Real estate agents warned not to mislead

The Commerce Commission says real estate agents need to heed the warning contained in a recent court case relating to pricing practices to avoid breaching the Fair Trading Act.

Thursday, December 13th 2007, 3:51PM

by The Landlord

Wellington real estate agent Tim Whitehead was sentenced in the Hastings District Court this week on three charges of breaching the act and was fined $7,500.

The charges related to three house sale advertisements which promoted a Wellington property as being available for sale at “buyer enquiry over $380,000.” However, Whitehead was aware that the vendor was not willing to accept less than $400,000 for the property.

“This case reinforces the commission’s view that a “buyer enquiry over” price must reflect a price the vendor will give serious consideration to,” says commission Chairman Paula Rebstock. “If the vendor’s bottom line is higher than the “buyer enquiry over” price, it is likely to be misleading.”

Judge MacIntosh noted in her judgment on the case that once a property is advertised by price, there is an obligation under the act to ensure it is not misleading. One of the reasons being to ensure that potential purchasers do not waste time and money trying to buy a house when there is no prospect of their offer being accepted.

“Whitehead had a defence in relation to six of the charges, in that he did not know at the time that the vendor would not accept a price below $400,000. However once he became aware of this, it was not acceptable to continue to advertise the property at a price that was not going to receive the vendor’s serious consideration,” Rebstock says.

“Buying a house is, for most consumers, their most significant purchase. The process of putting in an offer can be costly, involving for example obtaining building and LIM reports. To do that on the basis of misleading information about the price expectation can lead to a waste of the potential buyer’s money,” Rebstock says.

Rebstock also says the commission will continue to enforce the act where consumers are being misled, including misleading use of the “buyer enquiry over” pricing mechanism.

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