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 91: Fictitious Buyers – Exposing Real Estate's Dirty Tricks
Hosts Ciaran O'Brien and Peter O'Malley uncover the deceptive use of “fictitious buyers” by agents—an unethical tactic designed to pressure genuine buyers into overpaying. Peter explains how this differs from the previously discussed “phantom buyer” strategy, and outlines how buyers can protect themselves from falling victim to false competition.
We also cover:
- Why written confirmation from agents is crucial
- The legal implications under consumer law
- The importance of understanding where an agent’s duty of care lies
- Ongoing vendor hesitation ahead of expected August rate cut
- Low stock levels contributing to increased auction competition
- Clearance rates rising to 55.4% as market momentum builds
As always if there is a specific topic you would like for us to cover, please reach out and let us know!
All down, all silent, going, going, going, gone. So congratulations.
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 is my good friend Mr Peter O'Malley. Peter, hello.
Speaker 1:Kieran, how are you going? How was your week?
Speaker 3:Look always good weeks for me, peter. I'm so absurdly optimistic that I enjoy every week, regardless of what's happening, although I must admit I do enjoy that the sun has started to come out a little bit more. The mornings are slightly brighter when I get up and about, so it's been a nice change.
Speaker 1:This week I didn't get to catch up with how your footy team went this week. What happened there? Look?
Speaker 3:every year, I think one of the rugby league sides has to make a decision to let the other sides look really good. And this year, you know, wayne Bennett thought that he'd just get Souths to really take one for the team and the league and make all the other sides look great. So you know, a tactical move from Wayne. He knows what he's doing. He's been super coach for almost as long as I've been alive. So, you know, don't get too excited. Don't get too excited. I am saddened actually to think that the Panthers are making such a storm toward the finals and they've got the referees on side and now everyone else is on side. So, you know, could we be seeing a five-peat Dirty?
Speaker 1:dirty play from the trainer Wasn't happy to see that. But in good news, the Tigers got up. That was a victory and a half that was.
Speaker 3:That was, and it's caused its own storm on social media with the whole Lockie Galvin debacle, but we don't talk about that because he's no longer in the inner west as we like to think about it. Moving on then, peter, as much as we could do a podcast about football, I guess I really want to talk to you about an article that you've written for your monthly newsletter, the Real Estate Report, where you talk about the concept of a fictitious buyer. Now, I'm sure many of our listeners have thought about, heard about, maybe experienced this concept. But to open up the conversation today, if you can take us and our listeners through what a fictitious buyer is and really what has spurred on this article for you to kind of, you know, get some information out there for people.
Speaker 1:Thanks, kieran. Well, look, in the past we've spoken about the phantom buyer. I'm not sure if you remember that one. I do yep.
Speaker 1:And the phantom buyer is where the real estate agent will invent low offers in the name of a buyer to explore the vendor's bottom line. So the vendor might want $1 million and the agent says look, I do have a buyer at $900,000. That's all I've got at the moment. How do you feel about that? And it's like well, I don't want to sell for $900,000. I want $1 million. Well, would you be prepared to counter offer that buyer at 900,000 at a price somewhere between 900 and a million? Now that buyer at 900 doesn't really exist, not really serious about purchasing the subject property. What the agent's doing is using the phantom buyer to sort of erode the vendor's confidence in their price, if you like, and and soften them up. What we're talking about today, the fictitious buyer, is the buyer that's used in reverse to that situation and that's the one where the real estate agent blatantly invents another blind buyer at a higher price than what a genuine buyer has offered as a way of nudging them up.
Speaker 3:Yeah.
Speaker 1:And the reason we're talking about it today is there's an agent on the central coast not in Sydney who did a TikTok video on this and was picked up by the mainstream media who, to my surprise, were surprised that that was a tactic real estate agents adopt.
