Current Market Insights
The Current Market Insights Podcast is brought to you by Harris Partners Real Estate.
Understanding the property market can be a challenging thing, with highs and lows, twists and turns. The media and agents tend to spread the news they want you to hear, with the advice they want you to follow.
Current Market Insights is an unbiased look into what is happening, what tips you can use to buy, sell, or rent, and that you wont find anywhere else.
Current Market Insights
Episode 89: Industry Under Fire – Commissions, Conflicts & Consumer Trust
Hosts Ciaran O'Brien and Peter O'Malley delve into serious allegations against one of Australia’s top agents, accused of misleading vendors and manipulating commission structures for personal gain. Sparked by a series of Sydney Morning Herald exposés, we examine the broader implications for consumer protection, transparency, and regulatory oversight in real estate.
We also discuss:
- Commission incentives and alleged buyer deception
- Family-linked property deals raising ethical red flags
- Fair Trading’s response and the role of public accountability
- Auction clearance rates breaking above 50%
- The RBA holding rates amid economic stagnation
- What lies ahead for vendors as the market edges toward spring
As always if there is a specific topic you would like for us to cover, please reach out and let us know!
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Speaker 2:Welcome to the Current Market Insights podcast brought to you by Harris Partners Real Estate. Each episode we chat with real estate author and industry leader, peter O'Malley, to discuss the current property market conditions and provide insights to assist you on your property journey.
Speaker 3:Hello and welcome to another edition of Current Market Insights. I'm your host, kieran O'Brien, and with me, as always, is my good friend, mr Peter O'Malley. Peter hello, kieran, great to see you, great to see you, peter. It has been too long since we sat down and caught up. We've had a bit of a break for anyone on the podcast who may or may not have noticed just to recoup and get some things in order. But we are back and, peter, I want to talk about a really interesting topic today.
Speaker 3:Since we've been on hiatus or I have anyway many, many things have happened in the industry. You know the market's done what it's done and there's been, you know, the usual kind of ebbs and flows. But one of the things we talked about prior to our taking a little sabbatical was the ACCC starting to look into, you know, underquoting and concerns and fair trading starting to make some noise about things that were going on. And then, just this month, there was an article put out in the Herald that was referenced as one of the agents or an agent in Sydney's West who was under investigation or being looked at for some possible underquoting. But the article has really looked at some interesting kind of goings on. I might let you tell our listeners a bit more about it, but I think for me it's an indication that these agencies, for better or worse, are actually starting to take notice of what could be considered inappropriate behaviour in the industry.
Speaker 1:Thanks, kieran. Look, they're taking notice of unscrupulous conduct because of the complaints that are being made and the seriousness of the allegations. So there's been two major articles written against this agent at the moment and the sales tactics are nothing short of what you'd expect from the wharf of Wall Street. Really, they're pretty unconscionable and they're not unlike the issues that we discussed with the Wight office down in Oakley, victoria, in an earlier episode and it comes back to this in the article in the Sydney Morning Herald article which was run in June, they talked about the agent one of Australia's most prolific real estate agents turbocharging his commissions with a unique incentive scheme, and that's a very generous assessment for what has apparently transpired.
Speaker 1:So there's a couple of things here that I don't like, funny enough. The first thing I don't like is I don't like seeing anyone trial by media, and there's been two serious leaks against this particular real estate agent, and if he has done no good, charge him. Yep, I think that is the point there. But backgrounding him, it was the front page of the Herald on a Saturday morning about three, four weeks ago Big big photo of him as well, and there's pretty vicious allegations outlined against him. I'm not here to say that they're true or untrue. The Herald have obviously done their investigation because they've been confident enough to photograph him, name him, shame him and put him on the front page of the photograph. But I'm not a fan of trial by media, but look, the tactics that he's adopted will make any fair and reasonable person outraged.
Speaker 3:So there's a couple of things I want to ask you about. Obviously, we'll go into the article in a little bit more detail, but and outraged. So there's a couple of things I want to ask you about. Obviously, we'll go into the article in a little bit more detail, but given what's going on, let's just look globally, nationally, whatever it might be. Why do you think the Herald would run a full page front page story on this? Do you think that it's a reflection of public sentiment? Do you think that the story is actually that kind gross in terms of its possible misconduct? Or you know what? Do you think the rationale is here to make it such a media spectacle? This?
