The big spruik returns

Back in August this year I highlighted one of my pet peeves, which is the utter contempt the media and real estate industry seem to have for basic ethics by using real estate industry participants in news stories as first home buyers without declaring their interest.

Macrobusiness has since been represented in both The Monthly and Choice Magazine highlighting this issue.

I had hoped that some degree of pressure from the blogoshere would have put this issue to bed, yet today they are at it again  (h/t AlexF) .

Here is the picture from the Domain story, which is quite simply an all out spruik about first home buyer demand caused by adjustments in state duty in NSW:

The sub-title on the picture is:

Home free … Dan Brubaker and Kim Ahern moved to buy their first house, in Engadine, as soon as they heard the exemption would end.

And here is what Kim Ahern has to say in the article:

One of these couples is Kim Ahern, 23, and Dan Brubaker, 25, who had been looking for three years for their first house before the state government announcement.

”As soon as we heard the exemption was going to be taken away from us, we pulled out our finger and did something about it,” Ahern says. ”We couldn’t afford to pay for the house as well as all the fees and the stamp duty.”

They bought a three-bedroom house in Engadine for $547,500 from Bowen and her business partner, and are due to move in soon.

Ahern says the house, unlike most others in their price range, was immaculate and needed no work. ”All we need to do is move straight in,” she says.

There is just one small problem. Kim Ahern appears to be a strata manager for LJ Hooker in Cronulla ( 8km from Engadine):

Now, I have no issue with real estate agents buying houses, they are people too. But I take issue with the fact that the media feels that it does not need to declare Ms Ahern profession, which in my opinion is extremely relevant given that her words could easily be interpreted as an enticement to purchase a house.

Comments

  1. DE, wonderful point. Thanks for keeping MB going to the right direction. The official media has lost direction and is Murdock’s like.

  2. Notice no comments allowed in the article – this can always be an early warning sign to assist readers:
    – no comments = spruik = don’t bother reading

  3. Interesting. We received a property newslette, full of fabulous “advice” for the would be seller (including not accting an early offer, but holding out for the number you want, but being mindful of the tough market). On the back they were advertising a position as a salesperson (wow the starting salary is high), but one of the requirements of the job was that one owned a property. I can think of no other industry (apart from the pyramid and social marketing ones) that requires one to commit financially to the industry before one can take a job. After all, you don’t have to own BHPshares to get a job on a mine, or think that there should be no limits on alcohol to work in a pub.
    As a prospective client, I am not sure knowng how much the salesperson earns is going to encourage me to use that agency either.

  4. Great pick up DE. It all went suspiciously quiet there for a while with this sort of practice. As I’ve been banging on for quite some time, the lack of regulation with this industry is mind blowing.

    The RE industry has the country over a barrel. Where interest rates are concerned, unless there’s a dire circumstance, we ought to be keeping them stable at around current levels. As you can see, any glimmer from a cut supplies these theives with oxygen.

  5. Wait wait wait…. she is a strata manager. Their job is to make sure a building is properly kept in a satisfactory condition and that owner’s and tenants adhere to the bylaws. I don’t see why you have a beef with the SMH leaving her profession out?

    Im probably generalising now but If I ask the junior – intermediate property managers in my office (same job as strata)what negative gearing is, they know crap all. They come, do their work and go home.

    I just fail to see why being a strata manager makes their situation different to any other first home buyer who for example maybe works in a marketing company or non real estate related profession.

    • So what, she’s a VESTED INTEREST. Who put her up to it?

      The readership has every right to know that a person esposuing the value of getting in and buying before a financial inducement ends, is employed by an organisation/industry that stands to gain financially from your doing so.

      By the way if you ask the bulk of all blinkered property investors who have purchased your average property now yielding 1-4% on the basis of such articles, they also clearly know crap all about negative gearing.

      • “So what, she’s a VESTED INTEREST. Who put her up to it?”

        Vested interest? How so? She works in strata management. I don’t see how that means she profits from buying and selling real estate. Strata corporations pay her a fee to make sure that strata rules are followed and properties are maintained.

