Tanya Giles and Geraldine Mitchell
Herald Sun

DUMMY bidders are escaping prosecution in Victoria because government-appointed auction inspectors are powerless to stop them.

A Herald Sun investigation has found inspectors from Consumer Affairs Victoria have no right to obtain the names and details of alleged dummy bidders and no powers to interrogate or arrest suspects at an auction.

Inspectors do not have the power to gather evidence during or after an auction if they suspect there are dodgy bids.

And unlike public transport ticket inspectors - who are armed with police-like powers to demand names and addresses, proof of identity and can arrest on the spot - auction inspectors have to apply for a court order to ask suspected dummy bidders to answer questions, produce documents or supply information.

Documents obtained by the Herald Sun show no attempts have been made to use these limited court powers.

Instead, auction inspectors merely ask suspected dummy bidders if they could provide a written response to the allegations and thank them for their co-operation.

If they deny the allegations, the case is closed.

Concerns have also been raised that only four to 30 government inspectors police up to 1200 auctions across the state at weekends, compared with 538 authorised ticket inspectors working on the city's transport network every day.

The State Government last year vowed to wipe out dummy bidders, claiming its new laws would put an end to real estate practices that mislead and distort auctions.

But documents obtained by the Herald Sun under Freedom of Information prove the Government's planned crackdown on dummy bidding has failed.

Of the handful of cases investigated by CAV, more than half were discarded because of a lack of evidence.

Professional buyers' advocate David Morrell said the Government's best intentions had failed to get rid of the practice.

"It's just disgraceful," he said. "A lot of agents have woken up to it, but now we've got a lot of vendors doing it."

A spokeswoman for Consumer Affairs Minister Marsha Thomson said the Government was confident its tougher auction laws had resulted in a more transparent auction process and significantly reduced the number of dummy bidding incidents.

Spokeswoman Rebecca Spiteri said it was evident by the low number of complaints to CAV.

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Agents under the hammer

Tanya Giles
Herald Sun

AUTHORITIES have caught 18 real estate agents flouting strict auction laws.

The rogue agents were detected during secret inspections of more than 200 auctions in metropolitan Melbourne and regional Victoria over four consecutive April-May weekends.

Consumer Affairs Victoria officers conducted the surveillance to ensure agents were complying with real estate laws. CAV formally warned the 18.

Agents are required to have several contracts of sale and Section 32 statements available for bidders to inspect.

Consumer Affairs Minister Marsha Thomson said the 18 were on notice they would face prosecution if they repeatedly breached the Sale of Land Act. "Consumers are legally entitled to see the auction conditions in writing before the bidding starts," she said.

"It is disappointing to see that some agents do not appear to take seriously their obligation to give bidders full information about auction conditions prior to auctions."

Ms Thomson has also asked CAV to probe any complaints at private sales, or before and after auctions.

The Herald Sun found evidence of homebuyers being ripped off hundreds of thousands of dollars by real estate agents using fake bids at private sales.

One bidder for a house in East Melbourne was told a $3.2 million offer had been placed; it later sold for $2.96 million.

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Buyers' advocate reveals sales tricks

Robert Harley
Australian Financial Review

"Happy buying," writes David Morrell. "Remember it is a contact sport and you can have a lot of fun on the way through at the real estate agents' expense."

Morrell has made a business from out-smarting real estate agents. For seven years his Melbourne-based practice Morrell and Koren has been acting solely for buyers and the business is still growing, even in the downturn.

After another dinner party conversation turned to real estate and the tricks agents play, Morrell sat down and wrote a book on the subject - Real Estate Myths Exploded, A Complete Guide To Avoid Getting Ripped Off When You Buy Property. It is a book full of tips and stories, and told with all the flair that made Morrell such a name at Melbourne auctions.

On his favourite topic, auctions, Morrell does not believe that the days of dummy bidding are over. "Real estate agents will never change their spots . . . anyone who believes that dummy bidding is over is naive . . ."

In fact Morrell believes the rules will just make dummy bidders harder to spot.

But Morrell is picking up more work from private treaty sales. In fact private treaty is more fraught for buyers than auction.

With a private sale, the aim is to level the playing field to the degree that the buyer is controlling the negotiations. Morrell offers a range of games.

Use the phone. Don't ring an agent back. Instead gauge how keen the agent and vendor are by how quickly they ring again.

Find out about the agent. What is his or her reputation? What is the commission structure? If the commission includes a performance fee above a certain figure, that may be the figure which the owner thinks the property is worth. In the agent's office, try to deal with the listing agent because they have best access to the vendor.