Speaker 1:was mentioned by the Fair Trade Minister, I think it was in the New South Wales Parliament. Right, he was saying that the ultimate punishment for real estate agents who underquote is to name them and shame them. Yeah, so basically, we were told you, you know you, you were here, you know, we were told the department of fair trade was, uh, um, beginning a massive crackdown and a blitz about 12, 15 months ago in the industry and to have your stuff together and do the right thing, because we'll catch you and we'll find you out. Since that time, the amount of underquoting that takes place in the real estate market has only worsened. Yeah, and that is a clear admission.
Speaker 1:Despite the big data technology that the Department of Fair Trade have adopted to monitor everything and the extra people running task force, they don't know how to catch agents in the act. They don't know how to prosecute the few big high-profile prosecutions that they've made. Some of them have fallen over on technicalities. So, as I said, the Minister for Fair Trade said that one of the greatest deterrents for real estate agents underquoting is to name and shame those that do it. As I say, I'm not a fan of trial by media. Tighten the laws laws, clear the rules up and then monitor them and uh, if you're looking for it, um, you will find underquoting.
Speaker 3:But you've got to think like a real estate agent, not only thinking like a bureaucrat yeah, and I want you know I was here when fair trading mentioned or talked about what kinds of things they were looking at from a compliance perspective, which you know. I always wonder if you warn, your, your quandary, that they you know what they need to keep an eye out for you, in some ways prepare them to front run that right. You mentioned that some of the allegations look at an aggressive kind of incentive scheme, and to me it rings of a topic that you have written about and we have spoken about before, which is this idea of what's the kicker. You know, the use of a kicker scheme or an incentive sliding scale, whatever it might be, in agency agreements, given that that's something that's not new in the industry. What about this particular approach? Is media worthy and worthy of Fair Trading's attention?
Speaker 1:Yeah, great, great question, kieran. And look, I read what is alleged here and couldn't believe what I was reading, because I just couldn't imagine doing to someone what is alleged in this article.
Speaker 3:Yeah.
Speaker 1:So, basically, it's alleged, the agent went to his client and said look, we've got a reserve of 135, and I'm putting this into my words We've got a reserve of 135. We've got no interest in the home. It's Monday, the auction's on Saturday, the campaign's in trouble. You need to sell. Look what I'm prepared to do to help us get sold on Saturday, mr and Mrs Vendor, is I'm prepared to take my team off all the other properties and put them exclusively on yours and do whatever needs to be done to get your auction to the reserve of 135 on Saturday. Now, if the team do a great job and they manage to get above a certain figure, as a reward for my team putting this extra effort in, would you be prepared to pay them 20% above a certain price point as an incentive to keep working hard? I don't know what the situation was, kieran. Clearly they needed to sell. Clearly they were vulnerable. Clearly they trusted their agent. They agreed to all of this.
Speaker 1:Unsurprisingly, on the Saturday the auction was a roaring success and it triggered the kicker that was introduced in the final week of the campaign, where the real estate agent earned himself a jumbo-sized commission. Now, to that point, in the vendor's mind, that's all fair play and they could live with that. When they went to congratulate the home buyer on purchasing their home, the home buyer spilt the lollies and said well, I was here on the first week, I was always buying this home In my mind, absolutely love it, um and just was effusive in their praise and had been on the hook the whole time and was just waiting for auction day to come around yeah and it was at that point that the vendors in question who, um, you know, there's a photograph of them in the article they outed themselves the vendors.
Speaker 1:They didn't hide in the shadows an unnamed client. They put themselves front and centre and they said very clearly it was at that point that we realised we'd been played.
Speaker 3:Yeah, I mean, we have a.
Speaker 3:You're speechless?
Speaker 3:No, well, I am, because it's one of those things where my first thought was, surely, you know and I can't speak for the mentality of the agent in question but just my logical mind says, surely I couldn't get away with that, like just in my head.
