Things real estate agents may not tell you
Jessica Wilson is a researcher and writer who works on consumer law and other issues.
OPINION: Did you hear about the real estate agent who claimed that a one bedroom house with two windowless storage units was a three bedroom property? Unfortunately, it wasn’t a joke.
The case broke after the hapless buyer of the house filed a complaint with the Real Estate Authority (REA). Unsurprisingly, the authority concluded that the officer’s behavior was misleading and slapped him with a fine, albeit only $2,500.
It would have been hard to find the behavior anything but misleading, given that the officer had obtained a copy of the floor plan of the building from the council, which showed the property had been consented as one-bedroom accommodation .
The buyer only discovered it after moving in. More bad news came when an engineer later advised that it would not be possible to install windows or make other structural changes to convert the storage units into consented rooms.
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Unfortunately for potential buyers, the case is not an isolated incident.
Despite efforts to beautify the industry, complaints about agent behavior continue to pour in. In a declining housing market, the risk of underhanded tactics is only likely to increase as agents looking for their next sale are tempted to take shortcuts.
In a recent posting to the industry, the REA itself has felt compelled to remind agents that they are expected to understand the property they are selling and disclose all relevant information to buyers.
Whether this reminder does anything to stem the complaints remains to be seen. The available data does not suggest that there is much reason for optimism.
According to a survey published by the REA, up to one in six people buying or selling a home in the last year have had a problem with an agent.
The latest figures show around five people a week – 271 in total – lodged a formal complaint with the authority in the 12 months to June.
At the top of the list of complaints: false statements by agents. Examples of past indiscretions range from misleading a potential buyer that there were no other offers for a property, to not disclosing that a new building was about to be built next door.
It’s a salutary reminder – if one were needed – not to trust the sales pitch of the agent and to do your own due diligence on the property you’re considering buying.
But that doesn’t mean you just have to suck it up if you get caught up in an agent’s spiel and get left out.
According to the rules governing the sector, agents are expected to have done at least some homework on the property they are selling.
They should be able to give you relevant information about the house – for example, whether it is consented as a one or three bedroom unit. Not asking too much, you think.
They are also expected to be warned to identify potential hidden or underlying defects: if the property has all the hallmarks of a leaky building or asbestos ceilings, the agent cannot remain silent on this subject.
The rules stop short of requiring an agent to pay for their own reports to identify problems.
However, they must either obtain proof from the seller that the property is not subject to default or inform potential buyers of any significant potential risk.
Although some officers may wish otherwise, a “don’t ask, don’t tell” policy won’t work.
Likewise, if they are aware that a major new development is planned in the neighborhood, they are expected to let you know.
They also cannot blame the seller for any misleading information. Previous cases that have been submitted to the REA have criticized officers for attempting to do just that.
Despite the huge sums of money involved in real estate transactions, the exposure of questionable behavior in the market still depends heavily on consumer complaints.
When a complaint is upheld, the Real Estate Agents Disciplinary Tribunal has the power to award up to $100,000 in compensation, although this is generally reserved for cases considered the most serious on the spectrum. The agent may also face other penalties, including fines.
However, this is not the fastest process.
The woman who paid $629,000 for the one-bedroom house with two windowless storerooms filed her complaint with the REA in July 2020. It was not until May this year that the complaints committee of the authority has published its decision on the fine imposed on the agent. .
In the meantime, the woman had filed a complaint with the Dispute Tribunal, which ruled on her case in November 2020. She would have recovered $29,486, close to the maximum of $30,000 the court is able to award.