Don't be afraid of making a low offer, or two offers with slightly different terms. But make sure they are in writing. One of the myths of real estate is that agents pass on all offers to the vendor. And if you are not sure, go and see the vendor yourself.

If you are a buyer, remember the agent is interested in more than the current sale. He, or she, is looking for the next property to sell and it could be yours. In fact Morrell argues that an agent is more likely to push your case if you are a potential client.

"My advice is to always suggest to the agent that you have a house for sale. The agent isn't necessarily always telling you the truth, so only tell them what you can use to your advantage."

Morrell devotes a chapter to "Doing your homework". Most importantly, find out what a property is worth. Ring the local agents; speak with the neighbours; check comparable sales; get a sworn valuation; even talk to people at the auction.

Other chapters are devoted to Controlling the Auction, Spotting the Dummy Bidder and Auction Strategies. Morrell has never made a secret of his tactics and here they are again. Gauge the level of interest at the auction even to the point of circling the gathering beforehand and asking every person if they will be bidding; stand close to the auctioneer, so you can see what he is seeing; keep asking him questions and bid aggressively.

Of course most of us don't have Morrell's hide. Few of us could face down an agent for an hour or so, until they agreed to put the other offers on the table. And this is where Morrell makes his pitch. "This is usually a job for an expert and this is why Buyers' advocates have changed the landscape in the real estate world."

Buyers' agents, standing apart from the emotion of the deal, know when to hold and when to fold.

My worry is that naive buyers, reading Morrell will become so focused on the game that they will lose sight of the bigger picture. For most of us it is about buying a home. And in my experience at some point in the process, that requires putting some faith in a real estate agent.

My partner and I bought one house after it was passed in to us as the top bidders at auction. The agent encouraged us to sign at the $125,000 reserve because any offer we made would have to be referred to a university board. We took the advice, didn't quibble and signed the contract. That was was 1986 and we could feel prices moving. Six months later, the house was worth $250,000.

Morrell acknowledges that "there are some very good real estate agents who are good at matching buyers and properties." But only 20 per cent are in that category.

"In my role as a Buyers' advocate, I estimate that 70-80 per cent of properties are sold below their true value, other than those that are sold at auction past their reserve," he writes.

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Poachers' Ride Shotgun for Buyers

Alannah Goss
Australian Entrepreneur

Have you ever bought or wanted to buy a property because you fell in love with it at first sight, thought it was perfect and then discovered it was a lemon?

Sick of the banter of Real Estate agents eager to sell a property and gain their commission?

The emergence of buyers' advocates is a new trend in the residential sector in Australia. They act exclusively for the purchaser in obtaining and securing a property. More and more buyers are choosing their services to help them.

Two Melbourne-based buyer advocates, David Morrell and Chris Koren, say they won't flog off any property but they will help steer clients with professional advice and, hopefully, save them some money.

In a novel twist for the property sector, they will even advise some clients against making unwise investments.

Ex-Cathay Pacific boss Rod Eddington describes Mr Morrell as "poacher turned gate-keeper". Mr Morrell admits he's a bit of a "loose cannon" but his aggressive tactics get good results for buyers.

He and Christopher Koren established Morrell and Koren Buyers' Advocates after working years as Real Estate agents and receiving many pleas for help. "A lot of people came to see us who were not aware of the Melbourne market and not confident of their ability to deal with the market. People are very busy and simply don't have the time to investigate," said Mr Koren.

Mr Morrell says people from overseas don't always understand the market or what constitutes a good property. "They don't necessarily understand why one side of the street is better than the other and they can get caught up with games that Real Estate agents play."

They say Real Estate agents represent the vendor and themselves in their pursuit of a commission. They have a mutual interest in getting the highest price and often don't share all the information about a property with the client, says Mr Morrell.

Information which is vital to making a purchase - such as how long the property has been on the market, structual considerations and so on.

"People will outsource their legal advice, tax advice etc, but when it comes down to the biggest investment of their lives they take a guess and let themselves be guided by people with a vested interest," said Mr Morrell. "You only buy a property three or four times in a lifetime but you are supposed to be an expert."

Buyers' advocates make buying a property easier and less stressful. After obtaining a brief from the client about the type of property sought, the team talks directly to vendors, Real Estate agents or other parties such as accountants, lawyers or trustees in their search for the right property. Between Mr Morrell and Mr Koren, they have nearly 40 years of experience in Real Estate.