Speaker 3:I think that is so brazen that and so easy to kind of track and keep, you know, a tab on someone's movements throughout a campaign that I couldn't just so openly go and and run what is a lie alleged a lie to get these people to give up more money, which is why I'm speechless, because I think that you know salespeople chasing commissions that's part of life, you know, that's what many industries encourage, it's not abnormal. And when you're selling you expect you have to pay your agent a commission. What I found really, I guess, distressing in in the article was the fact that in all of the cases mentioned, the reserve had already been set, the expectations had already been laid out for the vendors as to what was happening, and all of a sudden yeah all of a sudden you know there's actually no interest, let me get you something better.
Speaker 3:And of course it was there, uh, in the article I think it mentions there was on this particular day that they referenced there was eight auctions or ten auctions or something, and half of them had had this occur, uh, where the vendors openly said absolutely, we got you know screwed or or misled or whatever it might be?
Speaker 3:um I in in that kind of scenario? I mean, we have talked about reserves getting absolutely blown away in situations where there's underquoting. Do you think that that's the case here as well? Do you think that some of these properties are being underquoted for the sake of blowing a stronger auction day result, or do you think that these were alleged opportunistic cash grabs with certain vendors that might be more amenable or pliable at the time of auction.
Speaker 1:Look until there's a charge that is put forward against the agent in question and sticks. They are allegations, but there's a flavour here, and let me say this, that if what's in the newspaper article is true which would be a big risk for the Herald to write it if it was not true, I think you'll find the reality is even worse.
Speaker 3:Yeah, because this is what they could find right.
Speaker 1:This is what they felt comfortable printing.
Speaker 3:Yeah.
Speaker 1:So this is not taking an extreme position on what's been happening.
Speaker 1:This is being saying we're safe to print this stuff and and and and and the reality will be will be more frightening. Now what I will say about the regulator? This trial by media tactic that they're using, that I don't like it. It it may have been deliberately written to encourage others who've been a victim of this, to enlighten them. Well, hang on. That sounds very similar to what happened to me. Or give them the confidence to step out and tell their own story to the regulator as well which I mean it makes sense, right people?
Speaker 3:you, particularly in very high-profile public industries like real estate. You know trial by media is effective. If that's what they're trying to do, do you think that I mean? What do you think the actual outcome will be here If all the allegations are proven true and if all of this you know comes out in the wash, that this was quite prolific, had gone on for ages and there was worse? Whatever it might be, what do you think the regulator actually does?
Speaker 1:You have to strike him off. Well, we've spoken about this in the past. You can't be allowed to operate and do this.
Speaker 3:Agencies have been caught doing things that are illegal under the regulations before, and they get so weakly punished. There's levels, though.
Speaker 1:I agree this is next level tactics. As I say, this is a wolf of Quaker's Hill stuff. This is outrageous and you would have to strike him off if you were able to prove these in a and I agree that should happen, ideally right.
Speaker 3:But what you know? Do you think you know? The agent in question is part of a much larger conglomerate or group who, to my reading of the article, not protecting but backing his position here. Do you think?
Speaker 1:that the regulator. Well, he was qualified. He's very, very lucrative to the Ray White network.
Speaker 3:Of course, but do they get punished here as well, because surely they know what's going on?
Speaker 1:The article quotes Tim Snell from the Ray White Group. Ray White's Group, new South Wales. Chief Executive Tim Snell, quote unquote acknowledged that a bonus scheme must be fully transparent and agreed upon in advance with the vendor. We understand that Joss Teslin does not have a standard template of an incentive bonus and each agreement is unique to the circumstances of each sale. So he's acknowledging kind of what's in the Herald's article but saying it's agreed upon in advance. But the way it's agreed upon it's when the vendor is at their most vulnerable and, according to the article, agreeing to it on a misled basis. Ie there's no buyers. But I'll put an extra effort in for you when the couple who are named in the article, the Ruffleys, subsequently found out there was a buyer there all along.
Speaker 3:Yeah, that's just a form of fraud. That's deception. Well, it's a misleading conduct right which the ACCC has a position on which consumer law heavily protects, which obviously Fair Trading. Look at yeah.
