Be wary in real es­tate deals

South Waikato News - - NEWS -

Imag­ine fi­nally sell­ing your house and then find­ing out as you toast your suc­cess that your real es­tate agent wasn’t re­ally an agent at all.

That hap­pened re­cently to a cou­ple in the South Is­land town of Gore. For a $500 sell­ing fee, Ewen McLeod took would-be pur­chasers through homes, put his num­ber on ad­ver­tis­ing and drew up sales and pur­chase agree­ments. But he never had a li­cence as re­quired by law.

This month in the Gore Dis­trict Court, McLeod was found guilty of oper­at­ing as an unau­tho­rised agent and is yet to be sen­tenced.

Real Es­tate Agents Author­ity chief ex­ec­u­tive Kevin Lampen- Smith said un­li­censed trad­ing was a se­ri­ous of­fence be­cause con­sumers did not have any come­back through the author­ity’s com­plaints process.

Leg­is­la­tion cov­er­ing real es­tate agents was tight­ened in 2008. Most agents are fol­low­ing good prac­tice but John Gray, pres­i­dent of the Home Own­ers’ and Buy­ers’ As­so­ci­a­tion, said there was ‘‘al­ways the odd rogue out there’’.

‘‘There are many real es­tate agen­cies who are putting in a lot of ef­fort to ed­u­cate their agents as to the new world that ex­ists now . . . but un­for­tu­nately there are those who are find­ing it hard to break old habits.’’

If you’re buy­ing or sell­ing a house, here’s some things to watch out for:

Dis­clo­sure

Some of those old habits lie in the murky ar­eas of dis­clo­sure and mis­rep­re­sen­ta­tion. It is no longer good enough for an agent to blithely par­rot what a ven­dor says.

Last year two Nel­son agents were found want­ing by the reg­u­la­tor be­cause they mis­tak­enly ad­ver­tised a prop­erty as be­ing ar­chi­tec­turally de­signed – a fairly com­mon com­plaint.

Gray also finds some agents can still be a bit ’’over-ex­u­ber­ant’’ about as­pects of con­struc­tion that they do not know enough about.

‘‘Pri­mar­ily that’s plas­ter homes, and we see agents ad­ver­tis­ing the fact they have a [ven­ti­la­tion or drainage] cav­ity, when we find in most cases the agents wouldn’t know what a cav­ity looked like.’’

Pre­vi­ously, an eth­i­cal agent who sus­pected the prop­erty had fail­ings might have ad­vised the would-be buyer to ‘‘get the place checked out’’. But un­der the new rules, an agent only has to sus­pect that some­thing is wrong and they are obliged to ask the ven­dor about it – and tell prospec­tive buy­ers.

And if an agent sus­pects that the ven­dor is keep­ing some­thing back, they must ac­tu­ally end the deal.

Real Es­tate In­sti­tute Welling­ton spokesman Euon Mur­rell says agents are cer­tainly be­ing more cau­tious.

‘‘We are more con­scious of be­ing cor­rect so we are obliged to find out more in­for­ma­tion then we used to and we are be­ing asked to even in­ter­pret ti­tles, which I have to say is a bone of con­tention be­cause we’re not lawyers.’’

Dis­clo­sure takes many forms. It also re­lates to whether the agent or any­one they know is in­ter­ested in the prop­erty them­selves.

A re­cent case down south in­volved an agent as pur­chaser from the same agency as the sell­ing agent. The deal hap­pened quickly and an ag­grieved con­sumer who missed out smelled a rat.

How­ever, the com­plaint was dis­missed be­cause they had been com­pletely trans­par­ent with the owner.

Un­due pres­sure

A fre­quent com­plaint to the REAA is from clients who claim they were pres­sured to sign with­out time to get le­gal ad­vice.

‘‘One of the things that we’re see­ing is agents pre­par­ing sales and pur­chase agree­ments in ad­vance with con­di­tions struck out and lit­tle stick­ers put on,’’ says Gray.

