Ethical Concerns for Australian and New Zealand Real Estate
Real estate consumers are losing millions of dollars due to the lack of ethics in real estate. It is a national disgrace in both Australia & New Zealand. And it is time it stopped.
We believe that most consumers are NOT informed of the dangers involved with selling or buying real estate. Further, we believe that consumers are being deliberately and massively misinformed.
Thousands of people are being deceived and misled, and until now, very little has been done to stop it.
At The Jenman Group we are committed to helping and protecting Australasian real estate consumers.
It is our aim to improve the real estate industry by creating methods of operation based upon the highest standards of ETHICS IN REAL ESTATE. We do not intend to give ‘lip-service’ to ethics, nor to say one thing publicly and do another thing privately. Together with many agents, we are deeply committed to the welfare of consumers. Everything we say and do has one motive at its core – to do whatever is best for consumers. This is part of our mission.
SCANDAL
The current lack of ethics in real estate is one of our greatest national scandals. It is hard for anyone who is not involved in the real estate industry to comprehend the magnitude of what goes on ‘behind the scenes’. Thousands of consumers are being ripped-off. In these days of high consumer protection it is amazing that the ethical crisis in the real estate industry is scarcely mentioned.
THREE REASONS
In our opinion, there are three reasons why consumer protection is so poor in real estate:
- Real Estate is a big money business. While ‘cleaning up’ the industry would be of enormous benefit to consumers, it would not be in the best interests of many agents and other businesses tied to the real estate industry.
- The Real Estate Industry is ‘controlled’ by real estate agents. When governments want to know how to improve the real estate industry they ask people who represent real estate agents. They rarely ask people who represent consumers. The real estate industry not only deceives consumers, it also deceives governments.
- Consumers lack knowledge. For many people, buying or selling a home is a once or twice in a lifetime experience. Consumers must rely upon agents to give them advice. This costs them thousands of dollars and much heartache. Also, many consumers never realise how much they are losing. They do not know what goes on ‘behind the scenes’. One media researcher expressed it well when she said,
“People are being exploited in ways they wouldn’t dream of.”
CONSUMER LOSSES
We believe consumers lose an average of $10,000 when they sell their family home. Some people lose nothing, but others lose hundreds of thousands of dollars. Usually, the more expensive the home, the greater the loss. However, consumers should be protected from losses of any size. We are especially concerned with protecting consumers who can least afford to lose money – the poor and the elderly. The widespread exploitation of these people by many agents has made us determined to improve the standards of ethics in real estate.
BRIEF EXAMPLES of LOSSES
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Homesellers.
The consumers who suffer the worst financial losses are generally the homesellers. We have ethical concerns about the following methods used by many real estate agents:
Up-front expenses.
Consumers are often duped into paying money to agents before their homes are sold. If their home does not sell, or it sells for less than the consumer was led to believe, this money, which often amounts to thousands of dollars, is lost.
Advertising.
It is well known within the real estate industry itself that the main purpose of advertising is NOT to sell homes, but to raise the profile of agents. In many areas, the number of sales being made has declined, but in most areas real estate advertising has exploded as agents compete with one another to raise their own profiles. This is at the direct expense of homesellers.
The issue of real estate advertising is where some of the MOST UNETHICAL CONDUCT occurs in real estate.
Agents are wasting millions of dollars of consumer funds on real estate advertising.
Kickbacks.
The payment of kickbacks from newspapers to agents can be as high as forty percent. It works like this: A homeseller pays $10,000 to an agent after seeing an account which ‘proves’ that this money was spent on advertising. But the agent receives a rebate or credit of up to $4,000 as a ‘kickback’ from the newspaper. This rebate or credit is rarely passed on to the homeseller. It is kept by the agent. Australian consumers are collectively losing millions of dollars annually through the use of kickback scams.
Auctions.
Thousands of consumers are painfully aware of the financial loss and emotional strain of auctions. Consumers lose millions through having their homes undersold at auctions. Homesellers are duped by a single sentence – “The price goes up at auctions.” But the reason the price goes up at auction is because it starts so low. The truth is that auctions get lower prices more often than they get higher prices. Tragically, many people do not realise how much money they lose at auction.
Conditioning.
Conditioning is a method of talking homesellers down in price. Many agents use a series of standard conditioning letters or statements – especially with auctions. One Real Estate Institute even conducted a course called, ‘How to Condition Sellers’. In the book The Real Estate Office Manual published by the Real Estate Institute of Australia, auction is described as “the fastest and best conditioning method.”