Speaker 1:And this goes on. The article goes, and this is the crux of the issue. A spokesperson for the agent said his incentivized commissions are agreed upon at the start of an agency agreement, but correspondence and text messages seen by the herald show that, at least in the examples given in this article, the incentives were introduced to the seller only in the days or the nights before the auction.
Speaker 3:Yeah.
Speaker 3:So I imagine there's a blanket block or line or something in the agency agreement that says you know there may be some incentive, commission-based situation, et cetera, which obviously he's then doing later on in the campaign when you know he feels comfortable, that he on in the campaign when, when you know he feels comfortable that he can get the, the profit that he wants, um, it's a look, it's a particularly interesting case.
Speaker 3:It's not the only thing, uh, the article talks about. Obviously. It does talk about um this this particular day, you know it uses the one example of how roughly 50 went through this scenario, but it also talks a little bit about the agent and members of his family also selling and buying properties from vendors, which is not illegal but is obviously a bit of a gray area in terms of how it's conducted. I mean, there's not, you know, we don't need to talk too much about this, but to me it paints a bit of a picture of someone who, uh, uses situations when vendors might be confused or stressed or anxious to achieve an outcome that benefits him uh, you know, in a in a much greater way than it does them, I think yeah, look, I, I can see here they're.
Speaker 1:They're um like the. All you can say is the Herald have obviously done their research on this, but we'll give our listeners an extract from the article. I'm just rereading it again, having read it three weeks ago, and it just stinks.
Speaker 3:They don't hold the punches, mate.
Speaker 1:It just reads so badly that you would think that Joss Teslin will sue for, or the agent in question would sue for, defamation. It's not defamation if it's true, though, is it? And it's not defamation if it's true and the Herald would protect. But here we go. Here, look, one of the few lacklustre results on that fateful day in March was a four-bedroom family home opposite Western Sydney Parklands at Bungarebe. It was originally listed with hopes of matching a recent $1,340,000 sale up the road, but after buyers gave negative feedback and despite objections from the owners, teslin suggested a reserve of just a million dollars to get an uplift in price. Sounds like conditioning, so they're being conditioned. Your house is nowhere near as good as the one that went for 1.34.
Speaker 3:They've got a left-turning toilet yep, that kind of thing.
Speaker 1:Yeah, we've got to reduce the reserve price by 30% to stimulate the bidding. It says in my book Inside Real Estate. A lot of people don't realise, kieran, that once a property meets the seller's reserve, the seller must legally sell the property.
Speaker 3:Yep.
Speaker 1:And if they refuse to sign the contract, saying, well, hang on. We only said a million dollars because the agent said it would stimulate the bidding and it stopped at $1.2 million you still have to sell it and the auctioneer can sign on your behalf. It's called lack of control. You actually hand over the signability of your asset to a stranger you've met on the day.
Speaker 3:Which, again small segue, is why in your book you talk a lot about take the time before you sign any agreements or anything to do your research. Yeah, anyway, that's an aside.
Speaker 1:The four-bedroom house in Bangaribi was passed in at auction, but it later sold to the agent's wife.
Speaker 3:Yeah.
Speaker 1:The night before the auction. There were four or five registered bidders expected, but none turned up on the day and Teslin's spokesperson said it was passed in with no bids. Instead, the house sold under the auction conditions. After the auction to one of the agent's family members and a consent form was signed by the vendors agreeing to the agent's interest in the purchase Title record show, it was purchased by the agent's wife for $1,020,000. So similar house sales for 134. We've got no interest in your house. Let's set a reserve where you legally got to sell it for the highest bid above $1 million and stimulate some interest. Oops, no one turned up. That's okay, I'll get you guys out of a pickle. I'll get you guys out of a pickle. My wife will buy your home for essentially rock bottom price and the agent was paid a $30,855,000 commission for his efforts in the process.
Speaker 3:Which means the vendor's got less than a million Correct. Yeah, yeah, Again. These are. You know I can only comment on what's in the article, but it certainly doesn't paint a good picture. It doesn't paint a good picture.