Speaker 3:Yeah right. Would it not be considered even similar to dummy bidding, like in that sphere of misleading tactics, to just encourage. Completely dummy bidding. Yeah, well, that's why I'm surprised that the media is surprised that this is a thing Now, dummy bidding is technically having a fictitious bidder there on the day of the auction for which there's a $22,000 fine.
Speaker 1:Yep, a dummy bidder stroke a fictitious bidder during a negotiation is becoming more common, unfortunately, and buyers need to be aware of it. So we started getting onto this. Late last year when one of my friends was looking to purchase in the area, there was a property with an auction guide, I think, of 3.25 down in belmaine. She said to the agent I'm interested in this. And the agent said look, we do have a buyer interested in it, so if you um want to buy the home, you're going to have to go to 375 to get it right and she's gone.
Speaker 1:Well, if you've got. If you've got 375, count me out. I I ain't paying 375 for the property. Um, go ahead and sell it to someone else sold two days later for 3.45 yeah, 10 below yeah yeah well, um, but just you know clearly there was never another bidder close to 375.
Speaker 1:He had the sale and he went fly fishing trying to get a high price from someone who might have been emotionally engaged in the property. Around the same time. Over in Leichhardt, funny enough, with the same firm, we heard the story where someone who'd purchased the property for well above what the market price for the property was when he bought it moved in and the neighbour who knew there was no interest other than him on the property, said hey, you paid a pretty big price for this property. Why did you go so hard on it? He said oh, there was heaps of competition, the agent said, and it was like a free-for-all. It was very competitive so we did our very best to get it before the other buyers did. Before the auction yeah.
Speaker 1:And the neighbour, to their credit, didn't sort of let the kid out of the bag but explained the situation to us that they had spoken to the previous vendor and the new owner. The new owner thought they were in a hyper-competitive situation against multiple bidders and the previous vendor said I'm delighted with the price I got because there was no one else Classic fictitious buyer scenario. This agent is obviously competing against such tactics in his marketplace in terrigal and he's gone public with it look, it's a.
Speaker 3:It's a good thing. I think that the people are speaking up about this. We, you know, we have spoken before about some of the dodgy tactics that do go on for our listeners. Then what? What safeguards are there in place? I know we always talk about do your research, try and get a you know, a sense of what the market's actually doing, look for comparables, et cetera. But what safeguards do buyers have when they're dealing with an agency to know that they're not getting played?
Speaker 1:Look, not many, but there's a few things in place here. So a couple of years ago we had a salesperson who had a really strong offer on a property we were selling and the purchaser was a barrister and before exchanged and we've had this more than once, you'll remember down at Balmain, this happened to me.
Speaker 3:yeah, yeah.
Speaker 1:But that was after exchange, that I think that buyer asked you to show proof of the other buyer, Correct, but in this case with the barrister. The barrister put our salesperson on the record and said can you write to me and confirm that you have another purchaser who's made an offer on this property? Yep, and he wasn't going to do anything with that information other than hold on to it. And and he wasn't going to do anything with that information other than hold on to it. And the salesperson said well, what do I do? And I said well, there's another buyer, so put in writing, there's another buyer whom has made an offer.
Speaker 3:Yeah.
Speaker 1:And that's what buyers should do if they feel like they're negotiating against a fictitious buyer and the article that you referenced that we're putting out in August says exactly that you should make the agent at the get-go confirm that there is another genuine buyer who's made an offer on this property. Now the agent doesn't necessarily have to tell you what that other buyer has offered. Some agents do. Some agents don't disclose what the other offer is. But you should not have a conversation with the agent looking for comfort, because conversations blow off into the wind. Yeah, written communication is on the record for all time.
Speaker 1:And if you're like that poor person over in leichhardt who thought you're in a hyper competitive situation, that's why you went to that price and then you realize that you'd been blatantly lied to, that you're in a hyper competitive situation. I need your best price today because it's selling and you realise you'd overpaid by deceptive and misleading conduct. You've got an ability for retribution. You can't take a conversation into the courtroom three months later or six months later and say this agent misled me into paying the price I did by unfair means. But if they put it in writing that they have another offer and they don't, here's some chance.
