In their training rooms they cry, “Pitch it high watch it die, pitch it low watch it grow.” Why should they control what the market gets told on value, enabling them to create frenzies?
An auction in Auckland listed recently in the script stated “priced to Sell CV $1,340,000.” I said to the agent: “It’s an auction, there is no price! Is the CV the price?” His reply: “I’m just stating what the CV is. It will be priced to sell for Auction based on market feedback. At that stage, it would be priced to sell.”
What confusing waffle designed to get hundreds through the door believing it’s priced at $1,340,000 on a CV that turns out to have been four years old. By running the sentence together “priced to sell” CV $1,340,000, what would you think?
The auction system seems to have impacted negatively on the Sydney and Melbourne markets, as every property is auctioned. If we do not change something here, values could easily continue to rise out of control.
The worst thing for real estate companies and the auction system is stability and transparent value. The only thing that auctions well in a stable market is properties that are unique. There was a saying in the early 90s: “if you can’t put a price on it: auction it.”
NZ real estate companies now pay a higher split of the commission to an agent that lists auctions or tenders. If I walked into my office with a property priced accurately, backed up by a solid accurate CMA, I could get 30% if someone else in my firm sold it. But if I walk in the door with an auction or tender, I can get 70% of the commission if someone else in the firm sells it. It is obvious what an agent is going to do and why we are in the mess we are.
The government firstly needs to pass a bill under urgency amending the real estate agents act. The Law Society in conjunction with the REAA need to draft an agreement for the listing of a property for sale in New Zealand, that must be used by any company licensed under the REAA 2008 when listing a home for sale.
Other points that must be amended that don’t affect the property are:
1. The contract for sale is until the property settles. Currently, the estate agent gets paid 10 days after a sale. If the property does not settle the agent still gets a full commission. This is unique to New Zealand.
2. The deposit needs to be paid directly to the homeowner’s solicitor. Currently, the cheque is made out to the real-estate company. They take their slice then send the balance to the homeowner’s solicitor. Again, this is unique to New Zealand as in the rest of the world the real estate agent is paid commission on settlement day.
3. There is no need, if we change the system, for real estate companies to even hold deposits. AML is done at the solicitor’s office as the deposit comes directly to them as it does in the rest of the world.
4. The listing form must address value. It should be the sole duty of every estate agent to ensure all buyers are fully aware of the CMA on the property. It should in no way be confidential.
The NZ sale process is a joke to most from overseas. In England, you get an accurate value and a full list of comparable properties that have sold. The buyer is completely informed. In New Zealand, it’s embarrassing if the agent does hand out stats, as they can be everything sold in the last year regardless of value.
We need to move away from the Australian system and insist that our real estate system provide value to all buyers. The job of our agents should be to facilitate not frustrate and manipulate. We must move now while we have a government that genuinely cares about these issues. Last time when the REAA was being formed we changed parties. The Nats took control and the big companies sighed with relief.
The second issue: how New Zealand allows agents at auctions to buy multiple properties for overseas consortiums that have formed many different NZ registered companies. They simply add “And or Nominee” to the end of the purchaser’s name to buy at auction, then transfer to other entities the nominee and then they are removed from the contract.
There needs to be some way to track people buying for overseas consortiums as at present they disappear after transferring the contract to whichever company they buy for. I suggest they need to apply to a government agency to be removed from the transaction. If it’s legitimate, such as a family member buying for a family member, there will be no issues, but if the same person apples multiple times the system will pick it up.
It is time for New Zealand to step out of this no price marketing system that is destroying the property market for everyday families. We need to demand that estate agents provide accurate up to date information on properties instead of leaving the question of value up to the buyer. Why should a buyer have to work out what a home is worth? If the agent cannot provide a system to give buyers accurate value, we may as well deregulate the industry.
With the Labour party in power, I believe this is the only window of opportunity there will be to change the system in NZ for the better.
Placing the property value at the forefront of an agent’s duty and making a CMA a document to be distributed to buyers will stabilise the market. At that stage, any changes that affect market conditions will be able to be controlled by the government as it will not be coming from the sale system.
We are all aware there are other issues affecting house prices such as out of control margins for the building companies compared to Australian pricing; RMA and council bureaucracy with inflated costs; and unity planning. There are also not enough punitive measures to capture capital growth and share this with the government in terms of a CGT.
But let’s be honest, it is not okay that an estate agent controls both the value and the message.
If a house is worth $1.8 the message needs to be $1.8 million not $1.2 million. We should not allow New Zealand citizens to be toys that agents play with in a quest to get a better price for a homeowner.
The Labour Government needs to introduce an NZ property listing form that states the fundamentals of what we expect in the sale of residential property in New Zealand. Such a document should be used in the listing of all property in New Zealand.
A New Zealand property listing form prepared by the NZ Government in conjunction with the NZ law society would be a huge step for New Zealand. It would be the biggest change to the dominance that real estate companies have had over NZ homeowners since the Real Estate Institute was formed.
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