Million Dollar Agent
Million Dollar Agent
Heated Debate on Underquoting: What’s Legal, What’s Not | Tim McKibbin, CEO of REINSW
Underquoting in real estate remains a persistent challenge despite years of legislative attempts to address it, with the REINSW CEO, Tim McKibbin, joining John McGrath and Tom Panos to unpack the legal and ethical dimensions of property price guides. The discussion explores whether underquoting actually benefits vendors or merely creates disappointed buyers who waste time and money.
• The offence of underquoting is representing a price that's less than the agent's estimated selling price
• Agents must work within a maximum 10% price range when quoting to buyers
• If a vendor rejects an offer, the quoted price cannot be lower than the rejected offer
• Agents can adjust price guides during campaigns as market feedback comes in
• The obligation to represent accurate pricing rests with the agent, not the vendor
• Poor industry education contributes to pricing issues with 80% churn rate in NSW real estate
• Serial underquoters damage the industry's reputation and create emotional distress for buyers
• Technology may play a role in monitoring compliance in future regulatory approaches
• Transparency and integrity are essential for rebuilding trust with the public
Million dollar agent, john McGrath, and I have decided we'll kill two birds with the one stone. We're going to talk to the chief executive officer of the Real Estate Institute of New South Wales, tim McGibbon, and I haven't really spoken with Tim since the days of COVID. We were jumping on during those times when people were at home and we were talking about things. Obviously, my co-host, john McGrath, is here Without Troy Malcolm today. We thought two verse one is better than three verse one. If there was three of us. We thought so.
Tom Panos:This is a podcast. So those of you that are listening on the Million Dollar Agent podcast, wherever you get your podcast from, we're also live streaming this as we speak, because we thought it was a very important session to have in information, particularly the fact that some of the stuff that we're going to talk about is stuff that you've got a view, tim, obviously, fairfax on the weekend we're writing stories about auction, price guides and a number of issues. I don't want to sit there and talk about detail by detail, but listen, tim, it obviously. Firstly, do I make the assumption. Have you caught up on that exclusive story that they covered about the difference of price between the list price and what it's sold for. Yeah, you're across the stories here.
Tim McKibbin:Yeah Well, I've read all the stories, tom, and I guess underquoting is something that has been with me as long as I've been at the REI. That has been with me as long as I've been at the REI, and before I joined the REI, underquoting was with us. You know, governments over the years have tried to bring in some solutions, but they certainly haven't worked, because we're still talking about the problem now. Why haven't?
John McGrath:they worked, Kenny. Why haven't they worked?
Tim McKibbin:Yeah, it's a great question. I think part of the reason is that it's a difficult thing to gather enough information if you are going to do regulatory enforcement. That's part of the reason, and the resources that would be involved is another reason. And lastly, I think that the legislation that we have now certainly doesn't serve us well. You would be aware that the last time that we played with the legislation and I say that respectfully, but the last time the legislation was amended, we ended up with some rules in there that said we weren't allowed to use the words offers over or offers above, and I've never understood why.
Tim McKibbin:I just don't know what the evil, what the harm is that we're trying to protect consumers by and I remember sitting down with Fair Trading after they came out and we were sort of brainstorming the problem that we had, which was to try and communicate to a purchaser that the price that the vendor was looking for was greater than this price, without using those words. So you know it's a bit crazy. So everybody's had a crack at it. I don't think it's the legislation. I don't think it's the legislation. I don't think it needs changes. I think we need changes in the way that we we deal with it, can I? Um, can I come back to you with a question then? Um, when is is under quoting uh, do do you achieve a better price for your vendor with underquoting? Does anybody has anyone ever asked that question?
Tom Panos:So, John, I'm sure we've both got views. John, do you want to go first, John?
John McGrath:Yeah, no, I don't think misleading anyone ever serves a positive purpose. But I think here's where the problem is, timmy, and there's a lot of great agents on this call, some newish, some experienced. I think that one of the challenges is, obviously, we all arrive at a lounge room and look at a property and the vendor has a certain expectation and desire for a property. Call it $1.2 million. We look at it and there are comparables that are probably saying that would be highly optimistic, it's probably worth $1.5 million based on comparables. Now, by the way, most of us that are on this call, been around long enough, would know that we don't actually never know what it's really worth until the market's been through it, and all of us, hopefully, have been through situations where we've achieved a lot more Um. So I think I think there is it's a, it's a um, it's an inexact science Um. I think then, on top of the, that you've got an agent who's trying to win the business and doesn't want to sort of tell the vendor anything that might sound a tad negative. So they don't want to say, well, the comparables are 1.5 million. Too many of them haven't developed the skill to handle that narrative. So they say, oh well, 1.2 sounds pretty right. Then unfortunately, many of them go back and when they start speaking to the other side of the equation, the buyers, they start, you know, sort of thinking well you know, probably on a good day it's really 1 million and 50. So I better be kind of trying to get anyone that's got high nines to a million entertaining it. And then you've got this gap.
John McGrath:Now I think there are some systematic under quotas and I believe, tim and I know you and I've spoken about this over the years, I know you agree they should be running out of the market. I mean, that's very different to someone who actually got the price wrong or occasionally, not by choice but just by mistake they underquote. So I think that's very, very different and I applaud and support the OFT in any action that actually stamps out serial, systematic underquoters, because I think that's why the agency industry can have often a bad name, because people say they all lie and some do, of course. But I think you know up in Queensland, as we all know, or most people on this call know, you know they come around by stopping quoting at all, which I think is ridiculous. But I do think that it's a good thing, tom, to try and eradicate the underquoters, because these are people giving the industry a bad name and not just giving the industry a bad name.