Speaker 3:So in reality, what uh? You know what? What would happen in that scenario? Do you think I would assume that there's unless something comes to light early in the process pre-settlement? I'm not sure. Would it be grounds for uh contract void if it was found that that had occurred?
Speaker 1:I know not contract void you, you.
Speaker 1:It's happened in melbourne yep it's a historical issue, but, um again, a barrister type person, uh overpaid wildly for a property, being told that they're in a hyper competitive situation. I think he was given even price guidance of where he needed to get above, which was again a fictitious line. Yep, and I don't know how, or I don't quite remember how he found out, but he sued the agent successfully and won. Before uh writing the article and speaking with you today, I just rang the lawyer and said have I got this right that the tactic we're discussing here is deceptive and misleading conduct?
Speaker 3:and he said yes, it is under the ACCC act yeah, okay, so if nothing else, the buyer could potentially get some recourse through consumer law or the ACCC Act. Yeah, okay, so if nothing else, the buyer could potentially get some recourse through consumer law or the ACCC to get some recompense.
Speaker 1:But you know, sadly they will still have paid the price. The consumer has means.
Speaker 3:Yeah, okay, it is one of those challenging scenarios because I think in many ways real estate is a simple but also a very complex process, right, for a lot of people. They've never engaged in purchasing a home before. It's very high stakes financially. It's often very high stakes emotionally. It involves contracts and things that you know people don't have a lot of exposure to, and you do put a lot of trust in your agent or the agents you're dealing with to give you good advice and to give you the right advice to hopefully help you get your home. But, as you kind of point out, and as this agent in the Central Coast has, there are some less scrupulous operators that we have talked about before who can take advantage of people who are very new to the game or perhaps less experienced than others.
Speaker 1:Yeah, look, I would just correct there that as a purchaser, you should put no trust in the selling agent. That's not to say the selling agent can't be trusted, but the selling agent is usually being paid a substantial sum to act on the vendor's behalf. The agent's fiduciary duty is to act on the vendor's behalf and, to put things in the best possible light, on behalf of the vendor. As the article says, creating a fictitious buyer does not fall under fiduciary duty yeah that falls under deceptive and misleading conduct.
Speaker 1:But I would say to all purchasers you can like the vendor's agent. As a purchaser, you can take everything they tell you at face value and then check and test that what you've been told is correct and put the agent on the record in writing for the things that you wish to question. But you must never put your blind faith in the vendor's agent because you will get washed downstream. That doesn't apply to certain agencies. That applies to our own agency. That that equates across the spectrum. As a purchaser, you must know the vendor's agent is not working for you look, absolutely, I I should clarify.
Speaker 3:I was making the point. Uh, I think that buyers have to put trust that the seller's agent, at the very least, is being honest and not deceptive.
Speaker 3:Uh, it was more the point of course their responsibilities to the seller and we have talked about that Look really interesting topic. We've talked about the Fanta buyer before and the fictitious buyer. It's something for potential buyers to look out for. It will be interesting to see, with all of the activity around real estate at the moment and the increased pressure from regulators and it's in the media a lot more. It'll be very interesting to see in the coming months whether you know the, the fair trading and the ACCC begin to to put a bit more pressure on agencies to justify things. Uh, if anything, you know it may increase the, uh, the administrative load or the, the legislative record keeping for agencies to make sure that there's some verifiable or provable who knows right. But I I would like to hope that more stories like this will actually change the industry for the better and make the whole process a little bit more seamless and trustworthy than it currently is in some spaces well, what was interesting?
Speaker 1:there was a nearly 100 comments on this agent's social media post from consumers, and the overwhelming majority of them said something like this happened to me. I told the agent, forget it, I'm out, and then two days later, the agent was chasing me, of course yeah so there's clearly rampant situations where agents have got nothing.
