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Real Estate Industry

February 3rd 2004

TASMANIA'S PROPERTY SHAME

Be warned - the beautiful state has an ugly side.


An elderly man from Victoria dreamed of buying a house in Tasmania. Like many mainlanders, he thought the island's prices, climate and pace made it ideal for retirement.

He saw an advertisement for a four-bedroom house outside Hobart. He liked it and paid a $5,000 deposit.

Then his dream turned into a nightmare. He discovered that two of the bedrooms were illegal because they didn't meet council regulations. He paid a four-bedroom price for a two-bedroom house.

He withdrew from the deal but lost his $5,000.

But he wasn't the only loser. The seller had bought elsewhere, thinking his former home had sold, and he now found himself paying two mortgages.

Meanwhile the real estate agency continued to advertise the house as four bedrooms. The Office of Consumer Affairs told them to stop but they arrogantly ignored the order. As you'll see, agents in Tasmania run amok when it comes to ethics.

Finally, the local council moved in and forced the agent to stop mis-representing the property. The home then had to be re-marketed as two bedrooms. The farce cost the seller $9,000.

Astonishingly, the agent demanded a commission for the first sale to the elderly man (even though it did not proceed).

Tasmania's Auctioneers and Real Estate Agents Council (AREAC) which is responsible for disciplining agents was asked to take action.

But AREAC - which has six agents among its eight members - is notorious for looking after its mates. It refused to act. The elderly mainlander lacked the resources to fight and so he lost the $5,000 deposit. A shameless fraud.

Turning a blind eye to outrages committed by agents is common practice for AREAC. Another agent was found guilty of fabricating the price on a sale contract to hoodwink the bank (so the buyer could get a bigger loan). He should have lost his licence. But AREAC whitewashed the issue. The agent was allowed to continue operating.

AREAC is funded from the public purse. Officially, it exists "for the protection of the public" and "to ensure acceptable standards of practice by auctioneers and agents". But it has frequently dismissed consumers' complaints because the agents denied the charges.

In Tasmania, it all comes down to "the consumer's word against the agents". And when the agents are the judges of agents the consumers are the losers. It makes about as much sense as replacing magistrates in our courts with convicted criminals.

But this is the real estate industry in the Apple Isle.

AREAC recently lent support to a scheme hatched by the Real Estate Institute of Tasmania (REIT) to use public money for a "public awareness campaign". A series of ads were designed to "educate" the public about auctions and other aspects of the real estate industry. Major newspapers agreed to run the ads at reduced cost. They were to start this month (February 2004).

The REIT said that with "the Council's generous support and the co-operation of Consumer Affairs" the ads would be money well spent. They would "go some way towards de-mystifying the industry in the eyes of the public". A blatant propaganda exercise if ever there was one.

But at last the State Government is taking action in Tasmania. The state's Attorney-General, Judy Jackson, has announced Tasmania's real estate laws will be re-written and AREAC will be scrapped.

The new Auctioneers and Real Estate Agents Bill is long overdue. Despite denials by the REIT, all of real estate's worst practices are common in Tasmania.

Tasmanian agents run auctions with the same trickery as their colleagues around the country, including misleading quotes, advertising rorts and dummy bidding. The Department of Justice says on its website: "Vendor bidding is permitted in auctions conducted in Tasmania. This means the auctioneer or a person in the crowd may make bids on behalf of the seller. Watch for this, because you may be the only person making genuine bids ..."

Tasmanian agents commonly use the Open House system but fail to keep their clients safe by identifying and supervising people who enter the property.

Tasmanian agents, like agents around Australia, cheat their clients by recommending advertising that is not needed. The agents benefit from the vendor-paid advertising. Even if the property sells many ads continue to run, thereby promoting the agents' success at the sellers' expense.

Some Tasmanian agents are willing to indulge in one of property's worst crimes, insider trading. If the seller wants less than the property's true value, many agents buy the property or sell it to a friend, rather than advise their clients to sell at the right price. These agents then re-sell for a quick profit - effectively stealing from their clients.

Tasmania is a state where the REIT turns a virtual blind eye to all of the above, but threatens agents with expulsion from the institute if they support consumer advocate Neil Jenman. It is a state where Launceston's newspaper, The Examiner has refused to accept advertisements that advise people they can save money by selling without agents.

Geographically, Tasmania is a beautiful place. "Paradise on earth," says one agent who has been ostracised by his peers for trying to improve real estate standards.

Paradise on earth it may be, but when it comes to real estate, it's hell on earth in Tasmania.

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