Source: The Australian

SELLING your house can be daunting. There are dozens of possible agents to choose from. Who do you trust? And should you go to auction? Will you waste your money on expensive marketing campaigns?

Faced with this task, more sellers are hiring vendor advocates, advisers who hold their hand through the entire sale process, from choosing an agent to picking the best photos of the house. Vendor advocates mean real estate agents “are kept accountable by a third party”, says Scott McGeever, managing partner of Brisbane buyers’ agent Property Searchers which is also a vendor advocate.

Most vendor advocates take a cut of the agent’s commission, which raises the question of how impartial they are. Taking a cut means they’re also a threat to agents’ commission structure. “If that (vendor advocates) became standard practice that would not be good for the agents’ industry,” says Ray White chairman Brian White.Real estate agents have had Australia’s property market to themselves.

They got the listing, and then handled all the marketing and negotiations between the vendor and buyer. But in recent years we have been shifting slowly to a US model, particularly with the growing popularity of buyers’ agents, advisers who represent the interest of the purchaser.
Another middle man is emerging: advisers, often former real estate agents but also buyers’ agents themselves, who represent people selling their homes. It has become particularly popular in Melbourne.

McGeever says vendor advocates appeal to interstate or overseas owners who can’t be physically present during the sales process. “They need someone on the ground who they can rely on,” he says. “It’s also of interest to someone who doesn’t know the market or which agent to choose.”
A vendor advocate is usually involved in all aspects of the sale. They will visit the property, give the seller an appraisal, including where the property sits in the market and a price range. They may also comment on positive and negative aspects of the property and where it might fall down in the eyes of buyers, and then give the seller advice on what to fix up.

Antony Bucello is the Victorian manager for National Property Buyers. His company is also primarily a buyers’ agent but performs vendor advocacy. He says the vendor advocate’s independent assessment of the property gives the seller something concrete to compare with what real estate agents will tell them. If the seller decides to go ahead with the vendor advocate, the advocate then gets real estate agents to assess the property and provide a market appraisal and marketing plan.

Buyer Solutions’ Janet Spencer, who was a real estate agent for 26 years before becoming a buyers’ agent and vendor advocate, says she thinks about the personal style of the vendor and who would be a good agent for them; she then goes to the market place and invites a few agents in. “It’s like a tender,” Spencer says. “They know they’re not a shoo-in. They know they have to work for it.”

Ann Doyle used Spencer as a vendor advocate for her 94-year-old mother’s two-bedroom unit in Surrey Hills, Melbourne. Her cousin, a friend of Spencer, recommended Spencer as an advocate. Doyle lives in Sydney and says using a buyers’ agent makes sense if you’re selling a property in another state. “It was really good,” she says. “Janet was there at the auction for me so I didn’t have to keep on flying down. It takes a lot of stress out of it, especially when you’re interstate. It was also good having a personal recommendation and we were happy with the price.”

Spencer recommended three agents and discussed them with Doyle; Doyle then met the one “on the top of the list”. Doyle says the agent was fine. Still, “they’re real estate agents; they’re not your friend.” She was also happy with Spencer sharing the agent’s commission.

Choosing an agent is one of the most challenging decisions for a seller. “There’s a multitude of agents out there to choose from,” McGeever says. “There are better agents for certain properties; they have better selling skills and are able to talk to buyers and know when the property is pushing the emotional buttons of the buyer and how to do that.”

Bucello says vendor advocates alleviate the stress of the selling process. “A lot of them don’t like dealing with selling agents; they aren’t sure which ones are ethical and which ones aren’t.”

The vendor advocate also advises on the best form of marketing, including whether to go to auction. McGeever himself attends photos shoots and helps choose the best photos for marketing. Spencer says she recently saved $16,000 on a marketing budget but still got the result the seller wanted.

After open home inspections, the agent reports back to the vendor and provides a sales report including information on the genuinely interested buyers. If the property is being auctioned, the vendor advocate also attends. “Vendors really love that because they don’t feel pressured just by the agent,” McGeever says.