"We are a bit of a nightmare for estate agents," says Mr Morrell who is known for stopping auctions when he suspects false bids. He has even offered other serious bidders cash not to keep bidding. "Agents get scared when we turn up to auctions because they know what we will do," he said.

They seek to take control of the auction and in fact the whole purchase process. "In Sydney people don't like to bid in public," said Mr Morrell. He says they go into a room to bid.

"It's all too easy to pay a lot more for a property when you do not know what you are doing. Agents may even tell you that there is another offer in even when there is not. Or they may ask people to nominate the highest price they'll pay," said Mr Morrell. These tactics can be easily hidden from unsuspecting bidders, he says.

The service is proving popular with overseas buyers who have been away for a long time and lost touch with market trends.

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Buying with a little help from a friend

Mathew Chandler
The Australian Financial Review

It's a brisk autumn day and the wind is billowing through Bennison McKinnon's "auction today" flags. The neighbours lining the street, joined by a string of sweaty-handed bidders and a blonde haired man who is as familiar to the auctioneer, as he is unwelcome.

As the auctioneer begins the sale, a bid is launched at $580,000. There is a murmur among the crowd and, in $10,000 increments, the bids begin to rise. Suddenly, the tall blonde, later revealed to be controversial buyers' advocate Christopher Koren, calls out: "Mr Auctioneer, can you tell me, is there someone in the audience bidding on the vendor's behalf?"

There is no response.

The question is repeated twice before the frustrated auctioneer walks up to Koren, grabs the contracts from his hands and mutters: "I'm running this auction, not you." And the bidding proceeds.

Eventually, Koren walks away with the property for $681,000-just $1,000 over its reserve and a price far less than his client had been prepared to pay. Koren also walks away with three new clients - a lawyer, a computer technician and a retired businesswoman. They all witnessed his performance and were impressed. The auctioneer, meanwhile, walks away red under the collar to face a stunned vendor.

Welcome to the world of buyers' advocacy, where you can pay someone else to sweat and haggle for you. Buyers' advocacy has always existed in-house through most real estate agencies, but in the past five years a new breed of agents has emerged, branching out from traditional sales and specialising in the art of buying. Most are rewarded for their efforts and, as a result of their auction-day antics, the trade secrets of auctioneers are rapidly disintegrating.

The most common mistake of property investors is the way they bid at auctions. Even the seasoned businessman or businesswoman can turn to jelly under the extreme nerve-bending conditions.

But as Koren's business partner, David Morrell, says, a buyers' advocate can offer insider knowledge, ruthlessness and an emotional detachment to a sale.

By intimidating auctioneers and other bidders alike, they often walk away with the day's best deal.

Auctioneers, not surprisingly, are now scrambling to dilute the powers of buyers' advocates.

This week, the Real Estate Institute of Victoria announced it was investigating the possibility of introducing a code of ethics for buyers' advocates.

In an interview earlier this month, chief executive officer Norman Huon said the code - which had yet to be finalised or ratified by the REIV - was being devised following a number of "incidents" between auctioneers and so-called buyers' advocates

Koren's recent run-in was among them.

Huon says the REIV does not want to pit its members against each other, but a code of ethics may be introduced to protect the rights of consumers. "There has been some tension created by a number of incidents where people have acted a little over enthusiastically when bidding on someone else's behalf," he says. "All we are really doing is investigating whether a code of ethics should be enforced for buyers' advocates."

But it's not just the auctioneers pitting themselves over the advocates. One property advisory film, Wakelin and Wakelin, has moved to support the REIV's proposed code of conduct. "Saving clients' money at the point of purchase has everything to do with skill and judgement and nothing at all to do with theatrics which intimidate both the auctioneer and other buyers," Wakelin and Wakelin principal Monique Wakelin says. "In fact, overly aggressive, theatrical behaviour simply attracts notoriety for the perpetrator and can disadvantage the client financially.

"For example, deliberately antagonising other bidders can even prompt retaliatory aggression, thus driving the price way over normal market tolerance."

Koren says any moves to muffle bidders - particularly buyers' advocates - is taking away the rights of the consumer. "There's nothing wrong with acting in the best interest of the consumer and that's what we're doing," he says. "All they want to do is stop us from asking questions - and that's wrong."

Questioning is the advocate's sole fire-power, not to mention the most potent. Morrell asserts the consumer's right to ask questions - particularly when the law in Victoria allows an auctioneer to make multiple dummy bids on the vendor's behalf. In NSW only one fake bid is allowed. "The bidders should know when there is a fake bid at play," he says.

