Sydney Property Perk? Industry Buzz Over ‘Magic Word’ Claims

Agent Admission Sparks Debate on Ethical Sales Tactics

Recent comments from a Sydney real estate agent have ignited discussion amongst property professionals and raised questions about transparency in property negotiations. Amir Jahan, director of A-class Estate Agents in Parramatta, has publicly stated that the practise of mentioning a non-existent “other buyer” is a widespread tactic used to drive up prices for vendors.

Speaking to news.com.au, Jahan described the phrase “other buyer” as a “magical word,” claiming that it is deployed during negotiation stages to pressure potential purchasers. He suggests that mentioning competition, even if fabricated, prompts buyers to increase their offers.

Understanding the Claim: How the Tactic Allegedly Works

According to Jahan, the process unfolds as follows:

• A serious buyer expresses interest and makes an offer.
• The agent mentions the existence of another interested party.
• The original buyer, fearing they’ll miss out, is pressured to increase their offer.
• The agent avoids disclosing the fictional competitor’s offer, encouraging the original buyer to bid against themselves.

Jahan maintains that this tactic helps vendors achieve their desired reserve price and that, in his opinion, agents who don’t use this tactic aren’t “good agents” because they aren’t prepared to “play the game”. He claims that agents are obligated to work to get the best price for the client.

Legal and Ethical Implications for Agents and Tenants

While Jahan presents his views as standard practise, the admission raises significant questions about ethical conduct and compliance with Australian Consumer Law.

Consumer Law and Misleading Conduct

The Australian Consumer Law (ACL), enforced by the Australian Competition and Consumer Commission (ACCC), mandates that businesses, including real estate agents, must act honestly and avoid misleading or deceptive conduct. Section 18 of the ACL specifically prohibits conduct that is misleading or deceptive or is likely to mislead or deceive.

Falsely claiming the existence of another buyer could potentially be construed as misleading conduct if it induces a buyer to make an offer they otherwise wouldn’t have made or to pay a higher price than they were originally willing to offer. If proven, such conduct could attract penalties under the ACL.

Tenant Rights and the Role of Fair Representation

Although the “magic word” claim primarily targets buyers, the principle of honesty extends to all dealings within the property sector. Good agents should maintain high ethical standards and be transparent with both clients that work with them.

The role of a real estate agent is to act in the best interests of their client (usually the vendor), but this does not override their obligation to act honestly and fairly with all parties involved in a transaction, including potential buyers.

Alternative Perspectives and Industry Response

Sydney buyer’s agent Sam Green, director of Advantage Buyers Agent, acknowledged that the practise of inventing imaginary buyers “certainly” happens. However, he suggested it is less common when dealing with experienced buyers agents. Green argues against fixating on what others are supposedly willing to pay, instead advising purchasers to establish their own budget based on thorough market research. He highlights “buyer fatigue” as a significant factor leading people to overpay. He claims that people tend to over-pay for properties due to being fatigue due to “missing out on a few properties…[and] become more likely to pay too much for something because they’re over it and can’t be botherd”.

The Vendor’s Perspective

While most vendors want the highest possible price for their property, they may be unaware of or uncomfortable with potentially misleading sales tactics. It is imperative that vendors have frank discussions with their agents regarding marketing and negotiation strategies, ensuring they align with ethical and legal boundaries.

Promoting Best Practices

For property professionals, adherence to ethical guidelines and legal obligations is critical to maintaining a strong reputation and avoiding potential legal repercussions. There is an opportunity for agents to show a commitment to transparency, where clear, honest communication is a key to a good relationship and trust, both from clients and buyers that they work with.

Staying Informed and Encouraging Transparency

The real estate industry is obligated to act honestly and that they maintain high ethical standards. Property professionals are encouraged to take caution in their actions, so they do not fall into the category of ‘fake competition’, or make false promises about prices to secure a sale. The debate around the use of tactics like the “magic word” highlights the importance of ongoing education and professional development to ensure compliance and best practices.

By staying informed about legal developments, ethical guidelines and promoting transparency, property professionals can foster a culture of trust and confidence within the industry.

Buyers also should remember to do their own research and set a budget.

This article is based on a report from www.news.com.au titled “‘Magical word’: Sydney real estate agent claims every agent is using this sales tactic”. You can find the original article here: https://www.news.com.au/finance/real-estate/buying/magical-word-sydney-real-estate-agent-claims-every-agent-is-using-this-sales-tactic/news-story/053302f80b63ab5560d9076e56c32bd2