        I’ve no doubt that when she bought a place of her own, she either offered, or was asked, to participate in this marketing exercise. This makes perfect sense, given the obvious connection between her company and the real estate business with the same name.

        But saying that this is misleading or deceptive, or claiming that she was coerced? Come on, people. This is just silly conspiracy stuff.

      • Sure thing.

        And all of the other like type articles over the past 2 years, coincidentally involving real estate employees is just a figment of our conspiratorial imagination.

        300,000 FHBs in the last two years, 20 or so buy now articles just happen to be profiling undeclared RE employees! These guys should be buying lotto tickets. As luck would have it they always seem to be in the right place at the right time! Either that or real estate agents and first home buyers are mutually dependent.

      • I would imagine they just use them (profile them) because they are easier to find.

        I note that no one above has yet stated the obvious. WTF would you buy now if you had inside knowledge?!?! The amount of houses in Engadine for sale is ridiculous the last month or so, all FHB trying to cash out some gains is my view.

        Also, the comment she made about “not being able to afford to buy it” if fees and taxes are included. WOW! Winner!!!

      • You’ve answered your own question. Now you know her job description and that she works for a company in the real estate industry for you can make up your own mind whether her comments are biased or not. The journalist has failed in his duty to provide that information. Unfortunately this is a trend as noted in the Choice article linked above.

      • Phil the engineer

        Is PhilH one of these APF sign in trolls? I posted under Phil_H a few times before I signed up properly to MB. Just want to be clear that whoever this PhilH is it is not me.

        Phil the engineer (formerly Phil_H)

      • Yep. Everyone who disagrees with the orthodoxy is a troll. Even if they have been posting as “Phil H” all over the net for years.

        Run this through Google:

        “phil h” site:www.smh.com.au

        Compare the subject matter and writing style. Draw your own conclusions.

      • Phil the engineer

        To Mr H below, fair enough. Just checking after the article that was on here a couple of weeks ago about user names being aped. I’ll go back to enjoying the commentary on MB. Cheers. PTE.

    • Right. So if people stop buying properties sold by that LJ Hooker office that won’t affect her job viability?

      Think about it another way: how did the journalist get her name? Check the link to Choice is the article above for another example where this lack of disclosure happened. Their employer is in the industry, and it should be up to the readers to decide if that’s relevant.

      • I understand your points but I think you guys are making this a bigger deal than what it is. Ill provide you with some anecdotal evidence. Ill disclose that I work for a real estate agency and I am currently studying a land economics degree so you could say I have a vested interest, ill leave that up to you but I feel I have a level headed understanding and am not so biased.

        1) A lot of people say that agents don’t disclose failed auction results so that the clearance rate doesn’t look bad. In all honestly, we don’t give a sh&!. If someone contacts us about the result we gladly tell them what happened. We pass the information onto Rp Data if they call but we never go out of our way to withhold information about a “public” event. (could be the newspapers who make a motsa from property advertisement who are fudging the numbers to keep a constant flow of adds going through)

        2)With the above event, unless the property was sold by an LJ Hooker agent then I don’t see any foul play. LJ Hooker do have a vested interest but if the article was going to happen the paper would have found another young couple who dived into the market. Remember buying a property for the long term to live in and NOT invest is a good decision. As long as you don’t over leverage and you want the lifestyle or security of owning your own home then its your choice. (my opinion).

        Yes agents can be shody and everyone has heard of a shifty real estate agent but in the case I think you guys have created something from nothing.

      • Right. So if people stop buying properties sold by that LJ Hooker office that won’t affect her job viability?

        Actually… no, it wouldn’t – a strata manager would keep her job so long as the strata property remained with the particular management company. I’m guessing they picked her as a pretty face with a story that matched their requirements and she wasn’t directly involved in buying and selling, a clearer conflict of interest.

      • I dont think there’s anything conspiratorial about it – the RE agency probably thought “hey – we need some PR – who hasn’t done a piece with the MSM yet – ok, you’ll do”. Its marketing, cheap, lazy marketing, but marketing nonetheless.

      • +1

        errks me but yes that is trash marketing.

        Lame, easy, and morally repugnant as well … poor strategy and lame advertising.