John McGrath:That's probably one of the least issues. One of the worst issues is people are spending hard-earned money and getting building reports, pest reports and conveyancing reports when they never had a chance of buying it. And then there's the emotional issue that comes in where? And I remember speaking to a buyer one day and she said you know, john, I turned up to the auction and we thought we're above where the way, above where the market was, and it went so far above us it wasn't funny. And she said my little kids had nominated each room and they were just devastated because they thought that was their new home. So you've got the emotional price, Tom. You've got the price of actually getting ready and getting prepared for an auction, and then, of course, you've got the industry's reputation. So no one wins when people serial underquote. What are your thoughts, tom? And so no one wins when people serial underquote. What are your thoughts, tom?
Tom Panos:So I have a view that if a property is overpriced and you adjust the price, a buyer may appear, no question about that, but it wasn't priced right at the start. But where I've got a real issue is where agents are quoting, underquoting very low and they are attracting. So, to answer your question, tim, do I think those are going to get a better price? The answer is no. I think that underquoting actually will bring 20 buyers that will register and out of the 20, there would be one that there's a big gap between one and the other 19. And on John's point, is that 19 of those people will walk away thinking to themselves I've been looking at this brochure on my kitchen table for four weeks. I fell in love with this property. I may have spent a grand in pest building due diligence and I've also spent a lot of time going back and forward and the reality is I was out of the bidding within 10 seconds of the first bid. Right, that's there. So the answer is no. The answer is no. I think there's, I think, I think.
Tom Panos:And, john, I get really confused. When I go to a property and I see 20 people registered and they say 20 registered, the first thing goes to my head is did they, throughout the process, realign the guide up to reflect that there was going to be a higher interest? The guide up to reflect that there was going to be a higher interest? Because I think to myself that, like why is there so many people there? I think two proper buyers for that property is a lot better than having 15 people thinking they're going to get something that they're not in anywhere close to getting. That's what I think.
John McGrath:Tim, I assume this is the hottest topic in terms of complaints about the industry. Would that be a fair?
Tim McKibbin:Oh, yeah, yeah, Unquestionably, john. It's the big one and, as I said to you at the outset, it's been with me for the 21 years that I've been at the REI and I don't know that there's a magic wand there that we can wave. I do think that the current group I'm working with at Fair Trading now so it's a broader stakeholder group I'm limited about what I can say, but I do get a feeling that we're going to positively impact it this time around. As far as a solution, that's that's tougher. Yeah, it is, it's, it's, it's a tougher thing, just to get a solution, I think. I think if it was easy, we we would already have had one okay, if you've got a proverbial magic wand, though, what?
John McGrath:give us one or two things, or three things, whatever you think that might be able to clean this up. I I mean obviously either. You've been thinking about it. I know there is no, you know, sort of ultimate panacea, but what would you be doing?
Tim McKibbin:I agree with you when you said that there's part art, part science in it, because it is for any other name evaluation. We're taking a punt at what we think, an educated punt about what we think this property is going to sell for. Now, if you got three valuers in there, you'd have three different valuations. So I think it is the case that the agent is trying to crystal ball what this thing is going to look like into the future. So it's a valuation by any other name and for that reason, the only time that you are going to know what the property is really worth is when it's sold. And I often have people they say you've got greedy agents and greedy vendors pushing the price up and I've just said well, no, they're not.
Tim McKibbin:The people who set the price of the property are purchasers in competition. If anyone doubts that, go and listen to an auction. Go to an auction and see the purchasers set the price of the property. To an auction and see the purchaser set the price of the property. Agents have an educated expectation. Vendors have their fingers crossed with a big hope, but at the end of the day, it's the purchaser set the price of the property. So it is an in-act science and that needs to be also accepted. But there are some rules around that about the way we go about it, and if you follow those rules, then I think that that is satisfying the expectation of the community as well.
John McGrath:But, timmy, let's I mean if, by the way tell me if you're okay with it and if anyone has any suggestions that you want to put up there that could help clean this up, please pop them in the chat box below. So, tim, what are the rules? Just to reinforce with everyone on here, because people are going to lose their licenses over this because there's a clampdown, as there should be. Some agents have been serially flaunting the rules, so let's just go through. Obviously, there's a 10% rule. Do you want to explain a few of the rules pertaining to this in New South Wales? Just so everyone's got their hygiene right.
Tim McKibbin:Yeah, I guess it starts, john, right back at education, because there are some people that have come through the training, the education and I'll use that loosely and get spat out the other end and then they're put out into the field to start pricing property and they have no idea what they're doing. It's always amazed me that prior to 2002, if you wanted a career in real estate, you went to TAFE for three years. Then in 2002, you went to TAFE for three years. Then in 2002, you can be a real estate agent in a week or something stupid like that, depending on which RTO you go to. So there's a big competency issue and I'm on my high horse now. But excuse me, but we have an 80% churn in New South Wales. People coming in realising the industry is not all Ferraris and fat wallets and then they exit out 80% churn. So we've got to start, I think, with education. You've got to show people how to price property properly and that's got to be our starting point. You can't expect somebody to get it right when you haven't trained them on how to get it right.