Speaker 1:They've under quoted below what the vendor wants to trigger activity. They've only stimulated interest from one buyer. Now they've got to get the price back up to what they told the vendor. So how do you do that? You create the fictitious buyer because you know if you get to auction day with that one buyer it's just your one buyer, the vendor and the real estate agent standing there and there's no competitive pressure in the situation, handing all four aces back to the buyer.
Speaker 3:Yeah, it's certainly harder to come up with a fictitious bid when you're standing at auction with them in front of you right, look, interesting topic, and we'll certainly follow any developments as they do come through. Moving on then, peter, I wanted to touch on briefly. We're very close now to the next meeting of the RBA where they will make, or should hopefully make, an interest rate decision that's favorable for most people. Is the, you know, still the, the expectation. I think, given that we have talked about what's been happening in the market improvement in conditions, the inflation's going well I thought we should just very briefly talk about what the the current chatter is around the RBA's potential movements next week and whether or not you still think we're on track for the cut you predicted last time we spoke, and whether anything's changed that may alter your I guess your drive for how aggressive they might be Look.
Speaker 1:I did see one piece of information that some people in the money markets are again speculating that the cut could be larger than 0.25%. I don't have all of the data or the information that the RBA has. Obviously I think they should be cutting by more than 0.25% and I think they made a major error not cutting in July. And the people that I speak to don't read graphs on the whole, they just operate in the real economy and I'm not just talking about people necessarily in the inner west or necessarily just in Sydney, but you know, when you're a real estate agent you speak to 100 people a day right across the country for different reasons, and the current interest rate setting is highly restrictive. It's doing damage to the economy and only the RBA really know why they didn't move in July. But the data that's come out since certainly has made a rate cut in August, essentially a lock, and will they go any heavier?
Speaker 1:As far as the real estate market goes, vendors and purchasers are looking for different things at the moment, which they're slightly connected, but they're different.
Speaker 1:Vendors are looking for higher prices from these rate cuts. There's a lot of stock that's being held back in anticipation of the rate cut, with the vendors hoping that pushes prices up and improves the market. Stock this winter is lower year on year than last winter and I think a big reason for that is the lack of rate cut in July saw some people knowing that if it wasn't happening in July it was almost certainly happening in August. I think the delay in the rate cuts saw a lot of people say we'll just hold back our listing until they cut in August and go then. So buyers are looking for an uplift in stock levels because stock is so low and vendors are looking for an uplift in prices as a result of the rate cuts. So I think there will be, as there is most springs, but this year there will be a surge of listings and I say that because there's such a lack of stock over the winter period so a couple of points to I want to touch on there.
Speaker 3:We spoke last week briefly about the rate cuts and where you know where you felt the rba was kind of sitting and what the the money markets were saying. I raised the point to you that I thought you know, do you think they would consider a 50 basis point or 0.5% cut? And from memory you're a little bit sort of hesitant, thinking maybe they wouldn't go so aggressive their language wasn't quite there and that maybe that wasn't the support wasn't there necessarily, despite the data. You know we commented on the fact that the data was quite compelling. Has much changed in the week that you now think they will go more aggressive, or is it really just a continuation of the same, with the data kind of holding firm that really we are struggling, the rates are still at a restrictive level and we have a little bit more to go to really get people back on track?
Speaker 1:Look, I think they'll go with 0.25. Contract look I, I think they'll go with 0.25. Um the rba are at a point where there's enough conflicting data out there.
Speaker 1:They can reach for any data that justifies any decision they make next week yeah so they could probably reach for data that justifies a hold, even even all their hidden data they have. Yeah, that's right, and they used for a long time the data dependent line about inflation, yep, and then in July they swiveled away from that. So there is no doubt there's a case for a larger and the reason I say a larger than 0.25% cut is we're not on a 0.25% cycle because there was a 0.15% reduction during.