        Pretty much sums up RE in Australia.

        I am yet to see anything in the marketing literature about quality RE marketing apart form their own nonsense awards.

        TM.

      • “how did the journalist get her name?”

        There was no journalist; it was written by a PR hack who works for L J Hooker. They picked the easiest person to find. It could equally have been somebody’s cousin, or their car mechanic. In this case it just happened to be someone in the office next door.

        RE agents (and in this case, junior staff) show up in RE spruik stories because it’s cheap and easy. (Happens in the MSM, as well. You just don’t notice it.)

      • I don’t. Who cares where she works?

        Does the article contain lies? No.
        Was any crime committed? No.

        Obviously the Sydney housing market is picking up as rates fall and the SD concession end date looms.

        It’s only natural that people would want to buy now before prices get away from them again.

        I don’t see how Kim did anything wrong here.

        MB should have asked permission though, before publishing her photograph (perhaps you did, I’m just guessing that you maybe didn’t?)

      • PhilH, in my opinion you are wrong. If this were an isolated incident then I would agree with you but this is just the latest in a long line of examples of not disclosing the conflict of interest in these columns that are clearly spruiking.

        This is however far from the worst example.

        The more this kind of thing is brought to light the better. I read this article this morning and my first thought after seeing the happy couple was “I bet she works in real estate”.

        Sad to say the RE/MSM did not let me down.

      • “If this were an isolated incident then I would agree with you but this is just the latest in a long line of examples of not disclosing the conflict of interest in these columns that are clearly spruiking.”

        In this particular instance, there’s nothing to disclose. The fact that there have been disclosure issues in the past doesn’t alter that.

      • Does the article contain lies? No.
        Was any crime committed? No.

        Obviously the Sydney housing market is picking up as rates fall and the SD concession end date looms.

        It’s only natural that people would want to buy now before prices get away from them again.

        Not so much lies in the article but the blatant spruik without more balanced discussion of current market situation is the issue.

        The article may be perceived by less-informed readers as if the “stamp-duty” saving is good enough incentive to decide on buying property NOW without considering possible financial ruin in the future from over-valued prices and over-committed mortgage debts or even better savings from lower, more reasonable price in the future if current price down-trend continues.

      • if people only buy cos of this ‘saving’ and couldnt otherwise, they probably arent smart enough to avoid financial ruin in some other form anyways..

      • Exactly NP.
        Kim is smart.
        She’s bought just in time to see RE prices jump for Xmas.
        If only investors were so smart.

        Signed
        Mortgage broker in need of more sales 🙂

      • Are you being sarcastic or are you really just a sheeple?

        nationally RE has been falling nationwide for what 9 months consecutively … and you think it is heading up?

        Are you an RE spin bot?

        TM.

      • @ The_Mainlander: Are you seriously asking Jon if he is serious? I know this is a serious discussion about serious issues but Jon’s comments made me chuckle, seriously.

        Nevertheless, now everyone can benefit from the rate cut, regardless if you are a seller or buyer and finally we can afford our dream home at the beach.

        Just imagine – the rate cut will save you $46 a month on a “typical” 25-year $300,000 loan! Now is the time to withdraw your $1.9mil from the bank to buy $2.2mil house. Savings, savings, savings, $46/month. The whole story just 2hrs after the cut decision here: http://manly-daily.whereilive.com.au/news/story/rate-cut-boon-for-market-1/

        At least they declared the young lady is a RE Agent.

    • Honestly – what what you expect from the sydney morning spruik.
      I think we all know how compromised the general MSM is these days.
      Isn’t that why we come here to MB?

  6. Is there any false information in the article? Did anyone tell lies?

    Also, do you have permission to republish the young lady’s photograph?

  7. Roger Douglas has a term that is very appropriate to what is being done to the younger generation by the urban land racket – I mean, half a million dollars for a first home???? What size mortgage, for how long?

    Douglas’s term is “fiscal child abuse”.

  8. At $547k, they’re still paying well over $13,000 in fees, even after the concession, so the story has an even more bogus feel to it.