Tim McKibbin:I'll tell you one story, and it's just one. There was an agent that priced the property I think it was around about two and a half mil. It was on a corner and went to auction and it sold for $5 million and he went. What happened? What happened here? Why did it go like that? What have I done? I'm great, but what did I do? And what he didn't know was the latent possibility of that property from a development point of view. Possibility of that property from a development point of view. So we had two developers that had read the contract, two developers that knew what was going on, and they bid it up to the $5 million, with a viewer smashing the house over and doing some stuff with it. But the agent didn't read the contract, didn't know how to read the contract and therefore wasn't able to price that property properly.
John McGrath:The product knowledge they hadn't done their homework.
Tim McKibbin:Product knowledge. Well yeah, well summarised, that's exactly right. But people.
John McGrath:So the obligation though, tim, as I understand it is, you must provide written comparables, and I think it's three or more, but is that the number that actually, when you list a property, three or more? But is that the number that actually, when you list a property, that are the best, closest comparisons in your mind? Is that?
Tim McKibbin:Yeah, look, it isn't that heavily prescribed. But there is an expectation well, no, there is a requirement that you would price the property properly, that you would get that right. That's part of the expectations of being an agent that you would be able to price the property correctly and then take that price to market. That is the expectation.
John McGrath:Robert's just going. Robert, thanks for that. That's music for my ears, tom, if you can see in the chat line.
Tom Panos:Yeah, is that what you're saying, john? Um, that's music for my ears, tom, if you can see in the chat line. Yeah, it's just an advertised price. Is that what you're saying, john? Should there be an advertised price on all properties?
John McGrath:on all properties which, tim. As you know, I went to war with the reiq, your counterparts in queensland, because they were the opposite way. They said oh you know, we know how we'll clear this up. We won't let agents quote anything. And I thought either thought either I'm an imbecile or they are, because I would have thought the opposite, which is what Robert's saying. If at least you have the agents have a requirement to put their money where their mouth is and say price guide one to 1.1 million. Well, that's now documented. And you talked before about resources, tim and evidence and so forth. If you did require agents to make known more publicly and transparently their price recommendation expectation, if you will, to me that would be a step in the right direction to actually to do that. But, as I said, some jurisdictions have deemed it appropriate to remove everything as well, have deemed it appropriate to remove everything as well.
Tim McKibbin:We should have said I mean, queensland's approach is a bit like throwing your teddy out of your cot. They're just saying, well, we can't fix it, so we'll just stop everyone talking about prices, which I find a bit odd. I mean, if I walk through the door and I like the property, the first thing I'm going to do to the agent is say I don't want to waste your time, you don't want to waste mine. What do you think this is going to go for?
John McGrath:So, Tim, there's a 10% limit, right? Sorry, 10% range. So you cannot quote to a buyer, either verbally or in writing, a range that's more than 10%. So you can say 1 to 1.1, but you can't say 1 to 1.2, correct?
Tim McKibbin:That's right. Yeah, You've got a maximum of 10%.
John McGrath:Yeah, and look, I guess that might play a role. Otherwise people could say it's 1 to 1.5, you know, and that really doesn't help anyone. That gives everyone an out. So I guess having a sort of a 10% range may be okay. The other thing is if at any point my understanding, tim and I'm not expert, you are if at any point during the sale process and a lot of agents ask me about this one, tom if there is an offer that is rejected by the vendor, my understanding is the price quote cannot be less than that offer.
Tim McKibbin:That's right. So that's right, but I've got to put a caveat on that. That's right. So that's right, but I've got to put a caveat on that. It has to be an offer acceptable to the vendor, and by that I mean, let's say, the property was a million dollars. That's what we were representing it to be. And somebody came in and said, well, I'll give you 1.2. However, I want a 0.25% deposit and I'll settle in two years' time. Now, yes, you've got your 1.2 offer, but the rest of the money money-wise, 1.2,. But the rest of the conditions that the purchaser is putting on you are not acceptable. So that is not an offer that I would view would change the estimated selling price.
John McGrath:Which is a hard one, tom, because I mean, let's just say, for example, the price was acceptable but the terms weren't. So I said I'll give you 1.2, but I want six months to settle and the vendor says no maximum. I'll give you 1.2, but I want six months to settle and the vendor says no maximum I'll give you is three months. So what you were saying, tim is potentially there, or probably in that instance the agent wouldn't have to change the quote because it had a term attached to the monetary offer that was unacceptable to the vendor, correct?
Tim McKibbin:That's right, that's right. The terms weren't acceptable to the vendor. The vendor correct. That's right, that's right. It the the terms weren't acceptable to the vendor. But here is. I like to use this example because it demonstrates what the the offense of underquoting is. So let's start and we look uh, we price the property, estimate selling price of a million dollars, and the um. The vendor says I want 1.1, that that's my bottom number, 1.1. So if we're going out into the market, we have to be representing a price that is greater than the 1.1, because the vendor has said I'm not taking anything. Listen, even though we think that the estimated selling price is going to be about 1, we have have to go with $1.1. All right, so that makes sense. You can't offer the property for less than what the vendor is going to say. Let's spin that around.
John McGrath:Can I just stop there, tim? What you just said, there never happens, never happens. There is never well, sorry when I say never, that's a strong word Generally what would happen there is? An agent would say yeah, look to you, I know you'd like one one. As you know, the comparables are closer to a million. I think we have to get people interested at around the million if we are to have any chance of achieving your 1.1, because that would be a great price. That's what would likely happen.