‘‘They present these con­tracts as al­most a fait ac­com­pli to prospec­tive pur­chasers and we are warn­ing pur­chasers not to ac­cept the ad­di­tional con­di­tions or the strike-out of ex­ist­ing con­di­tions in the stan­dard sales and pur­chase agree­ments just be­cause that’s the way it’s pre­sented.’’

Com­mis­sions and li­cences

Don’t be caught like the cou­ple from Gore – check your agent has a li­cence or still car­ries one. The REAA has a reg­is­ter – see if there is any his­tory of re­cent dis­ci­plinary ac­tion on record.

Re­mem­ber that your agent gets noth­ing un­less they find you an of­fer that goes un­con­di­tional. This is an im­por­tant point be­cause some­times your agent might in­tro­duce you to a buyer but you can’t set­tle on a price. Re­sult: no com­mis­sion.

But if that buyer comes back to you months later with a fur­ther of­fer, by­pass­ing the agent, and an un­con­di­tional of­fer re­sults, you must pay the agent com­mis­sion.

Hav­ing said this, there are plenty of cases where the agent messes up their side of pro­ceed­ings.

Take the case of the agent who gave a ven­dor’s se­cu­rity num­ber to her non-agent friend so he could open the door.

She did not bank on the ea­gle-eyed owner who saw the whole thing and com­plained his pri­vacy had been breached.

Owner’s’ – John Gray, pres­i­dent of the Home

and Buy­ers’ As­so­ci­a­tion

The odd bad egg

Even to­day, af­ter the in­dus­try has mostly been cleaned up, there are a ris­ing num­ber of com­plaints made to the Real Es­tate Agents Author­ity. The REAA was set up af­ter the Gov­ern­ment lost con­fi­dence in the in­dus­try’s self-reg­u­lat­ing model.

The author­ity sifts through the se­ri­ous com­plaints and sends the worst to its big brother, the Real Es­tate Agents Dis­ci­plinary Tri­bunal. Be­tween Novem­ber 2010 and June this year the tri­bunal heard 60 cases and has an­other 60 wait­ing.

Both bod­ies have se­ri­ous clout. Agents can lose their job, or their li­cence or be sus­pended for up to two years. In­di­vid­u­als can be fined up to $ 30,000, plus com­pen­sa­tion of up to $100,000.

One of the worst cases of mis­con­duct was heard in July. The agent used a rel­a­tive or as­so­ciate to buy prop­er­ties and then sold them What to watch for when buy­ing or sell­ing.

That might seem mi­nor, but how about the agent who in­serted clauses into the sale and pur­chase agree­ment with­out the ven­dor’s sign-off?

The agent claimed that the clauses were to the ven­dor’s ad­van­tage but it was still a ma­jor no-no. at a higher price, se­cretly pock­et­ing the dif­fer­ence.

Not only did he fail to dis­close that fact to the real ven­dors and pur­chasers but he then in­flated the prices on the later sales and pur­chase agree­ments to de­ceive the banks into of­fer­ing 100 per cent fi­nance to the buy­ers.

He forged sig­na­tures, in­serted ma­te­rial, and in one case, had his client sign two blank sale and pur­chase agree­ments, forc­ing the client into a sec­ond pur­chase with­out his knowl­edge.

In this way, the agent and his as­so­ci­ates reaped $189,000 from their of­fences, and the agent still got thou­sands in com­mis­sions.

One of the things that might have helped some of the luck­less pur­chasers was get­ting an in­de­pen­dent val­u­a­tion of the prop­erty. They might then have be­come aware the agent had in­flated the price.

John Gray sug­gests get­ting a reg­is­tered build­ing sur­veyor to do an eval­u­a­tion first, and then send it to your val­uer.

And do not use the agents’ rec­om­men­da­tion on in­spec­tors or other pro­fes­sion­als, he says, ‘‘be­cause they’ll di­rect them to build­ing in­spec­tors who won’t be quite so crit­i­cal of the prop­erty’’.

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