July 9th 2009
by Neil Jenman
A friend of mine is about to get ripped off. He's going to an auction to try and buy a house. Whether he buys it or not (and I think he'll miss out), he's still going to lose about a thousand dollars - needlessly.
It's so frustrating because there's nothing he or I can do about it. It's the way 'the system' works all over Australia (except the A.C.T.). Every week, thousands (yes, literally, thousands) of homebuyers are losing around a thousand dollars each when they try to buy a home.
Not only is this loss so frustrating, it's also needless and senseless. This rip-off not only hurts buyers, it also (as you will see), indirectly, hurts sellers. It's a rip-off that would be so easy to stop. The trouble is, of course, that protecting homebuyers means that those who benefit from the rip-off will suffer. For every loser, there's a winner. Unfortunately, in this case - as so often happens in real estate - the losers are the buyers and sellers.
Here's how it works. Before buyers pay several hundred thousand dollars for a property, they need to do some research to make sure the property is 'okay'. They need a building report, they need a pest report, they should get a valuation report and they need to get their solicitor to check the paperwork. Naturally, all this research costs a lot of money. There's little, if any, change out of a thousand dollars.
Now, when there is more than one buyer competing for a property (as often happens, especially when agents mislead buyers with false low quotes), there can be several buyers all doing the same sort of research on the same property. It's not uncommon for eight or ten buyers to fork out around a thousand dollars each for research on the same property. And, because only one buyer can buy any property, it follows that all the other buyers waste their money.
It's also not uncommon for buyers to waste several 'lots' of thousand dollars before they finally buy a home.
Now, what's really annoying (to me) about this rampant rip-off is that almost nobody seems to care about it.
The agents don't care because it's not their money being wasted; indeed, agents are often getting a kickback from inspectors. Also, agents love to see buyers spending/wasting their money checking out a property because the more the buyers spend, the more likely they are to 'hang in there' and turn up at the auction.
The inspectors don't care. On the contrary, they love it. Sometimes they are charging several hundred dollars to several different buyers for the same property. It's outrageous.
The regulators (other than in the A.C.T.) don't care because the agents (via those self-serving and hypocritical real estate institutes) have convinced the regulators that nothing can be done about this problem and, besides, it only happens on rare occasions (rubbish, consumers are losing tens of millions of dollars every year).
Incredibly, even though they are the ones being hurt, a lot of the buyers don't care too much. At least, they certainly don't care enough to send a written complaint to the regulators. The buyers have been conned into thinking "this is the way the system operates". As detestable as it may be to them, once they find a property, it's as if they grab an eraser and hurriedly rub out all the bad memories in their minds. Buyers, you need to start caring more about yourselves!! Speak out. Even if it won't help you, enough complaints will lead to legal reforms which means future buyers will be prevented from being ripped off.
The sellers don't care because, well, it's not their money; and, besides, when they were buying (and when they buy again), the same thing's going to happen to them.
But wait a minute, all you property sellers. You are about to see how you can offer a solution to this horrible rip-off that hurts buyers. You are also about to see how you can make your property stand out like a beacon. You can attract more buyers which will almost certainly mean more competition for your property which means you'll get a higher price. Trust me on this - the truth will help you.
Here's what you do.
Before you put your house on the market (or, if it's already on the market, go back and do this), arrange and pay for a building report, a pest report and a valuation. You can then offer your home with these words - 'GUARANTEED FULL DISCLOSURE'.
Your message (or the message conveyed by your agent) will go something like this: "Come and have a look at our property and make us an offer without having to worry about wasting hundreds of dollars on needless inspections and reports."
You see, what most sellers don't realise is that - under the normal system where buyers are ripped off without any care or consideration - many buyers don't even bother to look at many properties (let alone make a serious offer or attend an auction) because they don't want to waste another few hundred dollars in needless reports and inspections.
If sellers obtain these reports once, it will save buyers from having to obtain these reports several times on the same properties. Sure, the buyers may still want to arrange their own reports (perhaps they won't trust the sellers' reports) but they can do so after they have made the decision to buy.
Or, better still, the sellers can legally guarantee that they have made full disclosure (as happens in the A.C.T. and in a rapidly growing number of states in America).
If sellers are concerned that, suddenly, there is an extra cost imposed on them, they shouldn't be. As soon as they see the look of delight on the buyers' faces - and as soon as they see the increased number of people inspecting their home, the sellers will know they've made the right decision.
Later, when their home is being sold - probably to buyers who, previously, under the 'standard system' may never have even seen their home - the sellers can 'adjust' the sale price to include the cost of the reports. Buyers don't mind paying for inspection reports when they know, for sure, that they are buying a property.
Sellers, give the buyers a break and do yourselves a favour. Tell buyers that your property is offered with "full disclosure". Tell buyers that they can inspect inspection reports at no cost before they decide to buy.
Sellers, if you follow this advice, there's an excellent chance that you'll attract more buyers which means that you'll sell your property for a higher price.
Telling the truth is an unusual and novel idea for the real estate industry.
In this case, the truth will mean more money for the sellers. Try it.******************