5 minute read
No suprises - why getting to know a property before listing is always worth the time and effort
Between a client’s eagerness to ‘get the property on the market’, your natural desire to progress towards sale, and general workload in a busy environment, there can be pressure to move swiftly through the appraisal and listing process. But, taking the time to be careful and thorough with your due diligence from the outset is not only an obligation (under rule 5.1 of the Code of Conduct), it can save you time and trouble in the long run by preventing avoidable issues in the first place.
Many of the complaints we receive at REA are from consumers unhappy that they have not been provided with essential or accurate information about a property by the listing licensee. Typically, these issues result from oversight rather than intention to mislead.
Advertisement
However, it’s important to note this can still constitute unsatisfactory conduct. When listing a property, the onus is on the licensee to thoroughly research and understand what you are selling. Your client and potential buyers are relying on you to be knowledgeable about the property’s details.
Getting it right at the start of the sale process by ensuring the property’s details are accurately reflected in the agency agreement is critical because of the flow-on effects that can arise if this isn’t done. Mistakes or oversights at listing time can lead to issues such as advertising being deemed misleading, or potential buyers discovering compliance issues that weren’t identified and disclosed upfront.
Don’t rely — verify
Referring to your agency’s practice guidelines will help ensure you follow their recommended approach to appraising and listing a property. It’s also key to understand the stumbling blocks that can catch you out during this process, and of which you need to be aware.
Remember that licensees are expected to be proactive in gathering and verifying the essential information about a property, and if necessary, to dig deeper when something doesn’t seem quite right.
Clients are naturally a key source of information about their property. However, our research indicates that a significant proportion of clients may deliberately withhold information from licensees, or unintentionally provide inaccurate information (e.g., misremembering when renovations were carried out, which can affect compliance obligations).
Our research also shows that many clients rely on the licensee as the expert to help them navigate their disclosure obligations. For this reason, key property information supplied by clients should always be verified through documentation, direct inspection, or a combination of both.
When is a bedroom not a bedroom?
Just because a living space appears to be used for sleeping does not guarantee it can be marketed as a bedroom. For instance, converted garages cannot be described as bedrooms unless they have the appropriate consents and certifications, and rooms comply with the minimum requirements under the Housing Improvement Regulations 1947.
If a conversion has no Code Compliance Certificate (CCC), REA considers it misleading to advertise it as a bedroom (e.g., by including it in the number of bedrooms the property is said to have) — even if you intend to disclose the lack of a CCC to prospective buyers.
Go looking for red flags
Clients often see your initial inspection of a property as being all about appraising its value. They may want to accompany you as you walk through and showcase its features. But, it’s important to use the inspection as an opportunity to help verify information you’ve been provided, and look for possible red flags that may require further investigation.
Question:
• Does the land area in the Record of Title seem realistic?
• Does the floor plan differ from Council records?
• Are there signs of alterations (such as features not matching the age of the home) that the client has not mentioned?
• Do all the rooms that appear to be used for sleeping meet the legal requirements to be used as a bedroom?
• Are there any signs of stigmatised materials that will need to be documented and disclosed?
Remember, thoroughness is key to meeting your professional obligations. The Real Estate Agents Disciplinary Tribunal recently found in the case Beath and REAA and Mike Pero and Beath and REAA and Kemp & Scoble [2021] NZREADT 40 that the licensees had failed to exercise skill, care, competence and diligence as they did not disclose the presence of Dux Quest piping (a stigmatised material) under a house, even though they hadn’t known it was there, stating:
“…where there is reasonable access to the underfloor area of a property, reasonably competent licensees should take the opportunity of looking into (the) area, to satisfy themselves that there are no issues of concern — whether these be plumbing, piling or any indication of other issues.”
Knowledge is your best protection
Ultimately, under rule 5.1, your role as a licensee requires you to source pertinent information and take care when completing due diligence at listing time.
Moreover, knowing the property is the foundation for you and your agency colleagues to market it appropriately on behalf of the client. The more thorough you are, the more you can anticipate and avoid (or at least mitigate) a range of potential issues later in the transaction process.
Nadine Thomas
Head of Engagement, Insights and Education, REA