Speaker 1:COVID yeah, so there is a case that it'll be somewhere If they're going to go larger than 0.25, it's not necessarily. 0.5 is what I'm suggesting. You know, if I had to place money on it, I would say a 0.25% cut.
Speaker 3:Okay, I mean, it's the weird perfectionist in me would love to see a 0.35, because that would bring it down to a neat 3.5 cash rate. But I'm not sure the RBA makes their fiduciary decisions based on my kind of obsessive, compulsive needs. But we'll certainly see. I hope they go for a bigger cut, I think you know. We have talked about the idea, though, that inflation is good but unemployment's sort of a little bit up. We we're at this weird period, uh, and as you have talked about, with stock holding for this spring, you know rate cut cycle and then into we could see a boom across the property market and then, you know, flow on this whole series again, right, I mean not to the same level.
Speaker 1:I think if we're going to see any sorts of boom in the property market between now and Christmas, it will be isolated to sectors.
Speaker 3:Okay.
Speaker 1:So there's no chance, for example, that the one-bedroom high strata levy market is going to boom in this environment.
Speaker 3:So the rate cuts themselves, are you suggesting that at their current level, any shift is really not sufficient enough to increase the borrowing capacity for those you know single income first home buyers, to make a big difference in that space, or could you not? I?
Speaker 1:mean supply and demand supply and demand.
Speaker 3:But could you I guess there is much more of those, but you could also argue with the government, the federal government's kind of incentives around you, you know, encouraging first home buyers and this high density focus they have. Could we not see some of those combined at this perfect storm of, you know, government incentives plus lower interest rates, plus, you know, just a frenzy to get back or into the market for the first time, we could actually see a bit of a broad boom in some respects.
Speaker 1:No, I'm a little bit different to a lot of commentary on that, and the reason being is that the cash rate, what is it at the moment? 3.85. 3.85. That's the cash rate Before COVID. So December 2019, the cash rate was 1.25, something like that.
Speaker 1:Somewhere there yeah yeah, property market market was doing okay, but it was by no means booming. So point 3.85 down to 3.5 cash rate, which is a mortgage rate of five and a half, that's. That's not enough to set prices racing. You would need a series of cuts. So you've got to remember. The RBA openly acknowledged that the current rate setting is restrictive. We are strangling the economy.
Speaker 2:Yeah.
Speaker 1:And then when you go and talk to people, how's things in your restaurant? How's things in your hairdressing business? How are things going with your printing business, whatever it might be, how's your tiling business? How's your plumbing business? Even the handyman said to me the other day. He said, mate, you know getting payment and people approving jobs, he said it's very, very tight out there. This is a guy doing $250, $550 handyman jobs. Yeah, so they've openly got the. They're strangling the economy. They know what they're doing.
Speaker 3:I accept all that. I have to wonder, though and maybe I'm alone in this thought process but surely some of this is relative to the timing for people trying to enter right. So if you are someone who is saving for a purchase in 2018, 2019, when the cash rate is 1.25, whatever it is, and you don't quite make it in the market and it balloons up to 4 and a whatever percent, that's incredibly crippling, incredibly crippling. But if you are someone who's saving in the last few years where the cash rate has been high and aggressive and all of a sudden it comes down a few percent, relatively speaking, that's a huge load of pressure off for those people and I wonder, like it is obviously relative to, you know, when we had 0.1 percent and things were crazy, uh, that's, that's a like system-wide boom, right, but relatively speaking, some of these cuts for some people, I just can't imagine.
Speaker 1:They're not going to be in combination with the government incentives, they're not going to be boosters Without boring our listeners with the same two points that every podcast comes back to open borders and a lack of new dwellings. People say all the time how's this all going to play out? Property prices are going to go up. It's like no, no rents are going to go up. Yeah, which they are. That's which they are, yeah. So all the points that you're edging at there are playing out in the rental market, not the sale market.
Speaker 2:Yeah.
Speaker 1:Because the rental market is less permanent than buying a property. And you talk flippantly about saving.