False or Misleading Offers.
Many agents submit offers to sellers which are lower than the offer actually made by the buyers. This is done to make the genuine offer look good when it is revealed later. It is a common deceit. The notes from one training course are quite specific, “If you get an offer of $270,000, convey to the owner a lower figure, say, $250,000.” At other times, homesellers are given totally fictitious offers in order to convince them to lower prices.
Bait Prices.
Homesellers lose a lot of money when agents use ‘bait’ prices to attract buyers. Agents indicate to homebuyers that homes may sell for a low price when they know full well that the homesellers would never want such prices. Agents say this is designed to attract buyers who can then be talked up in price. This ploy backfires on homesellers because it attracts many buyers who can only afford the low price. The agents then say to the sellers that “this is the most the buyers will pay.” The truth is that the wrong buyers have been attracted. This method can be seen when a home is offered with a ‘price range’ or ‘price from’. This is common with auctions or ‘by-negotiation’ sales.
Open Inspections.
Not only do open inspection lead to lower prices, they are also dangerous. Almost anyone can walk through a family home without identification. This reckless disregard for the personal safety of home-owners is a serious ethical concern. Also, the more ‘lookers’ who can be attracted to an open inspection the easier it is to persuade the owner to reduce the price. Agents will say that there has been “lots of activity” and, if no one has bought, the price must be lowered. But agents do not say that the people who looked were not qualified buyers. There is a BIG difference between ‘lookers’ and qualified buyers.
Betrayal of Confidence.
Many agents are quick to betray the confidence of homesellers. If the homeseller is ill or going through a divorce or has financial problems, this highly sensitive information is often given to buyers. One real estate trainer openly boast that he “loves divorces” and encourages agents to exploit this emotional trauma. The personal details of homesellers should never be revealed.
We have grave ethical concerns with these methods.
We believe increased consumer protection is urgently needed to stop these methods.
Homebuyers.
While homebuyers do not generally suffer as much financial loss as sellers, the emotional toll caused by the lack of ethics in real estate, has a devastating personal impact on many buyers.
We have ethical concerns about:
Untruths.
The deliberate telling of lies about the likely selling price of a property causes enormous emotional stress to homebuyers. Buyers are often given false hope about the price a home may sell for. They get their hearts set on homes which they have little or no chance of affording. Buyers are often used as pawns to persuade owners to reduce prices.
Apathy.
The treatment given to many homebuyers is often flippant and casual. Many buyers are stunned at the almost complete lack of interest shown by real estate agents when they make an enquiry. We believe that courtesy and consideration should form the basis of ethical conduct.
Needless expenses.
When buyers are told that a home is within their price range, they often spend hundreds of dollars to obtain legal searches and building inspections. Later, when they discover that the home was never within their price range, they become emotionally upset and are often furious at having wasted money needlessly.
Auctions.
Buyers are often lured to auctions in the same way that sellers are lured – by deliberate misrepresentation of the price Buyers are told that the price will be low. Sellers are told that the price will be high. Great pressure is then applied to both sides at the auction. The sellers are pressured to reduce their price and buyers are pressured to pay more than they can afford.
Dummy Bidding.
The practice of dummy bidding at auctions continues to cause thousands of buyers to distrust agents. Despite denials by many agents, dummy bidding is still rife at auctions and is done to deceive both sellers and buyers.
Gazumping.
Buyers are often led to believe they have bought a home, only to be told later that someone else has paid a higher price for it. The most unethical cases occur when buyers are not even given an opportunity to make a higher offer.
Investment Advice.
The statements made to buyers about the investment potential of real estate are often misleading. Some agents tell blatant untruths about the potential of real estate. For many agents, it is always the “right time to buy”.
Negative Gearing.
Thousands of consumers suffer financially through negative gearing schemes which are often sold at ‘investment seminars’. Consumers are encouraged to mortgage their family homes for the purpose of real estate investment. This can place great financial stress upon consumers if their circumstances change. Many consumers discover, to their horror, that they are ‘locked-in’ to negative gearing. They cannot afford the repayments and the investment they purchased is worth far less than they were led to believe.
Over Borrowing.
