Property purchasers – how to minimize risks with Estate Agents
The property industry did not escape from poor service delivery and corruption that plaque South Africa over the past two decades. Apart from acceptance of public that poor service deliveries are part of our existence, smaller cases, passes smoothly under the radar.
The property industry changed drastically over the past few years. The same knowledge and methods of a couple of years ago, are outdated today. These changes happened on a continued basis stretched out over time – it was not immediate but at an increased pace due to the accessibility and advancements in technology. Various components that play a role will be unpacked in this article.
Real estate market and its agents are considered a controversial topic. People have different opinions, but overall, the public is rather opinionated regarding this profession. Unsatisfied buyers and sellers raise their concerns, but it is important to note that not all is at fault of the agent. An example of this is when the property seller advised the estate agent that the building has approved building plans and that they should find these documents. The buyer is informed accordingly. The date agreed on, is not met and the purchaser is getting irritated and told the estate agent that he is not getting the service he was expecting from the estate agent. The seller eventually gets the building plans, but these plans are not approved building plans. If the estate agent insists on approved building plans, the seller is usually also unhappy. This is just one example where the estate agent was unfairly coined as the responsible party where it was not their wrongdoing that resulted in missing documents.
Should an agent deliberately share incorrect information with the intension to “save” or establish a deal, this can be regarded as the incorrect influence of the responsible party. It is regarded as unacceptable when the purchaser suffers financial losses due to the lack of knowledge or complete disregard by a property professional. This incorrect information sharing is not always deliberate and could be argued as unintentional. This information for example includes approved building plans and approved sectional title plans. Other documents include patent and latent defects. The Offer to purchase may be a one-sided contract that protects the estate agent and the seller but not the purchaser. The reason for protecting the seller, is because the seller is paying the commission and this is the main reason, why such a system is toxic to the purchaser.
There are four type of estate agents:
1. The professional estate agent:
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- These agents kept up with the changing environment and can understand the expectations of both the seller and the purchaser.
- They have knowledge:
- on the specific property that is advertised by the individual,
- approved building plans,
- approved sectional title plans,
- zoning (if not utilised as a single residential dwelling),
- patent and latent defects,
- a solid Offer to Purchase Contract that not just protects the seller and themselves, but is also fair to the purchaser.
- These are the ones that do not chase all listings (irrelevant if it is totally overpriced), to look successful, but knows how to assist in price counselling (or request a professional valuation, as an option, if needed). They also know to walk away from certain properties and refuse to get involved when they knew the price is unreasonably high and the owner is unwilling to lower to a realistic market value, or at least make a formal arrangement that the price should be amended within 2 to 3 weeks, if there are no enquiries.
- They do not only hand over the Lightstone report to the seller and buyer to determine an average value for the area by such a report, neither do they manipulate such a report by taking certain sales out of the report.
- In short, they have the required knowledge and manage their energy to those properties that they know are correctly priced.
- Whether the preference is to work alone, or with partner the package deal is well organised, honest and are good communicators.
- These agents have the ability to adapt with change and learn through every single transaction, something new, to add to a professional service.
It is unfortunate that these sought-after individuals mark a minority in the overall industry
2. The second group of estate agents with standard skills.
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- These agents have the basic knowledge but lack detail and in-depth knowledge in crucial areas required to perform optimally.
- These agents hold that they have been in the industry for many years and are under the assumption that they cannot learn anything new about the property environment. These individuals may even be successful previously.
The opposite side to this coin is the new entries into the profession. There is also unexperienced estate agent, that is motivated to become a professional estate agent. It is therefore worth to mention that a percentage of this side will only be in this category for a while, until knowledge, hard consistent work and experience pushes those individuals to the top level. Purchasers should identify if an estate agent representing the transaction, has the in-depth knowledge with correct answers to your questions. If not, please double check with an independent professional. It is always recommended to do one’s own research to all information received for peace of mind. In a scenario where an estate agent does not have an answer immediately but is committed and gets back to you as promised with satisfied and true answers, it is acceptable. Those estate agents who do not come back to you as a purchaser with answers on your questions, are the ones that will stay in this group, and estate agents to be avoided, if possible. At least now you will have an option to build a work relation with this person, or break ties, especially with higher end price properties, it is recommended to only work with professional estate agents with knowledge on all aspects, to assist you.
- These agents have below average to poor knowledge in terms of important information that a potential purchaser requires.
- These individuals provide merely a Lightstone report and focus on average prices in the area, without knowledge or research on any detail of the so called “comparable properties” in the report.
- They have little or very limited skills to read a building plan, to verify if all the improvements are legal. They rather concentrate on the fake information to provide a building plan, without knowledge, if the plan is really an approved plan. This group master the technique not to take responsibility, with the lame excuse that a building plan was provided or even worse, to sidestep this important issue to echo the seller’s view that the building plans were damaged in the fire at Tshwane Municipality (if staying in Pretoria). Less than a thousand plans were destroyed, not all the properties in Pretoria. You can take this as an immediate red light in terms of the building plans.
- The Offer to Purchase Contract is specifically drawn up to protect the agent and the seller. Some of these contracts are poorly drafted and do not protect the purchaser at all for negligence, or lies from the seller and/or estate agent. This is a comfort zone to use as an excuse to avoid responsibilities and obviously possible future claims.
3. The third group of estate agents entering the market with virtually no or insufficient training, prior advising potential purchasers:
Various opinions can be mentioned here but usually these estate agents are under severe financial pressure and needs to earn as soon as possible an income. The individual situations may be sad, but unfortunately this group of estate agents harms the Industry tremendously if there is not a solid platform for crucial information established.
The owner of a property group is just as guilty when a recruit is falsely influenced that a mentor will assist, but in reality, the mentor is so busy selling their own properties, and not always available on a personal level. Another scenario is that many recruits are under one mentor, and personal assistance is not always possible. The best possible chance for an estate agent is to “shadow” an experience estate agent for a couple of months to learn in practice, with a training program focused on specific components. Too much training is based on motivation in the property industry, and crucial components are not always part of the training.
4. The fourth group are those estate agents that only focus to finalise a deal, and lost reality with service delivery, based on integrity.
This may easily occur with many reasons driven this behaviour. Financial pressure or even the drive to have the most sales in a group, all contribute to this category. This may even be a highly successful individual. In essence, the vulnerability of purchasers, irrelevant if it is a first-time buyer or not, will be targeted. In short, the needs of the purchaser are not a priority.
The days are long gone when an estate agent will just list a property, advertised and respond on calls to take you as a potential purchaser to the property, without adding to additional value. Value for a purchaser is measured in the correct answers provided to a potential purchaser on all relevant questions regarding the advertised property, as well as the suburb, market trends, prices of the past and the current market, what changes happened over the past year for example, and or any relevant property related news that influence their security on this property. This information should be based on facts, scientifically proven and not own opinions or hear say news. If the estate agent does not contribute to this, what is the purpose then of an estate agent? The owner could advertise and no estate agent is necessary.
A great estate agent will be an asset for you as a purchaser but merely relying on luck is not the best course of action. Instead consider joining an independent property purchaser group.
This group is especially designed for potential property purchasers to avoid the pitfalls within the process. Real live examples will be discussed, with the consequences and how to avoid similar incidents in your journey when purchasing a property. Video as well as written content, and live sessions to answer your property related questions. To enrol, visit www.cnvaluers.co.za and click on Academy.