John McGrath:I'm sure most people on the call would agree with me. You wouldn't generally say, okay, I'll quote 1.1 because that's what you want. And if you did, your clearance rate at auction would probably go down a long way because most vendors would say I won't take a cent less than 1.1. On auction day they hand you a reserve of a million and 50 and they'll take a million and 20 because they've been convinced through the process that the price that you originally quoted may well be the price. So just legally here this is very interesting. So if the vendor says, john, I don't think I'll take under one one, you know, give it a go, but I think unless you get me one one, I'm unlikely to be a seller and the comparables are at a million. Is there any legal obligation on me to have a price that either is at or even straddles the 1.1, even when I know it's a dream price?
Tim McKibbin:If the vendor is saying to you that they will not take a price less than 1.1, so they've made that clear. You can't go into the market and say that the estimated selling price here is going to be 1, because you know that your vendor is telling you they won't sell it for 1.
John McGrath:Doesn't happen, Tommy, doesn't happen like that.
Tim McKibbin:So let me spin this around, though, and I like doing this because it demonstrates what the offence of underquoting is. Now let's assume that Tom is in some financial difficulty and the estimated selling price of the property that Tom owns is $1 million. We'll stay with the same example, and so I say to Tom look, I reckon that this property will reach a million dollars at debt sale. Tom says that's fascinating, tim, but I need money and I need it now. So I've got the bank breathing down my neck. I want you to take this out at $800,000. That's my instruction. That's what I'll take, but get it sold Now. Can I take that out at $800,000? No, I can't. I am not allowed to represent a price less than my estimated selling price. Now, my estimated selling price is a mil, so what Tom wants is less than that, but I can't do that. I can't take it out at that price.
John McGrath:But on the previous example and I could be wrong, but I thought you were saying the exact opposite that the comparables your estimated selling price is a million but because the vendor said I'm not going to sell under a million one, you've got to take it out at their. Let's call it inflated for a minute or optimistic price. You've got to take it out of their. Let's call it inflated for a minute or optimistic price.
Tim McKibbin:So that almost sounds counterintuitive and this is the reason I've done it. The reason I've used this example is to demonstrate what the offense is. Because when you're looking at the first example, where the price that the vendor wants and the vendor's made it clear I am not going to accept anything less than 1.1, and we all know how these things change over the time then 1 million isn't going to buy it. We know that it's not going to buy it. But in the other example that I'm giving you is that the offense of under quoting is is take it, taking a um, a price out to the market, a representation to the market that is less than the agents, the agents estimated selling price. So when tom wants his 800 000, it's an offense for me as the agent to be going out there saying you'll buy this for $800,000.
John McGrath:Tony's just made a comment and I was going to go there myself, tony. So if on that $800,000, tom's desperate for cash, he said, mate, I'll take $800,000 plus, just get me out of here. And I've said, look, compro will say we should be able to get a minion. Why could I not say the vendor's reserve at auction will be 800? I personally think it's worth more than that. But if the highest bid on the day is 800, it'll be selling. So you're saying that would be? Yep, that's wrong. I couldn't say that.
Tim McKibbin:No, you can't represent a price that is less than your estimated selling price, and your estimated selling price is a million dollars. We've all agreed that. So it is an offence to go out there and do it, to actually offer the property to the market for less than your estimated selling price.
John McGrath:There's a few questions there. Tom anything you want to.
Tom Panos:Yeah, can I just, tim, picture this scenario? Owner wants one point. Owner is hoping to get 1.2. Hoping to get 1.2. Your estimated selling price is $950 to $1,050,000. So it's within the 10% range. You wrote on your agency agreement $950 to $1,050,000. Yep, your owner has said to you 1.2. The conversation you had with your owner is listen, 1.2 is very aggressive based on my three comparables. But I'm letting you know. If it's out there I'll get it. And I'm also letting you know that in real estate I've learned there's no recommended retail price, that sometimes properties sell above, lower, but I'm letting you know these are the comparables Now at the buyer's table. Can you be saying this when they ask you? Can you be saying this when they ask you, what's it going to go for? You say my estimated selling price is $950,000 to $1,050,000.
Tim McKibbin:Is that allowed? If I followed you with that, tom, if the vendor is in alignment with the agent about price, then yes, that's fine, but if the vendor is looking you up and down and going, no, I want this, I want this price.
Tom Panos:That's my bottom number. Okay, but if that's the case, what you're saying then is you're not quoting the estimated selling price that you've said. You're quoting what my vendor wants. That's a different number.
Tim McKibbin:Correct, correct. And you notice that in doing that. It's the reason I use that example of the $800,000, because the offense is quoting a price that is less than your estimated selling price. Now your estimated selling price is $1 million. The vendor wants $1.1. So you've got to go out there at the vendor's price because the vendor is telling you that's what they want and you've noticed here that the price that the vendor wants is greater than your estimated selling price. So on the agency agreement, it's done for this reason, on the agency agreement, you have to put in your estimated selling price and you also have to put in there what the vendor wants. That's the reason it's in there.
Tom Panos:Okay, but my reading and, by the way, while I've got everyone online, let me just say everyone here nearly everyone here is New South Wales. Could I urge you to actually sit through this course? It's an online course, it's 75 bucks. It's actually mandatory anyway, so you've got to be using it. It's mandatory and it's a collaborated course between the Office of Fair Trading and New South Wales TAFE, I believe, and it forms part of your CPD requirements. But I'm still so, tim, I'm still so. Here is where I think we have an issue right, Because often, and you'd agree, most owners at the beginning of a campaign are aiming for a number that's higher, just like my wife thinks we've got the best two looking kids and my wife thinks our house is probably worth a million more than what it is. That's a lie.
Tim McKibbin:I accept it, right, I'm not going there, tom, you're on your own.