Speaker 1:Yeah, it'll be interesting to see where that one goes. That's the second big article written on this fellow. The first one was alluding to where it was all going, but some of the bigger, more high-profile journalists at the Herald got hold of that one and that's yeah, that's savage.
Speaker 3:Look, it'll be interesting to see, and you know it doesn't escape me also that the higher a flyer you are, obviously the more scrutiny you come under and the more that the media is going to look for these sensational pieces. So we need to wait and see what the fallout will be ultimately. But I mean it certainly at a cursory glance. If you, if you trust that they've done due diligence with their journalism, it doesn't paint a good picture, and if it is all found to be below board and something wrong has occurred, then personally, you know, I don't know the guy, but I certainly hope that anyone who rips off people through unethical practice gets their just desserts. That's my preference. But if he has done nothing wrong, then I certainly hope that you know it's it. He has the ability to recover the image because, as you say, trial by the media can be incredibly damaging to those who haven't done anything wrong.
Speaker 3:Yeah, it is, yeah, yeah, yeah. Look, uh, yeah, it'd be interesting to see what comes of that as we uh, as we move on. Then, peter, it has been, as I said earlier, quite a little while since we caught up, so I really am hoping you can get our listeners up to speed on the current market conditions, in particular what the clearance rate's doing and how the market is kind of looking. And I'd also just love to get your quick thoughts on how the market actually feels out on the ground, because I, you know, we haven't spoken for a while, which means I've been a little bit out of the loop and I, you know, have been thinking, or wondering what it has been like as a buyer on the ground across Sydney at the moment.
Speaker 1:Look last weekend the auction clearance rate from 743 auctions was 53.6 percent and the week before, from 759 auctions, it was 55.5 percent. So auction clearance rates nudged past 50 percent consistently for the first time since last august. So that's suggesting that vendors are accepting a little bit more where market conditions are at, because it was getting down at to the low 40s these are.
Speaker 1:for anyone listening for the first time, these are sqm researchers numbers who only provide an auction clearance rate on the tuesday after the weekend, unlike some of the other bigger media houses that will quote the auction clearance rate on a saturday night, which tends to be more a higher clearance rate because the successes are pushed forward where the failures are held back, whereas SQM research have got a more exhaustive process, albeit slower, to get more accurate results, but nevertheless the auction clearance rate is pushing up. The market was wrong-footed by the RBA, not cutting rates, so probably could have been nudging 60% if the RBA had have cut rates. So how's things on the market? There's buyers out there, but they will steer down properties that are at the wrong price or properties that don't meet their brief or properties that require extensive capital to repair them. So, in a word, people say how's the market? In a word, patchy. There's good results happening out there, absolutely, but as an agent you've got to work for them.
Speaker 3:there's not many easy sales I've only really got two questions for you, pete. First is uh, you mentioned number of auctions 743, I think you said or 740 odd um. That's obviously lower than some of the numbers we've talked about over the last six months. Certainly is that a reflection of the winter period, do you think? Certainly is yeah, okay, so it's not. It's not off trend, necessarily.
Speaker 1:Yeah um and and um. There's no doubt that a lot of people were away on these school holidays, yeah, yeah. So it kind of felt like they didn't give the rate cut. In early july, school holidays were upon us and people just flicked the off switch in many ways and said I'll deal with this later, if not just wait for the august rate cut. The reason the august rate cut won't give people and I'm assuming in that comment, of course, that there will be a rate cut.
Speaker 1:I think there will be, but um, the reason that won't give the market the stimulus that the july one would have is the rba broke its own promise to the people with that decision on July 8th. They have told us for two years they're data dependent. When the data supports it, we'll cut and we'll deliver the data delivered and then they made a gut call decision, which was clearly wrong. And I say it was clearly wrong because the unemployment came out a few days later and showed a jump, and you've got to remember that unemployment jumped after the May rate cut.
Speaker 3:Yeah.
Speaker 1:So we've now got a situation where interest rates are going down, but unemployment's going up.
Speaker 3:Which we have talked about a few times. Yeah, it's a possibility.