Morrell likes to call the auctioneer's bluff by asking if there is a real bidder. He also likes to sidle up to other bidders and offer them an incentive not to bid. On the flip side, another agent acting for a client to walk away from an auction once paid him $10,000. He took the money.

Another of his "tricks" is to offer smaller increments than the auctioneer wants. If the auctioneer refuses his bid, he then goes to the other bidders and gets them to join him in similar bids. "There is this perception that the vendor has the upper hand at an auction. Nothing could be further from the truth," Morrell says. "A buyer always has the upper hand - if they are ruthless."

Tim Kelly, who recently bought a property using the Morrell and Koren agency, believes he saved $40,000 and is incensed at the prospect of regulating advocates.

"I think it's rather unfair. Vendors are able to use an agent to sell their property, why can't we use one to buy property," he says. "What the advocates have brought to the industry is more information. If I had tried to buy this house on my own, I wouldn't have been able to extract the information these guys did."

Buyers' advocates have yet to establish themselves as a force in States outside Victoria, where the auction scene is less vigorous. However, Morrell does venture into Sydney occasionally and last year managed to ruffle the feathers of at least one auctioneer, who threatened legal action against him and accused him of breaching the Competition Act.

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Intimidated by auctions? Hire a buyer

Lucinda Schmidt
Business Review Weekly

When the bidding reached $900,000 at a recent house auction in Melbourne, David Morrell decided it was time to clinch the purchase. He swooped with a bid of $1 million, stunning the other bidders into silence. Morrell, Melbourne's best -known buyers' advocate, secured the property for $100,000 less than his client was prepared to pay.

The "knockout bid" is one of many techniques in Morrell's bag of tricks. Another favourite is the reverse: a bid of much less than the auctioneer's starting bid. When the auctioneer protests that he is only taking bids of a certain amount, Morrell asks whether anyone else in the crowd wants to make that bid. After a long silence, Morrell chimes in again: "Well, my bid is looking pretty good now, Mr Auctioneer."

In the past year or so, buyers' advocates have become a regular feature of Melbourne house auctions. Morrell and his partner, Christopher Koren, are the driving force, but other have joined the fray, and their activites are spreading to other states: Morrell has acted for clients in Sydney, and recently bought a Port Douglas property for a Melbourne client.

Their services are not cheap. A winning bid at an auction may cost up to 1% of the purchase price, for a property the client has found. If the client wants the advocate to find a suitable property then buy it through negotiation or auction (known as "search and find"), the charge is about 2% of the purchase price. The costs are tax-deductible for a property investor, but not for an owner-occupier.

Morrell charged $10,000 to make that $1 million knockout bid. If he had also found the property for his client, the fee would have been $20,000. Had he failed to secure the property, the client would have paid nothing.

A buyers' advocate offers two advantages: expertise and skill in assessing properties, and the ability to make sure the client gets the property for the lowest possible price.

On the first point, there is little doubt that the buyers' advocates know more about the property market than most of their clients. They are usually real estate agents with 15 or 20 years' experience on the selling side.

The advocates also have networks or real estate contacts and databases that help them establish a price range for the property. For a recent $9 million land purchase in the Melbourne suburb of Toorak, Morrell rang several architects and real estate agents in the area, grilling them about what they knew. His client got the property.

Although some people enjoy the weekly ritual of driving around "open for inspections" at the weekend, others find it an exhausting grind, particularly when the weeks of looking stretch to months or years. The "search and find" service gives client back their weekends and usually snares a home quite quickly.

As to whether a buyers' advocate saves money, the evidence is less clear-cut. Morrell believes his clients pay 5-10% less for a property.

The techniques the advocates use at an auction include asking whether the bid is genuine. In Victoria, the auctioneer can take "dummy" bids on behalf of the vendor. Advocates say they can spot a dummy bid and take great delight in revealing it (auctioneers are required to answer truthfully, usually replying "the bid is with me").

The advocates will also ask whether the house is "on the market", meaning it will be knocked down the highest bidder and not passed in. They might stand out the front next to the auctioneer, facing the crowd, and make wisecracks or stare at other bidders. They will quickly and confidently overbid a rival, or make a few fast bids and wait and see.

In short, the buyers' advocates are not afraid to draw attention to themselves. In fact, that is one of their main aims, as it tends to frighten off other bidders.