Tom Panos:But what I do know and you see this in the full sales space, like I've looked up, the data's clear 75% to 85% of properties that get sold as private treaty sell lower than the list price. And that shouldn't come as a surprise, right? Even if it's five or 10 grand, they sell lower than the list price. So what I'm thinking to myself is, if you're saying to me, on an agency form you might have 950 to a million and 50, your owner has says I really am hoping to get 1.2.
Tim McKibbin:Yeah, but there's nothing wrong with aspirations. But I mean, as the agent, you'd be explaining to your vendor that on the day, if we do our job well, we will attract a lot of competition here and the competition drives the price up.
Tom Panos:Can I ask you this Do you feel like this kind of dialogue and approach will fit through the framework to the buyers? Mr and Mrs Buyer, I'm letting you know our owners have gone to auction. They're hoping to get as much as they can, like everyone else. I've got an estimate of $950 to $1,050,000. I'm letting you know they've committed to this auction campaign. They're hoping to get $1.2. I do think they are the people that will respond to market value. I do feel that if they see 40 or 50 groups through that, they yeah, let's say I pull it up there.
John McGrath:Let's assume you finished the sentence. But the owner would like to get a 1.2. But the owner would get. I think based on comparables, it's worth around a million. My client would like to see 1.2, but they've told me to take it to auction to see what it's worth. I'm looking, tim. Is there a distinction between an owner and I think the answer might be yes that says I will not sell under 1.2, as opposed to an owner that says I really would like to get 1.2.
Tim McKibbin:Yeah, of course, of course. I mean, if the owner is saying to you that I'm selling the property, I'm realistic. You're telling me it's a million bucks. If you can get me a mill, then you've done your job. But you've taken it to market, you've got me in the market price, but there's nothing wrong with them saying if you can generate a bit more interest, I'm not opposed to you setting a suburb record here. You know, knock yourself out, that'd be great, uh.
Tim McKibbin:But you know, you, if the vendor makes brutally clear that they're not going to accept the price below something, then as the agent you have to make a decision as to whether or not you want to represent that person. I don't, I don't. Um, an auctioneer told me one day that the vendor said to uh him, I'm thinking about asking for two mil on this property, and the uh and the. The auctioneer said well, what about three mil? And he said you know, will I get three? And he said you got as much chance of getting three as you're going to get it getting two. So you, you know you've got to. You need to have those conversations with your vendors, you know, and you'd be saying to them you're not realistic, mate.
John McGrath:Another question here, chris. Thanks for that. Chris has just written in about written adjustments. What is the protocol? So we've gone out, we're quoting a minion. You've said, yeah, okay, that's about right, we go there. The market's actually coming in at under that, saying it's probably $9,950. And I say, tim, I think if we want to have competitive bidding, we've got to adjust our price downwards because we got no interest, no contracts. All the interest are $9,950. I think you need to be resetting your expectation. What do I need to do? Because I get a lot of questions about this too, because people talk about I need to get it in writing. I need to do, because I get a lot of questions about this too, because people talk about I need to get it in writing. I need a form signed. Will a text message do? Will a diary note do? What do I need to do in order to satisfy any OFT investigation down the track if I am to change the price guide, either up or down, I assume, during the process?
Tim McKibbin:What's the-? So the estimated selling price is the agent's number. All right, I think people get a bit confused here with this. They think that they have to get the permission of the vendor to change the estimated selling price. They don't. They simply advise the vendor that they are moving the price because that's what they think the price is. So normally, as the interest generates, the price would be going up. If you are to express price in that market as it's moving up, you have to adjust your price, your estimated selling price, to be reflecting the market. So to stay with our early example, imagine somebody's come along to the vendor and says I've got 1.2. You know it's standard conditions, 1.2. And the vendor looks around and says I think things are hotting up here. I won't take 1.2. So you can't go out in the market and say 1.2 because the vendor's already turned it down. So you would have to be coming back out there saying it's going to be a price above 1.2.
John McGrath:So even if that buyer has now bought something else, and even if that buyer was a standout buyer for whatever reason and you knocked it back as the vendor, they have now bought the neighbouring property. Are you saying? I still have to quote the level where the offer happened?
Tim McKibbin:Well, now you're getting. This is where we spoke about earlier, about the art and the science. I mean, if you've got a purchaser that was, you know, out there on their own and the vendor turned it down, you'd be saying to the vendor like you know, you should take this, this is good. But if the vendor says no, well then they say no. But as far as the price is concerned, the estimated selling price, you would have to be looking at all the facts here and saying to yourself, if this goes to auction, um, we, you know, we're not going to get 1.2, we're not um, we're only going to get 1.1. So you know, I'll stay with the one point. I'm happy, happy to back myself there. The vendor's made a horrible mistake.
John McGrath:If you've got it, because I don't. If there's been a 1.2 offer rejected by the vendor, that buyer is no longer in the market because they bought the neighbouring property. All the other interest prior to that offer was at a million to a million, one which is what I was quoting. One which is what I was quoting. Do I have an obligation, if that offer is no longer valid, even though it was at the time, to keep quoting that offer, or can I revert back to the offer?
Tim McKibbin:Well, again, this is where the art and the science come in. The vendor in this example, frankly I think, is being stupid. They should have taken the offer. It was the best they're going to see. The agents advised them that, but they've said no, so that's fine if they haven't and they bought the neighboring property. Well, you've got a couple of problems. Firstly, you've been offered the 1.2. The market has clearly gone up because they just bought the property next door at 1.2.
John McGrath:That was a better property. That was a better property.
