19 Sep Buyers Agents Association hits back – Rich Harvey
President of the Real Estate Buyers Agent’s Association of Australia, Rich Harvey, slams real estate companies misrepresenting themselves as buyer’s agents and offering free services. He is angry at claims by a company called Seekology, that is out to disrupt Australasia’s property market by offering a service to buyers that is free.
Kevin: As you heard just before the break there, talking to Tim Godden about his new model called Seekology where he is purporting to be a buyer’s agent. This has caused grave concern to the Real Estate Buyer’s Agents Association of Australia. Their President is on the phone to me, Rich Harvey.
Rich, why are you so concerned about Seekology?
Rich: Good day, Kevin. Good to have a chat.
I guess any new company that comes into the buyer’s agent field needs to be very careful about how they present themselves. If someone is going to call themselves an exclusive buyer’s agent, one of the key things the consumer needs to be aware of is to ask the question “How are they remunerated? How are they paid for their service? If they’re claiming it’s a free service, which I believe it is, you have to ask the question why is it free? Are they being paid somewhere else? And is this a sustainable business model?”
Kevin, let me ask you this question. Would you use a free mechanic to fix your car? Would you use a free builder to build your house? I certainly wouldn’t. I want to use the best builder or the best mechanic so that I know my car is safe and my house isn’t going to fall in.
Kevin: It seems to be a model where one part of the business is going to be free of charge and the other part is where they’re going to be charging a client to buy an owner-occupied property. I find it hard to work out how they’re going to work that out.
Rich: That’s right. I think good luck to that company if they wish to go down that road, but I guess the key thing is to make sure that they’re doing the right thing by the client.
As an Association, we have a very strict code of ethics and we like to make sure that all of our members follow a strict due diligence code that they put the best interest of the client at heart, that they’re not receiving any secret kickbacks or any secret commissions along the way, and that they’re providing the best possible advice.
You have to just question how good free advice is, because it may end up costing the home buyer or the investor a lot of money down the track.
Kevin: Rich, do you think the Seekology model or what he’s proposing is a risk to consumers?
Rich: I do think it is a risk in the sense that it’s not proven. Like I said to you before, I don’t know of too many other models or businesses that stay around for very long that offer a free service. It’s not really a business. You can run a charity, but this is not a charity.
You’re talking about a major asset – at least half a million dollars when you’re buying a property – and if you’re going to have someone that’s representing you for free you have to question how good a job are they going to do for you if you’re not paying anything for it.
Kevin: Just on that point, Rich, if I could ask you then, if it is a possible threat or a danger to consumers, is there enough regulation around this? Why can someone come in and just open up a business like this?
Rich: First of all, Kevin, if they’re going to operate as a buyer’s agent, you must have a license to operate in the state that you’re buying that property in. If you’re going to engage a buyer’s agent, check that they have a license to operate in Queensland, New South Wales, Victoria, Perth, wherever they’re buying. Make sure they have a relevant license. That’s number one.
The other thing that needs to be improved, I believe, in the legislation is the licensing and education standards. At the moment, to become a selling agent, you can get a certificate of registration in about five days and then operate under a full licensee. That’s not a long enough length of time to get all the skills you need to operate in this industry.
One of the things I’m advocating to government is that they need to really ramp up the requirements to become either a selling agent or a buying agent and jump through a few more hoops before you start representing people’s biggest asset.
Kevin: Is that going to happen, Rich? There have been calls for that now for well over a decade and nothing seems to be happening.
Rich: In New South Wales, Kevin, I serve on a separate committee with the Institute and I’m advocating to the Minister. They’re actually doing a review of licensing as we speak. So there is a review going underway and they are looking at doing that. I’m not sure if it’s happening in Queensland or Victoria or the other states, but it’s something that should definitely be happening.
Kevin: I know that in some of the states, they have been talking about it for some time, but governments seem to be reluctant to want to get into checking those qualifications.
Rich: I think one thing that should happen is that there should be some simple regulation around the definition of the term buyer’s agent. We have to make a clear distinction between a buying agent and a selling agent. A buying agent is someone who works purely for the buyer and is paid by the buyer. It’s as simple as that. A selling agent is someone who is paid by the vendor for selling their property. There’s a thing called fiduciary duty, and there’s a pretty clear line between the two.
Kevin: Well then clearly, Rich, you would have a problem with the current way real estate works broadly in Australia where an agent actually acts on behalf of the seller but also deals with the buyer, because that creates a conflict.
Rich: Yes, but it can be done well. That’s why people should use more buyer’s agents. Yes, the selling agent there is representing the vendor and they certainly have interaction with buyers, but that’s where buyers need to be aware – not so much skeptical, but just be aware of who they’re dealing with and how the agent is paid. That’s what needs to happen.
Kevin: I know that in overseas countries they can’t work out how we work in Australia in those areas of conflict because clearly it is a conflict. In America, they have very clear definitions between the seller’s agent and the buyer’s agent.
Rich: There’s a different model in the U.S. In many cases, there’s a much larger commission at stake – there’s a 5% or 6% commission – and often they have buying and selling agents in the same office, which I think is a conflict of interest. So as much as you think we might have conflict of interest here, there they still have conflicts of interest. And again, they’ve had the same sort of debate between buyer agent and exclusive buyer agent.
I think the key thing here is that consumers need to be aware of the clear definitions of what a true buyer’s agent is and how they’re paid versus a buying agent who also gets cuts along the way.
Kevin: There is a lot of gray here. Just give us the parting message, Rich.
Rich: The parting message, Kevin, is buyer beware. Make sure that your buyer’s agent is licensed, is experienced, has excellent local knowledge, and certainly is a member of REBAA – the Real Estate Buyer’s Agent Association of Australia.
Kevin: Well said, my friend. Thank you very much. Rich Harvey is in fact the President of that organization REBAA. Thanks for your time, Rich.
Rich: Thanks, Kevin.