Don't bank on real estate agents

Further to the dodgy advice from agents discussed in our previous post, we've had our attention drawn to the following shocker. A Canberra agent is quoted in a Toowoomba paper (making us suspect that the piece may have appeared in other papers too) as advising money-conscious tenants:

They should increase the amount they pay in rent to their agent... by as much as they can afford until it hurts....

[The agent] puts the extra away in a bank account – say an extra $200 per week – and after two years they will have over $20 000 which is a big step in the right direction.

Here's the article, with the dodgy advice indicated.


Now, there is a time-honoured practice amongst some tenants of paying a couple of dollars extra each week so they don't have to worry about paying the rent over Christmas, but I don't think anyone does what this agent is recommending. And for good reason. Let us count the ways in which this advice stinks.

1. First, and probably least, it is a bit rich for real estate agents, as inveterate debt-pushers and spruikers (check the headline: 'Now is the time to buy'!) to presume to give tenants advice on establishing a savings culture.

2. Secondly, if you're handing over extra money as rent to an agent, it will go to the rent account, not into any other sort of account. It will not earn interest for you. Under section 47 of the new Residential Tenancies Act 2010, you are, happily, entitled to get overpaid rent paid back to you within 14 days of requesting repayment (but note: this is the New South Wales Act, and it does not apply, of course, to renter-savers in Canberra and Toowoomba).

3. Thirdly, if you're handing over extra money not as rent or some other legitimate charge under your tenancy agreement – don't. Put it in a savings account at the bank yourself – and if you don't trust yourself to keep in the habit, set up a scheduled transfer. Don't trust a real estate agent to do it for you. Quite apart from the risk of a rogue agent making off with the money themselves (and we note that in 2009-10, Fair Trading issued penalty notices to 83 agents, for a total of 99 offences, under the Property, Stock and Business Agents Act), you have to keep in mind: even an honest agent works for your landlord, not for you. You're not paying them to be your banker; don't expect them to act as one.

4. And handing over an extra $200 a week to your real estate agent? Why not just go ahead and ask for a rent increase?

We dips our lid to Delusional Economics at Macrobusiness for bringing this one to our attention.