Tim McKibbin:Oh, a better property, it's fine. They bought the property. If, in all the circumstances around you, all the data that you have indicates to you that when you go to auction, that it's going to sell for 1.1, not 1.2, that's fine, that's fine. 1, not 1.2, that's fine, that's fine. It's your estimated selling price, not the Vendors, not anybody else's, it's yours. So if you're happy to back yourself at 1.1 and you're saying, vendor, you made a horrible mistake. That's life. But when we go to auction, it's going to be 1.1. It's not going to be 1.2., that's fine.
John McGrath:Tim. Back to the question, because I don't think we actually ever finalise it. So if we adjust the price guide down during a campaign because feedback is that it's not worth what we had hoped and the vendor is understanding of that and my belief is you need to get that instruction in writing. I could be wrong. Do you have to get that instruction? Could I have a chat and say and you say yeah, john, whatever, if you think, put it down to 900, I agree, I just want to sell it. Do I need to get that in writing from you? Do I need a form?
Tim McKibbin:Well, that figure, that figure it would be in the agency agreement. When Tom signs me up and says, and I say it's one mil, tom, and he says, fascinating, get me 800k. And I'm happy he would put that into the agency agreement. But the reason I use this example is because it demonstrates what underquoting is. The fence of underquoting is when you take a price to the market that is less than your estimated selling price and that's an example. And, in addition, if the vendor is saying I want this, I want 1.2, well, you've got those decisions to make.
Tom Panos:If you're looking at a vendor that's saying I'm unrealistic, I'm not going to sell unless I get this price, you've got to say well, so Tim so I'm clear If you go out in the first one or two weeks there's no feedback or low feedback, you sit with your owner and you say listen, I'm making a recommendation, we've got an auction in a week or two weeks time. We're halfway through the campaign. We have no one Based on market conditions, based on buyer feedback. I'm suggesting that we realign by 5%. The owner agrees and says yep, okay, you go back to your form. I know some agents do it digitally. I think companies like Ethan told me he does it on real-time agent. You go on real-time agent, you document it. You actually put the reason why right, that's not underquoting. Then is it when you go out there, because you've got the approval of?
Tim McKibbin:your-. That's right and I think there's probably. It's probably a decision that you make with your owner when the price is coming down, because they need to be on that journey. But when the price is going up, if the owner has said, no, I'm not going to take any less than this, and then no to that price, then you have to push that price up, whether you like it or not, because the owner has said no.
Tom Panos:Quick question, john. I've got to ask this because today I was bombarded by around five text messages on the same thing. They said I think what happened is some people didn't want to ask the question publicly, so they've come privately. Right, and they turned around and they said Tom, I'm getting all these savvy vendors right that are saying oh, by the way, what price are we going to quote? Because I think if we quote it low, we're going to get a lot of people interested. Now you must have heard, tim, this come from agents that are yeah yeah, yeah, and I have.
Tim McKibbin:The vendors are thinking that the best way to get the best price for their property is for the agent to underquote, and this is really that's come because other agents that have gone to the listing and may have actually suggested it to them or they've heard it.
Tim McKibbin:Yeah, they're seeing it in the market every day. They're reading it in newspapers. That was the reason I started this conversation where I said is it the case that you will get a better price, better sale price using underquoting as a tactic? Now I know I put to one side all of the misleading aspects of it. Is it the case that you will? And you would have heard the old sayings quote it, what was it? Quote it low, watch it grow, watch it grow. Quote it high, watch it die, watch it grow. Yeah, quote it high, watch it die. All of that sort of stuff. But I've never seen any evidence that underquoting delivers a better price and I don't know whether or not it does, and that's a question I'd like answered. I'd like to know whether or not it actually does drive a better price.
John McGrath:Look, it doesn't. In my opinion it doesn't. And by definition underquoting is deception the word underquoting, now, it's different if you say he's quoting the right price, if the vendor is hoping for one too, but the comparables are at a million. Quoting a million in my world wouldn't be underquoting. But here's the other thing, tom, that you know a lot of agents are doing. They're saying, tim, look, yeah, look, I think one, two, it's possible, yeah, it's possible. It's a really good home. But here's what I'm going to do. I'm going to put a lower figure on the agency agreement, because whatever I put on here, I have to quote, and I think if we, the one too, we might kind of be a little bit high to start. So what I'm going to do is I'm going to put $950 to $1.5 million on the agency agreement, just so you know.
John McGrath:The reason I'm doing is a lot of agents, tom, they're actually colluding, if you will, with the vendor to get around this legal requirement to not quote anything other than what you've got on your agreement. So they're having these nod and a wink conversations, which again I think is terrible, and then I'm all for transparency, whichever I know is just have the damn conversation with the vendor hey, tim, if we can get one, two we will. That'd be a record. I can't guarantee you that because all the comparables are a million, a million and 50. However, let's give it every possibility. We'll do an amazing marketing campaign. We've got the best auctioneer in Sydney booked to do your auction, but I think we've got to go out there and get interest at where I think it's a bankable price a million, a million and 50. If we get enough interest and they get emotionally connected, I think that gives us the best chance to get the next figure. To me that's a good conversation to have, because I can't guarantee you we couldn't get the 1.2, but I can also tell you the comparables above that, tim.
John McGrath:There's another thing that and again I'm sort of coming in third hand because I'm not day-to-day selling every day. I list it quite a bit but I'm not selling every day. But they tell me now that technically, every time in New South Wales you have a conversation with someone and you quote price, you're meant to document it. Yep, I spoke to Tim McKibben at 3.40 on Tuesday, the 4th of August, and I told him I thought 1 to 1.1. I mean, is that the case legally? It's just not how the industry works. We're doing things Yep, yep, yep. That's just not how the industry works.
