Supporting buyers and sellers to navigate a hot market – meeting your obligations under the Code of Conduct

Rising prices, low stock and hot competition for property are highlighting what real estate professionals have always known – property transactions can be high pressure and extremely stressful. How do you best support buyers and sellers to navigate a challenging property market? As a licensed real estate professional, the Code of Conduct is here to guide you.

Rule 9.7 – Give buyers time to seek professional advice

Soaring demand and competition for property is driving a sense of fear of missing out, or FOMO. Some buyers may feel they need to move quickly or face missing out, but there are many risks, and when issues occur with a real estate transaction, the financial and emotional impact can be significant and long-lasting.

Before a prospective buyer signs a sale and purchase agreement, Rule 9.7 of the Code of Conduct says you must:

• Recommend the person seek legal advice

• Ensure they know they can seek other advice or information

• Give them a reasonable opportunity to obtain that advice or information.

Encourage potential buyers to seek advice early, so when it comes time to make an offer, they have all the information they need to make their property decision with confidence. That could include speaking to their financial advisor or mortgage broker, checking in with their KiwiSaver provider or insurance company, and getting a LIM and building inspection report.

Rule 9.2 – Do not put unfair pressure on a buyer or seller

Real estate licensees are qualified and experienced professionals who must exercise skill, care, competence, and diligence at all times when carrying out real estate agency work, according to Rule 5.1. The Code of Conduct also says you:

• Must not engage in any conduct that places undue or unfair pressure on the seller or potential buyers (Rule 9.2)

• Must act in good faith and deal fairly with all parties (Rule 6.2).

An REA-commissioned survey of New Zealanders who had bought or sold in the 12 months to 30 June 2020 found 22% of people say they felt pressured to make quick decisions.

In today’s hot property market, both buyers and sellers are navigating a fast-moving and challenging environment. Consumers who are experiencing stress and anxiety could be vulnerable. Meeting the expectations in Rule 9.2 is critical, which means not placing unfair pressure on a buyer or seller.

Rule 10.7 – Work with the seller to disclose issues and defects

Openly sharing information is one way the seller can help to remove barriers to a swift and easy sale. You should have a frank discussion with the seller around the importance of disclosing all relevant information to buyers and the potential repercussions if they don’t. It is important to encourage the seller to be honest and up front throughout the process.

Under Rule 10.7 of the Code of Conduct, you're not required to uncover all hidden defects, but there is an expectation that a reasonably competent licensee will be able to identify common causes of hidden defects and discuss these with the seller. For example, if a home was built between the late 1980s and the mid-2000s and has a plaster-style monolithic cladding system, a competent licensee will know to ask the seller about weathertightness issues.

If you suspect there is a hidden defect, Rule 10.7 requires you to get confirmation, supported by evidence, from the seller that the defect doesn’t exist, or you must tell potential buyers about potential significant risks concerning the suspected defect so they can seek expert advice.

Good disclosure helps reduce the chances of a sale falling through and minimises the risk of legal action after settlement due to non-disclosure.

You can read the Code of Conduct in full and find more information about your obligations at rea.govt.nz.

Guidance needed for overwhelmed home buyers and sellers

More than 60% of New Zealanders say they lack the knowledge and information they need when trying to buy or sell property, according to our research. As a real estate professional, you’re in a powerful position to share information with buyers and sellers to help them navigate the transaction. Encourage them to visit settled.govt.nz, REA’s consumer website, to find comprehensive and independent guidance to support them through each step of the transaction.

Nadine Thomas, Industry Insights and Engagement Manager, REA