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Commission sends warning to real estate industry


Commission sends warning to real estate industry - advertised prices must reflect vendors’ expectations

Two key judgements against Palmerston North real estate agency Century 21 Morris Realty and its agent Bette Ireland have reinforced the Commerce Commission’s view that real estate agents must accurately reflect a vendor’s price expectations when advertising property.

“Agents cannot hide behind the fact they don’t know what a vendor’s bottom line is,” said Director of Fair Trading Deborah Battell. “They need to understand a vendor’s price expectations and obtain the vendor’s consent as to how that expectation is reflected when advertising property for sale.”

In September last year, Century 21 Morris Realty pleaded guilty to charges laid by the Commerce Commission of making false or misleading representations in advertising about the price payable for a property. The case involved ‘price banding’, or advertising the price of a property as falling within a range. Mrs Ireland, who acted on behalf of the company, chose to defend similar charges, and has recently been found guilty of six breaches of the Fair Trading Act. Century 21 Morris Realty and Mrs Ireland were fined a total of more than $16,000 by the Court.

Judge Ross, who sentenced Mrs Ireland in the Palmerston North District Court, said, “If an offer at the lower end of the buyer enquiry range is not in fact an offer which the vendor will consider, the representation as to the range is apt to mislead.”

“The agent must make enquiries of the vendor and the buyer enquiry range must reflect the range in which the vendor will at least consider an offer, rather than reject it out of hand,” he added. “These cases reinforce the Commission’s view that real estate agents must accurately represent and seek agreement of a vendor’s expectations in all advertising,” Ms Battell said.

“To find that what you believe to be a fair offer is not even in the same ball park as a vendor’s expectation can not only be disappointing, but very expensive. People often invest a lot of time and money in the house-buying process – from travelling some distance to view a property, to commissioning valuation reports before putting in an offer.”

“This doesn’t just apply to using a buyer enquiry range. The Commission also considers that advertising practices such as ‘buyer enquiry over’ and ‘negotiation range’ may also mislead consumers if they are at a price below which the vendor is prepared to accept.” Ms Battell added.

The Commission is interested in receiving information from vendors or buyers who consider they have been disadvantaged by advertising practices such as ‘buyer enquiry range’, ‘buyer enquiry over’ and ‘negotiation range’, and it will investigate if this information indicates that there is a widespread problem. Consumers may contact the Commission on 0800 94 3600.

Background The Commerce Commission initiated its investigation into Century 21 Morris Realty Limited on the basis of a complaint laid by a prospective property buyer. In June 2000, Mrs Ireland put a house on the market on behalf of vendors who hoped to sell their property for $110,000 but would settle for near the government valuation of $97,000.

The property was initially advertised in a $90,000 - $110,000 buyer inquiry range. This range was dropped to $80,000 - $99,000, then to $80,000 - $98,000, and subsequently to $70,000 - $98,000, without the vendor’s consent. During this time, several offers of up to $87,000 were rejected.


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