How banking misconduct relates to conventional real estate.

Bank lending rules have become stricter as a result of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. This is likely to continue affecting the price of residential real estate.

As well as its influence on the market, there are some strong parallels between the Commission’s reporting on banking misconduct and equivalent behaviour in the real estate industry. The following table compares four points made in the report’s introduction to conventional practices in real estate industry and the LongView approach.

1.0 —————
Royal Commission observation on banking
– In almost every case, the conduct in issue was driven not only by the relevant entity’s pursuit of profit but also by individuals’ pursuit of gain.
– Providing a service to customers was relegated to second place. Sales became all important.
– Rewarding misconduct is wrong. Yet incentive, bonus and commission schemes have measured sales and profit but not compliance with the law and proper standards.

Conventional real estate practice
– Commission structures in the real estate industry, particularly in sales, typically reward the pursuit of revenue.
– This encourages agents to push for a sale regardless property and market related influences or a client’s personal circumstances.

LongView approach
– Property investment is a long game.
– It is also much more complex than the cliché of ‘location, location, location’.
– Personal investment goals, finance and numerous market-related circumstances are all equally important.
– This is why we identify all the options and make recommendations based on market conditions and our client’s individual circumstances.
– This means our recommendations may not always be to sell. While such guidance may not be in our immediate business interest, we know it is in our client’s best interest at the time.
– And we know if we please that client now, when the time does come to sell they’ll turn to us. Hence our name, LongView.

2.0 —————
Royal Commission observation on banking
– Entities and individuals acted in ways they did because they could.
– There was a marked imbalance of power and knowledge between those providing the product or service and those acquiring it.

Conventional real estate practice
– A similar imbalance of knowledge and power exists between conventional agents and clients.

LongView approach
– Open communication and taking the time to educate our clients about the industry are essential to creating a relationship of trust.
– Both are also vital to ensure clients are informed enough to make decisions that are in their best interest.

3.0 —————
Royal Commission observation on banking

– Consumers are often dealt with through an intermediary…who may act in the interests of the provider of the service or product.
– Duty (to client) and (self) interest pull in opposite directions.

Conventional real estate practice
– Conflict of interest is common in real estate, and are especially unclear when it comes to risk management.

– For example, some of the biggest risks for a landlord are ones that are outside the conventional obligations of a property manager – even though they are being paid to ‘protect’ the asset.

LongView approach
– Our Guaranteed Rent service is designed specifically to ensure risks can be allocated to the party best able to manage them – in this case us.

4.0 —————
Royal Commission observation on banking
– Entities that broke the law were not held properly to account.

Conventional real estate practice
– While there is less evidence of law-breaking in real estate, there is significant evidence of poor or unethical conduct. This is a key contributor to the minimal trust people put in real estate agents.
– In 2018, a report by Roy Morgan showed real estate agents are the third least trusted profession in Australia – just above advertisers and car salesmen.

LongView approach
– Trust is our currency.
– It lowers the cost of doing business by making it enjoyable for all participants.
– What’s it take to earn and keep your trust as a client?
– Act in your interest.

Client case study – inheriting golden memories and a bright future
John and his brother inherited their childhood home in Bentleigh. Our clients, John and his partner Maria, asked us to manage the property and discussed its sale, primarily because John’s brother wanted to be paid out for his share. The approach of a conventional agent in this situation would’ve been to transact the sale as quickly as possible so they could secure their commission and move on. Instead, we asked more questions.

The property was sentimental to John and Maria, and of significant value – a 600sqm block five minutes from Bentleigh Station in the McKinnon High School zone. We estimated its current value at $1.5 million and forecast to appreciate to $3 million in 10 years. So we advised against them selling. Instead, we worked hard to find a way John and Maria could access finance, buy out the brother and hold onto both their beautiful memories and a lucrative investment.

For further information on this article, or the services LongView provides, please contact Antony Cohen our CFO on 0419 381 905 or