The Real Estate Agents Authority is threatening legal action against any licensees who offer properties to property finding services.
By Susan Edmunds
The practice of property finding came under the authority’s legal spotlight last year when Francisca Forster’s company Home Buyers, a property trading company that buys property in its own name and on-sells it for a profit, with settlements that are sometime contemporaneous, was found guilty of carrying out real estate agency work without a licence.
She appealed the conviction and $7000 fine in February and was discharged without conviction. But the conviction and penalty on Home Buyers was unaltered.
At the time, Martin Sawyers, legal counsel for the REAA, said property finders and companies and agents that worked with them could face legal action.
The REAA has received reports of others involved with the activity, who are being investigated.
Kevin Lampen-Smith, chief executive of the REAA said the authority was concerned about licensees being involved in any way with unlicensed activity.
He said: “A reasonably common version of this activity involves businesses that purchase properties and then on-sell them before settlement. Having identified a property they will put in an offer conditional on a reasonably long period of due diligence. During the period of due diligence they market the property seeking a quick on-sell at a profit anywhere between $10,000 and $40,000. “
If the property finders were not able to on-sell the property, they would not declare the contract unconditional.
He said the authority's view was that it was unlicensed real estate work. It planned to investigate and prosecute those involved.
“We are also concerned at the role some licensed agents may play in facilitating this activity. It seems that often the businesses carrying out this activity have close associations with real estate licensees. The licensees, aware that there is the potential for a quick sale, will notify the business of the property and facilitate the initial sale subject to due diligence. Thus, for every little effort, the licensee has secured their commission. “
But that meant that the licensee was not acting in the best interests of their client. “They have facilitated a quick sale fully aware that the purchaser is going to seek to on-sell that property at a profit.”
They had not sought the best price for their client and the purchaser had the benefit of a long due diligence period with little or no risk of having to complete the purchase unless they obtained an on-sale at a profit.
Anyone aware of licensees participating in this kind of activity was asked to contact the REAA, Mr Lampen-Smith said.
Source: Landlords.co.nzcomments powered by Disqus