The process of selling and buying real estate can be overwhelming and stressful especially when considering the amount of paperwork and preparation involved with these transactions. Most sellers in New Zealand still rely on real estate professionals to sell their homes rather than selling privately. The reasons for this can vary, but many home owners clearly feel that real estate professionals can:
Are purchasers better protected when purchasing through real estate professionals? – “most absolutely.” This is especially so if the purchaser lacks sufficient experience in property investment.
Generally, selling one’s property privately is not classified as being “in trade” and hence these activities are often not captured by the Fair Trading Act 1986. What this then means for consumers is that if a private seller misrepresents the property or fails to disclose important facts about the property, then the only remedy available is in civil action which can lead to significant cost and time delay with no guaranteed outcome. More importantly, the onus of proof in these civil actions lies solely with the person bringing the claim.
In comparison, if the property was offered “in trade” via a real estate agent, then an option exists for a complaint to be made to the Commerce Commission. Under the Fair Trading Act, the Commerce Commission has the role to enforce this Act by investigating and prosecuting traders. The Commission can also ask the Court to order compensation for consumers who have suffered loss. The Consumer Law Reform Bill proposes to take this step further and include an additional provision under the Fair Trading Act which will place the onus on the person making representation (i.e. the trader) to substantiate the representation, failing which an offence will be established.
Under the Real Estate Agents Act 2008, remedies are available to have fines imposed or to have compensation paid for the loss suffered by the person bringing the complaint but only persons holding license under this Act can be found guilty of unsatisfactory conduct or misconduct that would subject them to these penalties.
Whilst various remedies available to the aggrieved buyers may not necessarily bring joy to the real estate industry, a warning is definitely there for those who purchase property without a licensed agent.
The Real Estate Agents Act 2008 was enacted to protect consumers. The compulsory licensing regime under this Act was also designed to protect consumers so that they get to deal with real estate professionals who must comply with strict requirements and professional standards and are required to keep up with continuing education.
So, the message to potential buyers of real estate, business or potential lessees is to make most of this protection provided and choose to deal with persons licensed under the Real Estate Agents Act 2008. You should also be aware that not all real estate licensees are the same. Only real estate licensees who are members of the Real Estate Institute of New Zealand (‘REINZ’) can use the title ‘MREINZ’ on the business card or other marketing materials.
REINZ members are bound by strict codes of ethics and are expected to develop and enhance the real estate industry by providing excellent customer care and upholding excellent standards of practice that are open, ethical and honest.
DISCLAIMER: The information contained in this material is not intended to form professional legal advice or legal opinion. Readers are advised to obtain their own specific legal advice.
Think Government Valuation is an indication on market value?
It is an unfortunate fact that many people are confused by the so-called Government Valuation when considering the market value of a property.
There is now no such thing as a Government Valuation. The Government recently decided to no longer be involved in property valuation and passed the Rateable Valuations Act 1998. This provides for local bodies to obtain a “rateable value” sometimes called QV or ‘quotable value” on which it can base the property rates. RV (or QV) is not necessarily an indicator of true market value (neither was Government Valuation). It is true that in some areas, for example where there are large numbers of similar properties, a RV can provide a guideline of market value. For example market value might reasonably be calculated as being a certain figure above or below RV. But this figure varies given that Rateable Valuations are only set once every three years and markets can change dramatically in that time.
It is also important to realize that RVs are normally undertaken without the “valuer” entering or probably in most cases even sighting the property. To put this into perspective, the company “valuing” North Shore properties was paid $5.58 for each “valuation” whereas a proper valuation would cost at least $250.00 plus. We sometimes ask people why they would base a decision involving hundreds of thousands of dollars on a piece of information costing just over $5.00.