  9. Perhaps there isn’t a conflict in the fact that she works for a real estate agent, the whole acrticle just stinks.. Look at the happy first home buyers who’ve purchased their ‘home free’ for a lowly $547,000. Even with a 20% deposit that’s a $437,600 mortgage (and I have to add that $109K is a big first deposit). It smells of irony when they state they couldn’t afford the stamp duty as well as the house. I remember the first 2 years in my first home when I bought right on budget, it was hell, we had to be careful with every dollar. At least the market was going up then, it’s not so rosey now!
    My favourite bit however is the part where an agent was ‘surprised’ that a $600k property had not been snapped up by a first home buyer just makes me laugh.

  10. Pointe Gourde Principle

    What a bunch of self-serving comments made by some RE Agents in here.
    .
    In case it wasn’t obvious – the issue is that her profession and association with a Real Estate Agency should have been DISCLOSED in the article.
    .
    Give the reader the information and let them sort the fact from the marketing.
    .
    The secondary issue is that buying a house is the biggest investment a person is likely to make, yet the Real Estate Industry & Media are not subject to anything like the same level of regulation (in supporting their “claims”) compared to, say, those in Financial Services.

  11. It’s easier to get the paper to run a story like this than it is to actually sell houses to prospective buyers.

    RE agents, IMO and experience agents are too lazy to do the work sellers pay them to do. If they watched Escape to the Country they might even get an idea of how to show buyers through a house, pointing out features, dealing with questions in a knowledgeable manner.

    They don’t even ask us what we are looking for – just send us through for a look. Any query is met with a don’t know. I really don’t know why there aren’t more private sellers.

    I haven’t yet had a RE agent follow us up with a call about the property and our level of interest in it. It comes down to all they are prepared to do for a buyer is open the door and if you make an offer, they convey it to the seller. If the offer is refused we usually find out by calling the agent. I think they usually use our offer to lever up some other poor mug.

  12. If all of the facts are correct in the story as in price of the house, did they really buy a house, etc then the story is not that bad but I find it hard to believe that some one in the RE industry who should know the state of the current market would be silly enough to pay that much for a house in a dying market but then again I do not know their financial position they may have just had a big win on the pokies

  13. If I own BHP shares and write an article about BHP shares I have to disclose.

    If I am an investment adviser and write an article about investing I need to make the relevant diclosures as to my interest and profession.

    Given that RE is the biggest financial decision that most people will make in their lives, why shouldnt RE agents and articles written by/for the industry be subject to the same disclosure rules?

    • Yes, but legally they don’t.

      I think this is the biggest issue with RE in Australia any Joe Blogs an get RE ‘quals’ and sell – no training of any financial type required.

      TM.

      • Consider this, too: Members of Parliament, especially Cabinet Ministers, get hounded to oblivion if they are discovered to own a few shares. But they can own as many investment properties as they like, and obstruct legal reform that would restore affordability to the housing market – and the media gives them a free pass.

    • I think the difference here is that the real estate agent is not writing the article, she’s the ‘human interest’ subject.

      It’s all pretty innocent though. What probably happens is that a journo decides to write an article about something property related. He/she wants a personal story for the human interest angle but doesn’t know any first homebuyers personally. So he/she calls a local real estate agent to ask if they can recommend a FHB who’d be happy to appear in an article about something real estate related. If the agent knows there is a FHB in their office, they’ll recommend that person rather than spend a heap of time ringing a dozen of their current clients. The journo may not even know that their FHB subject is in the industry, and the FHB is probably just trying to be helpful to the journo (or really wants their face in the paper to impress their friends).

      I have no problem with the idea that conflicts of interest should be avoided by stating the FHB’s profession, but I don’t think it’s part of a deliberate plan among agents to paint a rosy view of the industry.

  14. The point being made is simply the lack of integrity, rigour and ethics when it comes to real estate journalism. The article in question was lazy, sloppy, possibly “copy-and-paste” journalism at best, and unethical and misleading at worst. Nothing wrong with highlighting that, especially given the degree and extent to which the public is subjected to this ‘spin’.

