Overstating ads can put your real estate in trouble

Lucy Corry

Real estate advertisements are designed to make every property look like a dream buy. That is why they gloss over the negative aspects and linger on the good points, wanting you to be drawn in by the sun-drenched location rather than be put off by lack of garaging.

It is no crime to gloss over a property’s quirks, but lying by omission or design about more serious matters is not allowed.

If you do this when selling your property, you may be at risk of being sued by the purchaser.

When you are ready to sell your property, it is a good idea to get legal advice about your obligations before you sign an agency agreement.

Most of these agreements, which set out the terms and conditions of your contract with the real estate agent, require you to confirm that you are unaware of any undisclosed defects in the property and that you have not withheld any information about it.

As a seller, you must also confirm that your property has all the necessary consents and code compliance certificates for any building work.

Any outstanding consents, including ones that involve any works at a neighbour’s property, should be disclosed to the agent.

Agents’ obligations

This is important for several reasons. Licensed real estate agents have clear obligations when it comes to disclosure.

They must not mislead a seller or a potential buyer, or withhold any information. While it’s not up to the agent to uncover any hidden defects in a property, they must tell any prospective buyers what they know.

Under the Real Estate Agents Act 2008, if licensed real estate agents suspect that a property may have a defect then they are obliged to ask the seller about it, or advise potential buyers of any risks. For example, if a property is next door to a proposed new development, or if it’s in an area that’s been subject to flooding, the agent must tell prospective buyers rather than turning a blind eye.

Identifying risks

If your property may be prone to weathertightness issues because of its age or cladding, then the agent may have to disclose this potential risk to prospective buyers. If it does not have any weathertightness problems, it may be worth getting this confirmed in an expert report by a qualified building inspector who has professional indemnity insurance, understands the strict legal requirements of their role and carries out their work in accordance with the New Zealand Property Inspection Standard.

This will help make the sale process as efficient as possible.

If you know there are issues with the property, whether it is something small like a garage door not working properly, or a bigger deal like an unconsented deck, it is best to discuss them with the agent.

Managing problems

They can help you decide how to manage the problem, whether that means fixing it, or disclosing it to potential buyers.

However, a licensed real estate agent must not disclose any problems with your property to buyers without getting your consent first.

If a seller does not agree on a disclosure, the agent is required to stop working for them rather than disclose any defects without consent.

Caveat Emptor

These rules offer more protection to buyers than the traditional attitude of ‘caveat emptor’ (buyer beware), which assumed that the seller would always know more than the buyer and any sale was at the buyer’s risk.

However, buyers should always do their own research about a property before signing a sale and purchase agreement.

Buyers should also ask the agent about anything they are concerned about, no matter how trivial it may seem.

It is far better to get an answer upfront than find out when it’s too late.

For more independent advice about selling your property, check out sellingahome.reaa.govt.nz

Lucy Corry is Media Communications Manager at the Real Estate Agents Authority based in Wellington. For more free and independent advice on buying a property, please access the Home Buyers’ Guide at buyingahome.reaa.govt.nz.

If you still have questions, call the Real Estate Agents Authority (REAA) on 0800-3677322 or 04-4718930 from a mobile phone.


Photo Caption:

There is nothing like a ‘trouble-free’ house

(Picture supplied by Real Estate Agents Authority)

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