Dashdot: Inside the collapse that sparked calls for buyer’s agent reform

The liquidation of Dashdot has also renewed calls for stronger regulation, greater transparency, and more consistent professional standards across the industry.

Chair of the Property Investors Council of Australia (PICA) Ben Kingsley has cautioned consumers to be mindful of “self-interested” property spruikers as more buyer’s agents enter the market.

“Whilst the industry remains unregulated, these property spruiker types will keep surfacing and operating, which continues to put everyday property investors at risk”, Kingsley told REB (which is part of the Momentum Media network that also includes SPI).

“As a general rule for anything looking to work with a buyer’s agent – avoid anyone claiming big or fast returns, or offering any type of performance guarantee. And never pay 100 per cent upfront; only pay as you receive portions of the service or at the completion of the service”.

A collapse too fast to be in relation to the federal budget

When entering liquidation on 28 May, Glen “Goose” McGrath blamed the downfall of Dashdot on a rapid deterioration in economic conditions, investor sentiment, and lending capacity.

According to the Property Investment Professionals of Australia (PIPA), worsening macroeconomic conditions, the federal budget, and changes to Meta’s advertising platform were not enough to cause a business to collapse that fast.

“It’s mismanagement of finances. It’s spending more than what you’ve got. There are all kinds of business principles that they haven’t applied that would’ve led to their demise,” PIPA chair Cate Bakos told REB.

“And I think growing at such a rapid rate would’ve been one of those contributors.”

While interest rates are expected to reshape the market, Bakos said good investment-focused buyer’s agents would account for their impact and plan ahead in their business.

“Agents have a responsibility to educate and prepare clients for shifting economic conditions rather than assuming the historically low rates seen during the COVID-19 era would continue indefinitely.”

Bakos said that while relatively young, the agency operated a high-volume model with a large team of employees, many of whom had limited industry experience and had not worked in property for an extended period.

Last month, REB exclusively revealed that over 96 per cent of Dashdot’s shares were transferred to an offshore holding company in the British Virgin Islands around two years prior to the company’s collapse.

“There’s a lot of question marks around the ethics of the business owners and directors, and they would’ve known for quite a while that they were facing some tough headwinds.”

“They got obviously very excited by their own growth and all of their marketing, and their website’s still up now telling everyone how amazing they are.”

“I think there was a degree of complete naivety and greed, which is a dangerous combination,” Bakos said.

Dashdot: An unusual business model

Under their business model, Dashdot clients paid upfront fees ranging from $6,000 to over $22,000, a “red flag” according to the Real Estate Buyers Agents Association of Australia (REBAA).

REBAA vice president Zoran Solano said that even across the industry, Dashdot’s fee model was an outlier and not the norm.

“I think that it’s always hard to judge businesses when you’re from the outside. But I think that the warning sign of taking $15,000 to $20,000 upfront is an abnormally large amount of upfront cost for a traditional buyer’s agent,” Solano told REB.

“I think that’s a pretty big red flag.”

He said that most buyer’s agents were taking a small engagement fee upfront, with the bulk of their income coming at the end of the buying process once the contract was unconditional, and the property settled.

“A buyer’s agent should be driven by results,” he said. ”The engagement fee is simply a commitment to begin the search. The substantial portion of the fee is earned when we deliver a successful outcome for the client.”

While some reputable operators charge upfront fees, Solano encouraged consumers to question whether paying a large sum before the service was provided was necessary.

“In my opinion, the only reason you’re taking big upfronts is to cover yourself for some cost of operating your business. So it can still open its doors tomorrow and the day after.”

“Having cash flow is natural in any business, but why would that business have to have such a large upfront cost? That’s the big question,” Solano said.

Promises and guarantees

According to a contract seen by REB, Dashdot clients were promised their purchased property would outperform the market by at least 10 per cent.

“We guarantee that your property will outperform the market by at least 10 per cent or your money back,” the contract reads.

“For example, if you bought a property in regional NSW, and prices rose in regional NSW by 5 per cent over a 12-month period, then we guarantee your property would grow by at least 5.5 per cent over the same period.

“If not, we’ll give you a full refund.”

In total, an initial report from the liquidator, Teneo Financial Advisory Australia, found that 695 customers were listed as creditors for “prepaid services & refunds”, with claims totalling $10,594,079.

According to Solano, consumers should be wary of guarantees, as no one can control the market.

He said that as the buyer’s agent market continues to be highly saturated with inexperienced operators, overly attractive guarantees were often marketing tactics and usually “too good to be true.”

“It’s marketing 101 that we’re seeing here. A lot of these companies have a very high cost per lead,” he said.

“By charging a substantial fee and substantial upfront, it would hypothetically enable companies to help cash flow in situations where it falls short of the guarantee, and they have to foot the bill.”

Solano advised buyers to carefully assess who they work with and consider longer-established agencies with lower overheads and experience across multiple property cycles.

“Which is why I think consumers need to really go back to the core ethos and work with someone who potentially is more boutique and has been working for longer than one property cycle.”

An influx of unqualified buyer’s agents

Following its collapse, Dashdot referred creditors to nearly 50 buyer’s agents, with the list including part-time operators and agencies opened for less than six months, raising concerns about the quality of property advice provided to out-of-pocket Australians.

An REB review also found several agencies were not registered for goods and services tax (GST), suggesting annual turnover below $75,000, while one buyer’s agent did not appear on the real estate licence register at all.

According to Cate Bakos, the industry’s rapid growth has been problematic, as many new buyer’s agents lacked the depth of knowledge required to navigate a fast-paced market.

“A lot of them have originated through the Buyer Agents Institute, which is not a formally recognised training institute at all, but it’s a privately owned business that’s been purporting,” Bakos said.

“They believe that as buyer’s agents they will earn huge sums of money, and they can do it on the side and still have a day job.

“Their training programs focus heavily on marketing and lead generation, with little emphasis on buyer’s agency skills such as due diligence, property analysis and risk management.”

She said that the “approved” list of buyer’s agents was a mechanism through which Dashdot could ”appease” its creditors.

“I don’t think Dashdot started at doing that altruistically or out of guilt. It looks like they’ve got a network of people who have an opportunity to sign up clients and get some revenue,” Bakos said

“I’d be very, very wary as a creditor who’s lost their outlay to just jump onto this list of BAs that lack experience and even some of the questionable credentials.”

Additionally, Bakos urged for better licensing and overall industry regulation.

Currently, buyer’s agent licensing varies by state, with new professionals taking advantage of the easier, faster Queensland licensing pathway before seeking recognition in the rest of the country.

“So we’ve seen a flood of these buyer’s agents who have limited, if any, experience and no formal training and unfortunately, that’s really stained our industry,” Bakos said.

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