Unlicensed agents ‘a growing problem’

More than one in every 10 properties advertised for sale on Trade Me in April was listed by unregulated salespeople, according to data from the online marketplace.

Reliance on such salespeople, particularly in the new-build market, could lead to buyers receiving poor advice, struggling to secure finance, and even the loss of deposits, law firm director Jan McNamara warned.

A typical real estate agent must be accredited by the government regulator, the Real Estate Authority (REA), but those selling privately and salespeople working for developers do not require an REA licence.

Trade Me figures show nationwide in April, 9% of properties were listed by developers, 3% by private sellers, and 88% by agents.

There are over 32,000 properties listed for sale on Trade Me.

‘‘I always say that private sales are much more problematic than ones through an agent, even though agents have a reputation for being difficult and overpaid,’’ McNamara said.

‘‘They do have to abide by a set of rules that aren’t there for private salespeople.’’

McNamara said she recently had a client who was told by a developer’s salesperson they did not need finance approval before paying their deposit, because approvals only lasted up to 90 days and settlement could take two to three years.

McNamara said it was important to get approval early on regardless, because it facilitated the checks and balances banks brought. If a buyer paid their deposit and found they could not get a home loan at completion, they would be in default, may forfeit their deposit, and could be required to cover the developer’s costs.

If an REA-certified agent gave the same advice, it would be easier for a buyer to bring a claim of misrepresentation against them, and the agent could lose their licence to practise, McNamara said.

Ray White franchise owner Tom Rawson said there were other unregulated salespeople out there, including what he called ‘‘property finders’’ – people who approach homeowners by door knocking or letter drops, and offering to purchase the property without involving an agent.

‘‘It is often in perceived lower socioeconomic suburbs, where the thought of someone coming along and offering $1 million for a property and no real estate agent fee is appealing,’’ Rawson said.

‘‘You can have cowboys out there . . . and there is no comeback on that.’’

Tom Rawson Ray White franchise owner

He said it was not unusual for these people to flip the property or have another buyer waiting in the wings, and for the owner to find out they had missed out on hundreds of thousands of dollars.

By comparison, he said, REA members were generally required to take a property to the open market and had a fiduciary duty to the seller to get the best price.

They were also required to disclose any known faults or information that would be important to a buyer, such as whether the property was a leaky building.

‘‘In any industry that is unregulated, you can have cowboys out there, you can have people pulling the wool over people’s eyes, and there is no comeback on that.’’

Rawson said unregulated sellers were a growing problem, with many joining during the booming market of the past two years.

Developer listings more common in Auckland and Christchurch

Trade Me data shows that in the Auckland region, developers made up a larger proportion of listings, at 13%. Private sellers made up 2% and 85% were listed by agents.

In the Canterbury region, 5% of properties for sale were listed by private sellers, 14% by developers and 81% by agents.

In the Wellington region, 2% of new properties for sale on the site were listed by private sellers, 5% by developers, and 93% by agents.

The REA rules

REA chief executive Belinda Moffat said REA licensing protected consumer interests where an agent worked on behalf of an unrelated vendor.

She said the authority did receive occasional inquiries relating to property developers or buying off plans but it could only take action if there was a licensed real estate salesperson involved.

In cases where there was not, the rights of buyers may be covered by broader commerce legislation such as the Fair Trading Act and Consumer Guarantees Act, and contract law principles, Moffat said.

Settled.govt.nz gave a rundown of risks and issues arising from private sales.