    A couple of pertinent items from the SMH code of ethics to consider:
    http://www.smh.com.au/ethicscode/index.html

    “Herald staff will report and interpret honestly, striving for accuracy, fairness and disclosure of all essential facts. They will not suppress or distort relevant facts. They will … separate comment from news.

    Staff will not allow advertising or other commercial considerations to undermine accuracy, fairness or independence, or to influence the nature of the Herald’s coverage.”

  15. “So what, she’s a VESTED INTEREST.”

    When James O’Conner spruiks Swisse pills he never discloses his financial interest ie the fact that he is being paid to say that he takes all those pills.
    TV and newspaper advertisements are full of people who don’t declare their financial interest. We even have doctors on the television advertisements recommending people to take drugs. They do it because of their financial interest. It’s the way of the world. People must put up with competitive selling. I recently bought a bed and was told how good the beds were. They never told me they received money if I bought one.

    • > TV and newspaper advertisements are
      > full of people who don’t declare their
      > financial interest.

      I am not suggesting that this is a crime but maybe the Victorian Crimes Act can give us some insight into how an omission is treated by the law when financial advantage or benefit is obtained as a result of that omission. According to section 81 deception includes omission. If the RE agency behind this article who are set to gain from the spruik did not declare that the woman was employed by them it’s definitely morally dubious. It is a common practice among economic commentators that they declare their financial interest e.g. owning or not owning shares in a company they write about. However, nothing like this applies to RE.

    • Sorry, I though there was a difference between the news content of the paper and the ads. So reporters are officially writing the ads now? Perhaps the publishers should disclose that fact.

    • I would argue that blowing a weeks pay on a dodgy bed or useless sugar pills, is not comparable to the potential to ruin lives like a poor financial or realestate advice.

      • not comparable as long as the bed does not cause you long term back pain nor the pills do not cause the user to experience allergy reaction

    • This argument doesn’t really hold water. In all of those cases what you’re looking at is quite obviously an advertisement.

      In this case, we have an advertisement masquerading as a news article. People aren’t willing to see that though because everyone drinks in the Australian Housing Dream kool-aid.

  16. Yeah ,yeah – forget the ethics debate – that’s a battle long lost. How about the investment itself? Would you buy?

    Originally listed on 9 February 2011 for $589,000
    3 months later – no takers – delisted.

    Relisted on 1 October 2011 for $539,000 (8% discount over 234 day = that works out to roughly a 13% per annum loss on asset value). I wonder if there is a story about the vendors coming?

    Sold to the canny couple for %547,500 on 10 October 2011.

    Maybe negotiation skills aren’t a core capability in strata management?

      • Proove it. Whose estimate? Based on what? Published where?

        Thowing numbers around without basis of fact is easy.

        $700,000
        1
        57745

        See, anyone can throw numbers at the Internet and hope some of them stick.

      • I think Hewell is being sarcastic (I much the word to trolling – a rather childish term).

        The range he is quoting is an estimate off the onthehouse.com.au site. Not to be taken too seriously.

        As for the numbers I have quoted – they are real.

  17. Obviously that’s $547,500 on 10 October 2011 – grrrr

    BTW – shiteload of properties in Engadine for sale – anybody, anybody ….anybody?

    • How much are they saving by getting in now? 23. Poor things, it will take them a lifetime to undo this one.

      • Let’s say they make a 20% deposit to be generous
        Loan amount $437,600
        Interest rate 7.50 %
        Loan period 25 years

        Repayments Monthly $3,233.83

        Interest paid $532,549.00

        Wow – that’s about $50K pre-tax annual salary gone!

      • endrortsonhousing

        Always good to see the cold hard numbers.

        I’d guess that a strata manager would probably be lucky to make 50k – so they have shackled themselves to some serious mega-mortgage debt.

  18. I think whatever side you fall on, it’s terrific that this discussion is occurring. Personally, I won’t lose any sleep over it but at the same time it’s a a merger of editorial and marketing and should be exposed for that reason.

    • Pretty sure that under the legislation with media that if an “Advertorial” is placed in a media vehicle it has to be denoted as such clearly in the copy … i could find the legislation but I am to tired … but it must be clearly identified and that is really what this is – an Advertorial.

