years to avoid agents he doesn't trust. If, for example, he sees a property on the market in Manurewa and he has a contact in the Howick office of that same agency that he trusts, he will buy through that agent - who gets to split the commission.
It's true that the vast majority of real estate agents' clients are happy with the service they get. Gilchrist points out that there are almost certainly more lawyers and accountants in jail than real estate agents.
As well as Ryder's book, home buyers and sellers could benefit from reading Garry Bond's book Selling a Home Privately in New Zealand or Olly Newland's book The Rascal's Guide to Real Estate which, although a little tongue in cheek and aimed primarily at property investors, has chapters such as "Real estate agents: their treatment & cure", and "Falling in love can be expensive".