There are three ways buyers’ agents are compensated. The first is a straight fee. Another method is for the vendor advocate to charge the seller a fee, then negotiate with the real estate agent for the seller to pay a smaller commission to that agent. But the most popular way of paying a vendor advocate is for them to receive a cut, typically between 30 and 40 per cent, of the real estate’s commission.

If an agent sold a $600,000 property and charged a 2 per cent commission, or $12,000, then the vendor advocate would receive between $3600 to $4800. In technical terms, they become conjunction agents. That’s good for the seller because they’re paying no extra fees or commission for the vendor advocate’s service.

But the structure raises issues: if the vendor advocate splits the commission with the agent they’re meant to be overseeing, how impartial are they? And why would an agent give up a huge chunk of their commission and still have the incentive to market the house to the full?
Malcolm Gunning, president of the Real Estate Institute of NSW, says that vendor advocates are not a big issue for his organisation, but he says that commission structure is “questionable”. He says that real estate agent fees can’t be split unless the vendor advocate is a licensed real estate agent or buyers’ advocate.

Ray White’s Brian White says the commission splitting structure has dangers for the seller: why wouldn’t the vendor advocate recommend the real estate agent who gives them the biggest cut of their commission, rather than the best agent? “That’s a huge potential risk to the owner,” he says.

He says there are also question marks over the role of a third party during negotiations with buyers. “You wonder what advice that third party would give at the negotiating stage,” he says.
McGeever acknowledges there is a risk in the commission structure. “Any system can be corrupted,” he says. “It’s a matter of trust.” But McGeever says all his vendor advocacy work comes from referrals or from existing relationships with clients, and he says that if sellers are considering a vendor advocate they need to speak with past clients.

White says that vendor advocates are not something he has come across much, but he concedes it is a challenge to real estate agents because if it became popular, you’re effectively going to have agents on less income. “The tendency will be for that agent to speed up the sale which may not be in the vendor’s best interest,” he says.

But vendor advocates are adopting techniques to keep agents on their toes. Bucello says one is “planting a seed’’: sending someone the vendor advocate knows through the property and asking that person to report back to the advocate on how well the agent followed them up.
Another is incentivising agents. An agent might get a 2 pet cent commission if they sell a property for anything up to $500,000. But they get a 10 per cent cut of anything over $500,000. “It’s a really good incentive for the agent to work hard,” Bucello says.

A vendor advocate who advised agents based on the biggest commission “wouldn’t last too long”, Bucello says. “You’re engaged by the client and trusted by the client,” he says. Still, “the vendor needs to be placing some sort of trust in the vendor advocate”.

Spencer says there is “no way” she would favour an agent. “It’s case by case with me.” But she says trust is key: “The main reason they’re coming to me is trust. If you’re just going to the Yellow Pages to find a vendor advocate, you better do your research.”

White says that commission rates in Australia are low compared with the US and New Zealand. “There would be resistance from the agency industry to having that ­reduced fee compromised further,” he says.

But vendor advocates say they have earned their commission: the agent wouldn’t have the listing if it wasn’t for them. Spencer says the commission split is no different from a real estate agency dividing up a commission within the company.

Bucello says that some agents do refuse the commission structure. “They tend to be the experienced ones who have been around for a long time.” But he says the “younger brigade’’ have no problem handing over their commission to vendor advocates. Bucello says it’s a case of “have that or have nothing. It’s better to have a slice of the pie than no slice of the pie at all,” he says.
And White does say that choosing an agent can be challenging. And that’s what vendor advocates are exploiting. “People just value the advice, and someone to lean on and a hand to hold who isn’t the real estate agent,” McGeever says.

McGeever says that at the end of the day seller has the final say on the agent. “The majority of the time the vendor will say ‘it doesn’t really worry me, pick the best one,” McGeever says. “But ultimately it comes down to them. They have to be 100 per cent OK with the person they end up with.”