      “An advertorial is an advertisement in the form of an editorial.”

      http://en.wikipedia.org/wiki/Advertorial

      TM.

      • The story comes from Domain.
        Domain is entirely a collection of advertisements. Do you take financial advice from iselect? Or realestate.com? Or ebay? Or Amazon? Are these sites and their sellers required to reveal their vested interest?

      • The ‘article’ is positioned as new in Domain. The article no doubt came from either the RE shop the Industry RE in the state or a PR agency.

        Maybe I should search the PR Wires as I am pretty sure it would be available.

        This is not news that if you supply the news they will readily reproduce it as they don’t check like they used to and standards of journalism don’t apply when these guys pay so much in advertising.

        It is part of the financial apparatus which controls the media for the benefit of the few to dupe the may.

        Problem is that this only works when times are good – no one questions.

        So, question is are times good and was this an article or an ad.

        I say ad.

        TM.

  19. True story, two friends. One wants to be a real estate agent, does a two day course and can practice. One wants to be an account manager in insurance industry, 6 month financial planning course and can practice. The account manager probably dealing with sums of 10-20% of the real estate agent.
    Spectacular fail from regulators.

  20. an excellent note about the state of the human being De – ta –

    but, does anyone anywhere actually believe anything a real estate agent tells them or whatever it is that Re agents do …

    dear young and innocent ones, you have a lot to learn …

  21. You have to check out a video by fairfax media on the the Age today (no direct link) entitled Calling all first home buyers.
    Mind blowing.

      • That’s it. Is it journalism? I thought it was an ad.
        There seem to be more than just the European existential crisis going on if this is journalism.

        Advertising I have no problem with when it’s open and honest. RE industry is doing its job.

        In a case of a falling market and if people are losing money, let alone their life savings, there will be a lot of questions asked about how and why so many who bought in were so misinformed in so many ways.

      • Under the current bubble conditions, rent is so much lower than mortgage payments, you are ahead tens of thousands of dollars every few years, by renting.

        Even if a crash never comes, the people who BUY at the current time will have lifetimes of grindingly limited discretionary income. I suppose if owning your home matters more than how well you feed and clothe your kids………I can see social conflicts arising over the children of renters having more toys and trinkets and club memberships and holidays than the children of “home owners”.

      • “Under the current bubble conditions, rent is so much lower than mortgage payments, you are ahead tens of thousands of dollars every few years, by renting.”

        Leith has shown that mortgage rates have always, at least since 1980 (probably much longer), been at least 50% above rents and as much as three times rent in the past. Why is it different now?

        http://macrobusiness.com.au/wp-content/uploads/2011/07/Rental-Yields-Mortgage-Rates.gif

        http://www.macrobusiness.com.au/2011/07/when-to-buy-sell-housing/

      • Be careful when reading percentages. When house prices were cheap, the actual dollar difference between renting and owning was not that high because both options were affordable. But now that prices are high, the dollar difference is much greater, even though the percentage difference is only a little higher now.

        For example (assuming 100% financing for simplicity):

        $200k home loan at 7.5% over 25 years = $340 per week. If rent was 50% of this, the $ difference is $170/week.
        $500k home loan at 7.5% over 25 years = $850 per week. If rent was 50% of this, the $ difference is $425/week.

        Renting is a better option when homes are overvalued.

    • What is that? Advertising? Editorial? Financial advice? I couldn’t tell. Anyway, sorry Fairfax. Your property market has run out of bigger fools.

  22. Tassie TomMEMBER

    Whether or not to declare a potential conflict of interest is quite simple.

    A potential conflict of interest should be declared if a reasonable outsider could perceive that there may be a potential conflict of interest.

    Even if this was the most genuine story in the world, this declaration clearly should have been made.

  23. The BurbWatcherMEMBER

    I think that the real issue is this:

    The graying/obfuscation between what, ideally, SHOULD clearly be a factual report article, and what is actually a marketing story.

    When people read an article, they generally want to know upfront the nature of what they are reading.

    This sort of “journalism” wants to conveniently sit between the two…

    My 2c