At the extreme end of the buying tactics is a (legal) bribe to stop someone bidding. Several advocates say they would not offer rival bidders money to drop out, but Morrell delights in the reputation he has for throwing money around. However, he is uncharacteristically coy about the details, refusing to reveal whether he has actually paid money to stop another bidder (but saying that if he did he would pay by cheque rather than cash). "The agents think we're doing it. They see us talking to other bidders and they chuck a wobbly. We will offer any incentive we think fit to reduce the price."

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Cleaning up to protect buyers

David Luff
The Daily Telegraph

Meet the new face of the Sydney real estate market. Buyers' advocates - the property experts who find houses and try to buy them at the lowest prices for clients - are the self-described "poachers turned gamekeepers" of the real estate game. They are promising to clean up Sydney residential property, protecting buyers from unscrupulous agents as they drive up prices, and in turn, commissions.

"Sydney people are pretty naive. These agents have been getting away with blue murder," said David Morrell from buyers' advocates Morrell and Koren.

"Sydney prices are unreal. And one of the biggest reasons for it are the tactics used by the real estate agents. There's a whole list of dirty tricks. It's fraudulent and deceitful. They have been getting away with it for years, but they won't keep getting away with it."

Melbourne-based Morrell and Koren are planning to set up an office in Sydney next month, believing the city's home buyers are sick of being driven out of the market by the agents. Mr Morrell believes the Australian Competition and Consumer Commission should be brought in to examine the practices of some Sydney real estate agents. He argues agents and auctioneers take advantage of buyers' inexperience, bullying them into making bids out of their price range. Mr Morrell insists there are clear examples of vendors making multiple bids on their properties at auctions, using friends and acquaintances to pitch offers to drive up prices.

"But most people are nervous wrecks, they bid two or three times in their whole life so they don't really know what is going on," he said. "People don't know their rights and they get taken advantage of and end up paying more than they have to."

Buyers' advocates will employ aggressive, in your face tactics to get the property as cheap as possible for their client, Mr Morrell said. He said he was prepared to intimidate rival bidders, standing next to them, and promises to weed out dummy bidders. "You can spot a bogus bid, a plant, a mile away. You just go up to them and say out loud,'Is this a genuine bid?' and see what they have to say." He refuses to be pressured into bidding in large increments, preferring to raise his bids in smaller amounts to avoid rapid accelerations in prices.

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Advocates in action

Your Mortgage Magazine

Buyers' advocates are all about getting results for their clients, using whatever means are necessary. Your Mortgage asked David Morrell about some of the more interesting auctions he has attended. Without revealing names or precise property locations, he was able to recall events that had me shaking my head in disbelief. This man certainly doesn't mind being the centre of attention - but it's all part of his strategy to save clients' money.

Tales from Toorak

David was recently attending an auction in the Victorian suburb of Toorak. There was a substantial property on offer and David was instructed to bid on behalf of his client. Early bidding had taken the property to $1.3 million and the auctioneer was eagerly looking for the next bid, at a $50,000 increment. Thinking that all the bids made up until this point were actually dummy bids, David offers $1,000 more than the last bid. "David, I won't take your $1,000 increase, I want $50,000." pleaded the auctioneer. "You haven't got a real bid yet," David quickly replied. "I might have ..." "Then why don't you show the public where the bidder is then?" Not surprisingly, the red-faced auctioneer accepted David's $1,000 bid increase and the auction continued, at the pace David wanted.

Neighbourhood watch

A forward-thinking home owner in a well-to-do suburb had wanted to purchase their next door neighbour's house, so they could demolish it and turn it into a tennis court.

Sounds like a reasonable plan, if you have the money to afford this sort of a purchase, but there was a slight problem - the neighbour had been feuding for years and wouldn't sell to the homeowner under any circumstances.

Finally, the property is available for sale through auction, and David receives a telephone call from the potential purchaser. "Can you help me? I think I might be in trouble because I offered $550,000 and the agent hasn't replied." David quickly arranged to attend the auction, taking a colleague with him so that between them it would look like there was some serious interest in the property.

"The vendor and auctioneer thought we were three distinct bidders, but in reality there was only one at $451,000." Mr Morrell said. As the bidding proceeded, David asked the auctioneer if the property was 'on the market' and whether the vendor was prepared to sell. The auctioneer replied that he wasn't about to sell the property yet, as there were two other bidders still interested in the property. The two other bidders (David's colleague and the next-door neighbour) immediately ceased bidding and demanded to know if the property had reached the reserve price. "The auctioneer then referred the latest bid to the vendor, pressured them to lower their asking price so the three of us could continue our battle." Mr Morrell said. "The auctioneer then put the property on the market, the three of us shook hands and we saved the neighbour an estimated $99,000." he said.





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