Tim McKibbin:We're doing things. Well. This brings me back to what I said, that government and I'm fearful this time around because it's all through the newspapers, it's on the news, all the rest of it so government will feel the pressure to do something. They've got to be seen to be doing something and this is what happened last time, when there was a lot of media about it, Government stepped forward and actually introduced the things that John has just said You've got to make filenames, You've got to do this, You've got to do that, You're not allowed to use words office over, office above and plus signs and all of these things. They did that in response. My fear is they're going to do something equally stupid and let me call it what it is this time around. That's my fear. Can?
Tom Panos:I ask does the REI NSW do you feel like for me? I feel it needs to be a collaborative but industry-led solution, because the industry is at the front line sitting there talking to the buyer and the seller right, and I just feel just what John just said there. Now I can tell you I'm not even afraid of saying this, every agent in New South Wales would be in breach of that. No way in the world. Tim, you're telling me that they're getting email inquiries, phone inquiries. I mean, we're talking. Some properties are getting thousands of buyer inquiries in the first two weeks. You can go look at the data on realestatecom and domain. I think the compliance level of that there is close to non-existent. John, you'd agree with that, wouldn't you? I?
John McGrath:mean A hundred percent. And that's why I asked the question, because when I heard that was the legislation I thought that's just unworkable. Because I'm in the car and I'm you know, I'm walking down the street, I'm at an open. We're doing so many things at once in this industry because it's a mobile industry, as opposed to accounting where you're in the office, meeting a client every time pretty much. Where we're not in the office, we're out and about and in cars and so forth. But it comes back to my my point about price guides, tommy. I mean that would clear it up if, if there was a price guide that at any point in time was your best estimate on price and it was published. That would probably clear up a lot of this Again, opposite of what Queensland is saying. So you alluded to before, tim, it didn't sound like you wanted to say too much, but you alluded to before. There might be some discussions happening that may involve the industry, is that?
Tim McKibbin:Yeah, no, we're at the table now. We're sitting down with Fair Trading. We've got a group of people there. I won't go into who's there, but I think we've got a good cross-section watch the industry, using technology to be able to watch the industry more. Because in being able to watch the industry do what they do, it will send that message out there.
Tim McKibbin:So my go-to example, John, is that if I went up on the weekend, up to see my latest grandson up the M1. Now I'd sit on around about 130 or 140 k's going up there, but I don't, because I know that there are people sitting on the road that might have a speed gun and I'd end up really bad. So I think if the industry knows that fair trading has the tools to watch more closely those people that participate in this and I'm a realist, I know that people do I don't think it's the majority of people. I don't think that's the case. The majority of people. I don't think that's the case. But those people who do participate in it, like speeding they won't be interested in doing it if they know that somebody's over their shoulder and they're watching.
John McGrath:Why is this working group and I'm not being critical of you, I'm just interested why is it so clandestine? Why don't we know who's on it and what's the discussion and get the minutes of the meeting and recommendations? I mean, it seems to me. I mean Tom and I and I'm not saying we're any gurus, but we do speak and coach and train a lot, and that's the first I've heard of it. I would have thought, if we're trying to reach transparency here, there should be a process to debate this, and in fact debate's probably a pretty good word, because I'm guaranteed that we'll have a slightly different view as an industry over the governing body. I mean, surely we should have some level of transparency.
Tim McKibbin:Yeah, look, I understand what you're saying, but it's very, very common, in fact, pretty much every time, I see all of the legislative instruments that come through when they're in draft and we receive them in what's called cabinet in confidence. So we put in a lot of submissions and these sort of things at that stage which we're not allowed to talk about. That's a frustration for us, because we do so much good work in that space that we can't talk about, um, one of the and you know, that's a frustration for us because we do. We do so much good work in that space that we can't talk about it. Uh, one of the things that when I am speaking, I always say to people that what we have achieved is to take the legislation from dreadful and moved it to bad. Now, if we weren't here it'd be dreadful, but it's a frustration because we can't talk about that process and internally, when you keep it in that confidential, people can throw ideas out there and let them permeate around the room.
John McGrath:Interesting Tim Doms from Blink Property. Doms just said I agree with you, dom, if you call fair trading three times, you're going to get three different definitions of underquoting, and I agree with that. And I don't think you and I were talking, tom. Well, tim said that to me this morning. Yeah, I was talking to someone earlier today and they said oh, it was actually someone told me Was it you? It wasn't you, tom, it was someone else. I, it wasn't you, tom, it was someone else. I remember what it was, but there was something that they said to Cindy Kennedy, who's one of our best agents, and I will guarantee you what they said is absolutely not right. But you and I weren't talking, tom. Sorry.
Tom Panos:It was about price adjustments that you couldn't actually you're not supposed to do a price adjustment in the first two weeks. That's right, which I find hard to believe.
Tim McKibbin:She was told by someone from the. It's wrong. Your obligation is to represent to the market the estimated selling price at that point in time. That's what I said, that's all. So if you've gone to your first open first week in and the interest is such that it's driven the price up, you know you're going to do better than what your estimator's selling price is on the agency agreement. Then you move that up.
Tom Panos:But, tim, this is the problem, same with down.
Tim McKibbin:Yeah, same with down.