Homebuyers are often encouraged to pay more than they can afford. A slight change in interest rates in the future is often enough to cause some people to lose their homes because they cannot afford the increased re-payments. Many agents have little or no regard for the future well-being of homebuyers. Some are now even involved in arranging finance for buyers and receiving additional income by way of kickbacks or commissions from lenders.
CAUSES FOR LACK OF ETHICS
We believe there are two main causes of the ethical crisis in real estate.
The first is that governments and consumer protection bodies have never thoroughly investigated the real estate industry.
The second cause is far more worrying. The real estate industry is controlled by real estate agents or groups whose primary concern is to represent agents – not consumers. False and misleading information is regularly given to both governments and consumers.
Real Estate Institutes.
We have grave concerns about the “codes of ethics” of Institutes. Many consumers believe Real Estate Institutes are bodies which protect consumers. But, in reality,Real Estate Institutes represent real estate agents not consumers.
The Real Estate Institute of Australia’s Code of Ethics is also of concern to the Australian Competition and Consumer Commission. In a press release dated November 29, 1999, headed “REIA’s Code of Ethics Revoked”, the ACCC expresses concern over the complaint handling mechanisms for consumers. For more information, please visit the ACCC website.
The training courses conducted by these Institutes teach many methods which we believe are misleading and deceptive. Many of the most flawed methods in real estate are supported by Institute Members. However, members who try to increase protection for consumers face an almost impossible task.
The Immediate Past President of the Real Estate Institute of Victoria, Mr Garry Nash, in the Institute’s 1999 Report, expressed his disappointment at the way in which many members are more concerned about matters which adversely affect agents than matters which hurt consumers.
SOLUTIONS
Investigation.
We believe there should be a full and independent investigation into the real estate industry. In our opinion, many of the common practices in real estate are not only unethical, they are also illegal. Australasian real estate consumers are losing millions of dollars. We would both support and welcome an unbiased investigation into the industry.
We believe real estate agents should be compelled to use ethical systems which protect and benefit consumers.
Misinformation.
There is far too much misinformation about the real estate industry. Systems which benefit agents and hurt consumers are given too much good publicity while systems which offer an alternative viewpoint receive little or no publicity. Some consumer information produced by The Jenman Group has even been banned from many newspapers because it is not in the best interests of those newspapers and real estate agents. The fact that it benefits consumers is considered irrelevant.
The aim of The Jenman Group is to vigorously promote ethics in real estate.
REAL ESTATE MISTAKES
We have released a book which tells consumers exactly how to avoid mistakes which cost them thousands of dollars. You should read this book. It will really help you. We believe that reading it will be the equivalent of being paid $10,000.
We can afford to risk $20.00 but we don’t believe you can afford to risk selling or buying real estate without reading this book.
Obtain a copy of Real Estate Mistakes. It will save you thousands of dollars.
DON’T SIGN ANYTHING!
This book reveals how thousands of consumers are being ripped off in real estate. It shows how the greatest asset of most families is under financial assault from business people who are either dishonest or incompetent – there can be no other explanation for what happens in real estate today. It is a national disgrace.
Although the real estate industry is riddled with deceit and corruption it is not as complicated as many people think. It’s only the tricks that are complicated. When you understand the tricks, you will be in control. You will be able to buy or sell with confidence. You might even enjoy it.
WHY WE DO THIS
We promote ethics in real estate because it feels very good to be involved in something as important as protecting the greatest asset of most consumers. We feel that we are involved in an important cause. We love what we do. The support we receive from consumers is magnificent.
Some agents accuse us of making profits from ethics in real estate. We believe that being ethical is good business and that making a profit with ethics is preferable to making a profit without ethics. We receive no government funding. We receive our income from agents who support what we are doing. Our profits go into increasing consumer awareness of the need for ethics in real estate and into paying our staff. Many of our senior people are real estate agents who could earn far more in a real estate office than they do working with us.
APPROVED JENMAN AGENTS
It is our aim to create a group of agents in whom consumers can have complete trust. These agents will be known as ‘Jenman APPROVED‘. The Jenman Group will offer the most genuine and comprehensive guarantee to consumers who use one of our APPROVED Jenman agents. These agents will be recognised by the APPROVED Symbol. As at February 2000, we have 300 real estate offices who are our clients. We are working with these agents to install our system of ethics in real estate. If you would like to contact one of our client agents, please contact us at 1800 1800 18 or email us or click here to see if we have an agent who services your area.
We wish you all the best in your real estate endeavours.
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