HonestyHub

Which can perform better for property buyers – regulation or technology? A mix perhaps?

With our powers combined, we can bring balance to the property industry.

Buyers are not a unified bloc. They have no advocates to speak of. Usually they buy once, and that’s it. Maybe again decades later. In Ireland in recent times, we have had two forces fighting against each other – government policy and Central Bank policy, but neither were really a force for buyers at the coalface of trying to get a property to call home.

The government wanted people to buy property as well as to see values rise (they may not admit this), so the property market and industry might start to function again. The Central Bank of course wanted to protect banks and so introduced lending restrictions, which some would argue caused higher value areas to cool off for a period, some time back. (I won’t get into the state of the market for now and whether or not measures on either side worked in short term or may have contributed to a slower pace of recovery in the construction industry generally.)

But why no love for property buyers or help for them in some fashion? Sure, the government is making efforts to see more properties being constructed, but it is slow progress. The Central Bank is not mandated to care about the needs of property buyers as such. Well, who does care then? The PSRA – that’s who. The Property Services Regulatory Authority, conceived of in part at least as a response to some RTE undercover investigations towards the end of the Celtic Tiger era. They are mandated to regulate auctioneers or “Property Service Providers” as they are formally known, to ensure that, among other things, bid data is recorded. That is, whenever a bid comes in on a property, the sales agent must record the amount, who made the bid, etc, and keep this information on file.

The thinking behind this is simple. If there is an audit trail, what happened can be pieced together if needs be and all parties contacted, etc. There is even a new bill moving through the Oireachtas which would allow for buyers to make a complaint to the regulator, who would then source this bid data from the agent with a maximum time of ten days mandated in the current version of the bill within which the regulator must return to the complainant with the bid data, stripped of any identifying information.

The intent here is noble. Buyers are under pressure, and a time limit might possibly mean that they would have confirmation of the bids from the regulator before the property goes to “sale agreed”, but I do not see any mechanism whereby making a complaint could stop a vendor deciding to agree a sale, or instruct their sales agent to do so. Is ten days a quick enough turnaround? Won’t buyers, under pressure in a market with poor supply, simply make a complaint regardless of whether or not they have real grounds, just in case? If I as a buyer were aware of this option, I would do that. Why not? If agents out there who would represent buyers become aware of this once the bill is enacted, won’t they do so as a normal part of property procurement? Wouldn’t they have to since the data would be available, or would they risk being sued by their clients down the line for not doing what they could to secure the property at the lowest possible price? In my opinion, this further security for buyers as it purports to be needs further scrutiny itself, although I do applaud the sentiment. What the industry doesn’t need is something which becomes a nuisance.

Is it even possible at all for legislation to empower a regulator in any way other than to undertake checks and balances independent of technology? Can or should a regulator for example, mandate that all auctioneers use a bidding system? What would the capabilities of that system have to be? Would the regulator have to certify such bidding systems? What would the knock-on effect be then for buyers? Would it impact on a vendor’s property rights?

Proper regulation then would seem to be about balance. Legislation has to balance the rights of the vendor with the rights of the buyer somehow and currently, a sales agent’s sole duty is to the vendor. Not many buyers are fully aware of the implications of this. It is reasonable though when one examines the transaction taking place. The seller deserves to get as much as possible for their property and the sales agent is exactly that – their agent – as they endeavour to realise their asset as best they can. So what is the corresponding force on the buyer’s side? Well, they could, if they could find one, engage an agent to work for them. In practice, should a buyer have to fork out a percent or two to someone who can represent them? And what for transparency? How could having an agent working for you as a buyer make up for what still amounts to an opaque bidding process, albeit helped by a person familiar with the process? Are they clairvoyant?

It seems that the buyer ls left to the protection of the regulator and to be fair, the current regulations make sense. It is very difficult to conceive of an alternate regulatory regime which would not impact on the rights of the property owner or alter the fact that the agent has a duty of care to the seller only, which is as it should be. If the agent had any duty of care to the buyers, beyond not telling untruths, could they perform their duties properly without constraint for the vendor?

The PSRA proposes in its current plan to make its existence more widely known to buyers. The regulator even expects the amount of complaints to rise, simply because of this wider exposure. As a result of the expected uptick in interaction from buyers, they also plan to hire more inspectors so they can audit a significant number of agents per annum, circa ten percent, I believe. These inspectors represent the regulator’s capability to bite and it is through a constant inspection regime they would hope to ensure that agents are not being economical with the truth.

Will this make anything any more transparent? No. It might well give the public more confidence, sure, but for a buyer on their own at the coalface, the low-tech approach doesn’t make their position any less lonely. And should it? The likelihood of bidding against a mirage is very remote. What is more likely is that one could be bidding against someone with no capability to fund their purchase. The bidder could well win the race, get the property and never know if that last volley of bids was even necessary. Regulation can do nothing about this without severely impacting on the vendor’s right to get as much money as possible for their asset. It could be the case that while the unfunded bidder hasn’t funds right now, they may have been on the way to securing it. Maybe the vendor would be happy to wait two months while they sort their funding out.

Transparency around this issue would mean that the seller and other buyers could each make their respective decisions on the basis of much clearer, verifiable funding data, as well as other indicators. Sellers could decide to let the under-bidder match the high bid and sell to them were they to be fully funded, rather than taking the chance with the dubious funding capabilities of a higher bidder. People might choose not to bid, were they to see that a competing bidder doesn’t have the funds at the time of bidding. With the HonestyHub technology, at least people would be empowered.

And beyond regulation, what can our technology do to push back for buyers as a bloc, for the first time? Well, especially in a market such as this, with high demand and low supply, buyers bid on more than one property at a time. This is usually concentrated within a geographic location, say Dublin 9. In fact, it is likely that lots of buyers are doing the same thing and it could well be the case that two buyers, each bidding on two properties, the same two, could be pushing up the price on both properties unnecessarily. If it were not an opaque process, if it were to take place in the town square, it would become clear and they would stop, and work out which property each wanted. Our technology will detect when this is happening, be it two bidders or ten, and allow for people to back off a given property in return for another bidder doing the same, and actually limit the impact of low supply. This technology will work regardless of who the sales agent is or where the property is. The agent doesn’t even have to be using the bidding and regulatory compliance technology we will be offering to them for free. This is just one example of many exciting possibilities enabled by our technology.

It is possible for regulators to go too far and impact on the normal dynamics of a market. However, good regulation, as I believe we have now coupled with strong professional help for sellers and our new tools for the buyer, can together bring balance and transparency where it is needed.

As always, please feel free to interact in the comments below or click here to contact us.