John McGrath:This is the problem that you know. A representative of fair trading told one of our best and most articulate, most successful agents you can't change the price in the first two weeks of a campaign. You have to wait until the first two weeks. That's not true, and so, as Don said, you're getting all of it.
Tom Panos:I think what was said was you can't rely. I actually did check it out. Sorry, John, I did check it out afterwards with Michael Carolyn. If you know, he's a good auctioneer and a Dubbo guy. He said his understanding was you can, based on buyer intel and things that have happened in the market, but you've got to be able to justify it.
John McGrath:Yeah, but the RFT's told you you can't right.
Tom Panos:They can't right. She led me to believe that you can't do it in the first two weeks, taking the price down based on buyer feedback alone. It has to be another thing as well.
Tim McKibbin:No, I don't agree. I don't agree. If the vendor has said no to a price that's higher than all agreed, the estimated selling price said no. You can't go out to the market and keep pushing that price in the knowledge that the vendor has said no. That's right and that doesn't matter. If that happened before the ink is dry on your agency agreement, all right, you don't have to wait two weeks. 100%.
Tom Panos:Okay, I'm just going to finish on this note. This is a hot topic, tom. This is a hot topic, johnny. We could talk here for ages, and I'm having a look here. I reckon there'd be 400, 500 people on here, but for some reason, I don't know why, I'm sure I've got the maximum subscription. It says maximum. Yeah, we have.
John McGrath:Yeah we have. We've done that. Okay, we've done it. Okay, tell me there's another Tom Panos on here. Yeah, that's Susan. By the way, that was some investigation into that. Timmy, just before we wrap up, before you do, tell me, does REI and NSW have training specifically around this?
Tim McKibbin:Yeah, yeah, we do about pricing property, yeah, yeah we do.
John McGrath:Is it webinar like this, or is it in room?
Tim McKibbin:No, some of it's in room. Yeah, we teach how to go about it. But again, you know if you can get into this industry in, you know, in a few days, as people do, you just don't have the skills. You don't know your product, you can't read the contract, you know. So pricing property is one of those skills that takes time to develop and you're not going to learn that. You're not going to learn that that way. I mean, the latest idea that we have now is, if you go and get your license in, let's say Victoria, all right, and the education down there is less than what it is in New South Wales, okay, yep, and you are trained on Victorian legislation, all of that, okay. You know nothing whatsoever about New South Wales conveyancing practice, law and practice. Know nothing about agency practice in New South Wales, conveyancing practice, law and practice. Know nothing about agency practice in New South Wales. Now are you going to let that person come into New South Wales and deliver, deliver real estate services? Our current minister says, yes, they can come in.
John McGrath:They know nothing about what it is everyone online. Just in case you didn't know, tim is also a lawyer as well as or was a lawyer, or I guess still he's as well as the ceo, so this is coming from someone who's the head of the best and most authoritative body in terms of the industry representation, as well as someone who's a legal, a legal scholar so well, john, I've just got to say you know what's fascinating.
Tom Panos:Do you know? In Australia, the total properties that are sold by the auction system are under 15%. So 85% of properties are not auction properties. In Sydney, it's like 80% are non-auction. In Melbourne, it's like 78%. Right, we are talking about a small sample of properties, but it's obviously an emotive issue if it's such a small amount. And I think it's an emotive issue, tim, because if you fundamentally think about it, what has been the big burning issue in Australia for some time, and now more than ever, has been housing. The whole federal election was based on a housing policy, the fact that people are finding housing, whether they're buying or getting a challenge.
Tim McKibbin:Yeah. So you say, tom, you've hit onto something here that has been spinning around in my mind and is the nuclear solution, really isn't it? And it is the nuclear solution, really isn't it? You're saying 20% of the markets is about auctioning, and so if you just said no more auctions, there's no more auctions across the country, well, listen and be careful. Be careful, because they must be thinking that way.
John McGrath:No, they couldn't do that to me, but you're right they might. They might be that silly. Here's the other thing, and we'll finish on this, tommy, because we're getting up to 5.30. I know we want to let everyone go, either to close another.
Tom Panos:This is the longest podcast we've done. Tim, congratulations, we're going to.
John McGrath:Here's what I reckon, just to let it, while everyone's still here, the other. The problem is, the buffoons in our industry are going out. There's a housing crisis, there's a cost of living crisis and we have buffoons going out there showing they've got a Rolex on each arm, they're driving a Ferrari, they earned a million dollars today because they sold 10 auctions. We have caused a lot of this ourself from our egotistical approach of going out and telling everyone how much money we're making, which is just absurd. So again, the industry sometimes is getting what they deserve, and if I'm out there and I've been under quoted an auction or three times and all of a sudden I'm seeing the agent that did it is flashing off, how much money they earn.
John McGrath:This stuff really irritates the public the non-real estate agent public, which is a off. How much money they earn. This stuff really irritates the public, the non-real estate agent public, which is a majority. So, please, humility, please do the right thing, please have transparency, please have integrity. Please get to the REI New South Wales if you don't know this stuff well enough, and learn it, because we've just touched the surface here tonight. Tom and we could have gone on for another two hours debating different scenarios. So, yeah, please get along. And Tim thanks for coming. It's always a pleasure to speak with you and the toy stimulating conversation over to you, tommy.
Tom Panos:And listen, don't under quote, end the story Like I think we all know what it is now and I think we all know there is no point having someone at a $1.2 million auction that thinks they're going to buy it for $800,000. No one's winning there, right? No one is winning there, right? Anyway?
John McGrath:Thanks, tim Thanks.
Tim McKibbin:John, good to see you. Hey guys, see you, timmy.