The property industry in New South Wales is stacked against the humble real estate agent. Real estate agents who are just trying to run a business are always handicapped in the exercise of standard operational procedures. The restraints of trade, which are placed on real estate agents, make it difficult for the humble agent to make a buck.
Section 46 of the Property, Stock and Business Agents Act 2002 (The Act) is the starting point. It prevents real estate agents from earning an income from both buyer and seller, requiring them only to obtain a fee from one side. Interestingly enough, in other parts of the world, it is almost instituted that you can act for both sides. In France, a notary receives approximately 8% from both purchaser and vendor for selling the property. In the United States, the commission is broken between buyer and seller under the multi-listing service regime. In Perth, a real estate agent can also be a settlement agent/licensed conveyancer, and can act for both sides. But in NSW, we are restricted from earning fees for undertaking work for people if we are getting it from somebody else.
Section 45-50 sets out a whole pile of disclosures:
- If you are earning anything from work you are undertaking for vendor, section 47 requires you to disclose it;
- Section 48 requires you to disclose to purchasers, any personal relationship you may have with a referrer;
- Section 49 states that you cannot purchase your vendor’s property without them consenting on the fair trading form to that purchase; and
- If you are selling your own property, section 50 requires you to state, â€œagent declares interest.â€
Considering these restrictions, the real estate industry should therefore be congratulated due to its ability to continue operating. The industry cannot upsell, cannot obtain referral fees, cannot work in partnership without disclosure and cannot even sell their own properties without telling the world. Nonetheless, real estate agents have been incredibly successful at selling property in the face of all this restraint of trade.
Often the industry is maligned because of its lack of intellect. In our position, we are often criticized for throwing our lot in with the real estate industry. We have a whole different thought here at Leverage: we believe that the real estate industry, against the odds, have been able to operate successfully for many decades.
Instead of criticizing real estate agents, the pundits should get off their backsides and actually congratulate them. In the financial services sectors, the legal fraternity or any basic business, when you are not able to upsell, don’t be screaming from the rooftops. The agents cop it and succeed. Margarine came up with a campaign in the 1990s, which boosted Meadowlea to the largest selling margarine in Sydney. Its slogan was you’ve got to be congratulated. This is just as applicable to real estate agents.