Speaker 1:Yeah, yeah, so that shows that the RBA's judgment call that they made in July to sit on the fence is the wrong one and it will hurt people accordingly.
Speaker 1:So you've got that the RBA broke faith with the people by not cutting when, if you followed their own thinking for the last two years, a rate cut was a lock. And the other reason is is the next rate cut is going to clash or coincide with the surge in spring listings? Yeah, now, um saw a great quote today, um, from westpac. They put it out and, um, they have a view that the Australian economy is struggling and not as strong in 2025 as what it was in 2024. Westpac throws cold water on Treasury's hope that the private sector would take the economic growth baton from the public sector. Quote-unquote from Westpac today.
Speaker 1:Kieran, the recovery in the economy, not the property market, the recovery that was gaining, the recovery that was gaining traction through the second half of 2024, has stalled in the first half of 2025. Quote unquote. And that goes to the point that we were talking about before you had your hiatus period, that, anecdotally, we were speaking onto the ground. Who was saying economic conditions are really tough and deteriorating. We've got a rate cut in may, but clearly, from what westpac is saying, it has not done enough yeah, it's interesting too.
Speaker 3:I obviously we can't take too much, or not not maybe not the same level of notice of the us that we may have in years gone by, but I was only reading some data this week that showed, I think, the US has had three successive inflation kind of rises, or you know inflationary data increases, which you know. They're in an environment where getting a rate rise would be near impossible, given the obstruction to the Fed. But also they're in a bit of a weird scenario where their inflation is going up and the economy is doing some strange things obviously. So I have to wonder whether the RBA is in some way influenced by what's going on. There is so much global chaos that I think you're right, people did need to disconnect a little.
Speaker 3:The only other question I had for you so the raise in interest rates, the rising clearance rate over the last few weeks, with a hold on interest rates, would you take that sort of four in a row as evidence of something of a bounce or a recovery, or do you think it's just a bit of an anomaly? I mean, what do you think is driving, you know, albeit subtle increase in clearance rates? Do you think there is? You know you say there are buyers, but they've been quite astute. I can't imagine borrowing has gotten significantly easier in the last six to eight weeks. I can't think of any factors really that would make the clearance rate rise, other than perhaps lower stock.
Speaker 1:I think lower stock is the primary one and I think a lot of the successful auctions nearly half again were sold prior.
Speaker 3:Yeah, okay.
Speaker 1:So if you're talking about an auction campaign that climaxes on the 19th of July or the 26th of July, it's fair to say that you started that campaign in mid to late May.
Speaker 3:Yeah.
Speaker 1:So if you've taken an early offer, you've taken the early money, the good money before the RBA decision, which it looks like essentially half the people did. You weren't exposed to that Then any vendor that had maybe a slightly aggressive reserve. He's suddenly scaling their reserve back a little bit in their own mind to meet the market. Because you go to auction because you really want to sell, and the buyers are saying, well, there will be a rate cut in august. By the time I settle, the rate cut will still be here anyway, so I'll go with it yeah, yeah, it's, uh, yeah, interesting period ahead.
Speaker 3:I certainly think the RBA. It's disappointing. They didn't cut you and I had spoken a lot about it and we expected they would. Based on the data and the trend was certainly indicating it was time to do so again. I hope you're right about August and I I'm, you know, like many people needed a mental break from the world in July. I think that's not not uncommon, but certainly interesting to see what happens. I know we're at an interesting precipice, as you say, because if they do cut rates leading into the spring cycle, there's a sudden influx. You know, we could see a bit of a surge in in pricing again if people are feeling more confident and of course, all of that contributes to inflation and the cycle continues. So you know, interesting time ahead, as always. But really really good chat today, peter, really interesting recap and a great article. I certainly look forward to following it over the coming months. Yeah, good on you. Thanks Kieran, thanks Peter, and thanks to everyone for listening to Current Market Insights. We look forward to speaking with you next time.
Speaker 2:Thanks for joining us on the Current Market Insights podcast. Thanks for joining us on the Current Market Insights podcast brought to you by Harris Partners Real Estate, the podcast providing real estate insights you won't find anywhere else.