Speaker 3:Yeah, which is hard.
Speaker 1:How does a tenant save at the moment? Well, mate.
Speaker 3:My wife and I went through this for years and years and years and years and years before we finally got into property. How do you save?
Speaker 1:with jobs and this is what's been created, right, of course, is the next wave of homebuyer that you're talking about coming through because there's a need. They can't come through because the money they were saving that was going into a deposit is going into the weekly rent.
Speaker 2:Yeah.
Speaker 1:So there's systemic issues there, and this is what I said about the Labor government's victory in May. On the path they're on, they are going to crunch the people that put their faith in them.
Speaker 3:Yeah, not just the young ones. I feel like every government does this. Yeah, them, yeah, not just the young ones. I feel like every government does this. Yeah, well, yeah, they ultimately make decisions that crush their own voter base, right, that's right. They take them for granted. Yeah, of course, yeah.
Speaker 1:And then you know another topic which we weren't going to talk about today, but the government have come out and said that we're upping the amount of international students coming into the country by 25,000 a year. That's nationwide, not Sydney. A lot of them will end up in Sydney. What do you think that'll do to rents?
Speaker 3:To be fair, not to defend the government here, but they did cut international numbers in. Anyway, that's neither here nor there. I mean, it is one of those things. Right, the government is using any lever they can to artificially boost productivity and make the GDP look good, correct? I saw Chris Binns recently. I don't follow too closely, but personally socials. You know, the first of like seven 3d printed houses were ready. It only took, however long he's been premier for that, I just anyway. We're not going to spend time on that. It's madness, the we are so far behind in so many sectors that everything we talk about now I have no doubt that our contemporaries in 25 years will be doing a podcast about the same issues. Peter should, should they be so lucky. That's it. As we wrap up today, then, as is customary, I would love you to run our listeners through SQM researchers, market numbers. What's the market wrap looking like in terms of data as opposed to just subjective observations on the ground?
Speaker 1:Look it's creeping up Auction clearance rate for the week, 55.4% up from 53.5% last week, so 2% jump and I think up from 50% the week before maybe so pretty solid rise yeah it's climbing Interesting. I wasn't expecting this on lower volume.
Speaker 3:Yeah, so I think last week was 800. And the week before that was about 730 odd.
Speaker 1:No 755.
Speaker 3:Yeah, okay, so it averages out about $7.75 somewhere, not too bad yeah.
Speaker 1:So look pretty decent week Low stock levels. Vendors who are serious about selling can sell, because there's people there that want to buy their property. I guess the only other one, which is kind of interesting, of the sales that occurred $178 were prior to auction, 240 under the hammer yeah right, so they've been pretty even like in recent memory, they've been pretty much neck and neck what's sold prior and hasn't uh, whereas we're starting to see a few more creep.
Speaker 3:I mean, how many though uh withdrawn this week, because I think last week was about 20 or 30 odd. It wasn't substantial, but it's again been relatively consistent.
Speaker 1:Well, the new word for withdrawn is rescheduled.
Speaker 3:Sorry, yeah, I shouldn't be so negative. Sorry, how many were, you know, relaunched?
Speaker 1:So 104 were rescheduled and only six were withdrawn and 24 sold.
Speaker 3:after the auction Okay, so I mean, mean really that's. It still shows that the wrong properties going to auction are being rescheduled, as you like to call it, or as the market likes to call it. But interesting to see the auction number creeping ahead of the sold prior, which to me reinforces what you say there's a little bit more buyer activity and confidence there to bid on the properties that are worth it.
Speaker 1:Yeah, indeed, that's a pretty decent outcome actually.
Speaker 3:Yeah, really good Great topics today, peter. I love when we talk about things that are a little bit juicy. To be honest, I do like putting the heat on people doing the wrong things out there. So, as always, thank you for coming in and thanks for talking with our listeners. 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 brought to you by Harris Partners Real Estate, the podcast providing real estate insights you won't find anywhere else.
