Double agents aren’t solely the domain of James Bond films, as property industry insiders sound the alarm over “double dipping” real estate agents leaving consumers vulnerable.
The Real Estate Buyers Agents Association (REBAA) has warned of “potential conflicts of interest” from “double agents”, as major real estate agencies seek to extend their services to include both selling and buyer’s agency divisions.
Despite laws prohibiting selling agents from acting as buyers’ agents on the same transaction, industry insiders allege that the lines are increasingly being blurred by “double dipping” real estate agents with undisclosed financial incentives who operate out of self-interest.
This industry’s lack of independence and transparency leaves consumers vulnerable to misleading advice, with little means for recourse, the REBAA said.
“Agents need to decide which side of the fence they are acting on â€“ for buyers or sellers, but not both,” REBAA president Rich Harvey said.
“A buyer cannot be guaranteed a pure and exclusive service when using an agent who is selling property or accepting incentive payments from sellers.
“An independent adviser cannot operate on both sides of the transaction. Professional advisers, such as licensed independent buyer’s agents, have a fiduciary duty to put their clients’ interest first.”
According to Mr Harvey, the softening property market will make buyers more susceptible to bad advice from unscrupulous real estate agents looking to increase their commission earnings.
“One of the things that you’re going to see as the market cools down is that it’s going to be harder for selling agents to achieve the same level of income as they were during the boom,” he said.
“In a tougher market they’re going to have to work harder to meet expectations, and some will think that they can make fees through buyers.”
The REBAA is calling for property investment advice to be regulated to protect buyers from advice that is not in their best interest.
“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,” Mr Harvey said.
“Homebuyers and investors should not need to be detectives to try and understand if conflicts of interest arise from their adviser â€“ they simply need someone they can trust.
The banking royal commission has shone a light on grave misconduct in the financial advice sector, including revelations by Australia’s corporate watchdog that nine in 10 financial advice deals it has investigated were not in the interest of consumers.
Property Investment Professionals of Australia president Peter Koulizos said there is a desperate need to regulate property investment advice.
“Property’s probably the most expensive asset that people buy, and if people are given wrong advice or conflicting advice, it can be financially devastating,” he said.
“If people do the wrong thing in property they need to be penalised.”
Mr Koulizos said he hoped that the financial misconduct revealed in the banking royal commission would act as a catalyst for reform within the property sector.
“It’s a no-brainer that property investment advice needs to be regulated and we’ve been lobbying for this for over 10 years,” he said.
While “double dipping” does occur, it is less common in residential real estate than in the commercial sphere, Real Estate Institute of Australia president Malcolm Gunning said.
“It really gets down to the credibility and professionalism of the agent,” he said.
According to Mr Gunning, some real estate agents are putting their own interests above those of the vendor who engages them.
“I am concerned that the lines of responsibility in residential real estate get blurred. There is the opportunity for collusion,” he said.
“When you’re engaged to act as an agent, you must act in the very best interest of your client. You can’t serve two masters.”
Vendors should undertake due diligence to ensure they are selecting a trustworthy and appropriately qualified agent, Mr Gunning said.
The REIA has recently moved to “professionalise” the real estate agent sector, seeking to increase education and training for would-be real estate agents and raise the standard of entry to the industry.
“The public out there are suspicious of agents. That’s the reputation that residential agents earnt themselves. That’s how the public see us, and that’s what we must work to change,” Mr Gunning said.
Isabelle Lane, Property Reporter, The New Daily. 18 June 2018