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Peter Rogozik Property Consulting

The Absurdity of Vendor Advocacy

The idea that one real estate agent would oversee another real estate agent in the sale of a property seems absurd. Yet it happens: it’s called vendor advocacy. Vendor advocacy is a service whereby a real estate agent who calls himself a vendor’s advocate will appoint another real estate agent to sell a property. The vendor’s advocate will then oversee the real estate agent ensuring he performs his duties properly. This relatively new phenomenon preys on uninformed vendors.

The vendor’s advocate has essentially convinced the vendor that he is the good guy and the real estate agent is the bad guy. This is a dangerous situation for the vendor as unquestioned trust – which is essentially what the vendor’s advocate is expecting – in any substantial financial transaction often results in a less than satisfactory outcome.

The service of vendor advocacy is mostly provided by buyer’s advocates as a means of increasing their revenue base. This is clearly unacceptable and potentially unethical as it could easily lead to a conflict of interest where one person found themselves advising both parties to a transaction.

The service of vendor advocacy is riddled with anomalies. For instance, if a vendor’s advocate purports to be so highly competent that they are qualified to manage another real estate agent, why aren’t they performing the role of the real estate agent directly? The answer is that a vendor’s advocate does little of the work yet claims a substantial proportion of the commission: it’s easy money.

Vendor’s advocates don’t carry out open for inspections, don’t liaise with buyers, and have minimal influence on the marketing campaign. Their main role is to review offers before they are presented to the vendor. Occasionally they will affect the outcome of the negotiation, but in the greater majority of situations a vendor’s advocate will have no positive impact on the property’s sale price at all. Many real estate agents who are overseen by a vendor’s advocate certainly believe this to be the reality.

When a vendor’s advocate is used, sales commission is shared between the advocate and the real estate agent. In other words the real estate agent’s normal fee is substantially reduced, though they are still doing the same amount of work. This is all bad news for the vendor. First, the overall level of service they are provided with is likely to suffer. It’s quite simple: when you are being underpaid for a professional service it is likely that the quality of your service will suffer. Nobody likes working for substantially less than they are worth, and real estate agents are no different.

Second, in those situations where the real estate agent receives their normal commission, the vendor ends up paying a substantially higher total commission in order to reimburse the vendor’s advocate as well. Either way, real estate agents loath these arrangements, though most reluctantly agree as it is difficult for a real estate agent in these tough times to decline a listing when a vendor’s advocate calls. In their eyes, a small fee is better than no fee.

As vendor’s advocacy grows, we hear of more and more situations in which vendor’s advocates deceive their client (the vendor) into thinking they have achieved a higher sales price through the skills and efforts of the advocate. This is done in two ways.

In one scenario, the vendor is asked by the vendor’s advocate to get a sworn valuation from a registered valuer prior to the commencement of the marketing campaign. As valuations by registered valuers are generally conservative, in the greater majority of situations properties will sell above these valuations in any case. However, many vendors are not aware of this fact and are therefore conned into believing that their ‘exceptional’ sale price is all down to the performance of their advocate.

In the second situation, an offer is communicated to the vendor by the real estate agent at a level substantially below what the actual offer is. The vendor’s advocate then advises the vendor that he will directly negotiate with the purchaser in an attempt to increase that offer. This negotiation never occurs, but the vendor’s advocate is able to subsequently communicate a higher offer to the vendor regardless.

This gives the vendor the false impression that the vendor’s advocate was able to extract a much higher price for the property than would otherwise have been obtained. I am not suggesting that these two deceptive methods are used by all vendors’ advocates, but it does happen.

The concept of vendor advocacy suggests that the real estate agents they oversee are either not trustworthy enough or lack the skill set to market and sell real estate. This is an insult to real estate agents as their area of expertise is marketing and selling property. How could any self respecting real estate agent agree to such an arrangement?

Being a buyer’s advocate I would be the first to admit that there are not many real estate agents on my Christmas card list, yet in my view there are many competent real estate agents operating in Melbourne. Further, while vendor’s advocates argue that they will choose the best real estate agent in the area to market a client’s property, the reality is that not all real estate agents will participate in such an arrangement. It is more likely that the vendor’s advocate will merely choose the real estate agent they have a close rapport with.

I believe a vendor should avoid the service of vendor advocacy. If you are selling your home choose a real estate agent who has an exceptional reputation and a proven track record over a long period of time. A referral from someone that has actually used the real estate agent’s service is an important first step.

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