Open homes, auctions, offers and no house. Frustration over house-price signals

Author
Ben Leahy, NZ Herald,
Publish Date
Sat, 19 Jun 2021, 10:03AM
(Photo / NZ Herald)
(Photo / NZ Herald)

Open homes, auctions, offers and no house. Frustration over house-price signals

Author
Ben Leahy, NZ Herald,
Publish Date
Sat, 19 Jun 2021, 10:03AM

A fed-up house hunter who has missed out at more than 20 auctions claims buyers are being given false hope that they can afford homes beyond their budgets.

But the real estate industry is defending the actions of agents, saying they can only give price guidelines and ultimately have no way of knowing how much a home might sell for at auction.

Monique Hodgson said she and her partner had endured "an awful experience full of disappointment" after going to more than 50 open homes and putting in seven unsuccessful purchase offers since October.

She called for tougher laws after she claimed one agent urged her to go to a Mt Albert home's auction, saying other buyers were looking to pay about $1.5 million for the house.

Yet, at auction, the home appeared to reach its reserve — the minimum price at which the seller was willing to sell — only when bidding neared $2m, Hodgson said.

The agent told the Weekend Herald she acted appropriately, following all professional conduct rules, including one barring her from telling buyers the seller's reserve price.

But young couples wondered why they had bothered to come as the bidding instantly rocketed out of reach, Hodgson said. "We just don't like our time and money to be wasted when it can be easily avoided by agents and sellers giving more accurate price estimates," she said.

House hunters are contending with booming Auckland prices.

The city's median price hit another high of $1.15m in May, leaping 27 per cent in 12 months, the Real Estate Institute reported this week.

That was $150,000 higher than October's median $1m price when Hodgson started looking.

Such wild jumps made house prices hard for anyone to predict.

Hodgson said it was ridiculous for agents to encourage people to chase homes that ended up selling for half a million dollars above their budgets.

She felt agents were simply trying to get as many people to auctions as possible to drum up interest.

Yet buyers typically had to fork out more cash in legal and building inspection fees with each auction they attended or purchase offer made.

She hoped tougher rules could be brought in, saying the Australian state of Victoria had made it illegal for real estate agents to "underquote".

That meant agents could not advertise or advise buyers of a price that was less than the auction reserve price, a seller's asking price or a written offer the seller had already rejected because it was too low.

The agent who sold the Mt Albert home said she sympathised with Hodgson, but said the issue was tricky for agents too.

Under their code of conduct, agents could not reveal the reserve price until after an auction started.

Sometimes agents didn't even know the reserve price, the agent said.

That was because sellers might not decide what price they wanted to sell at until an auction had started.

Even then, sellers were free to change the reserve at any time during an auction, if, for instance, the bids were lower than expected.

The city's median price hit yet another record high of $1.15m in (May. Photo / Michael Craig)

Agents also had to present sellers with a written price appraisal before homes were listed for sale. That gave an estimated price based on recent sales of comparable houses.

Yet agents were again barred from sharing this information with buyers.

Selling agents were allowed to tell buyers, however, what they had been hearing from the "market", the agent said.

That meant the price other buyers were saying they were willing to pay.

So when the agent gave Hodgson a $1.5m guideline for the Mt Albert home, she said she was passing on the typical price other buyers had said they'd be willing to pay for it.

The Real Estate Institute, the lobby group for agents, backed this up, saying agents could not disclose the reserve price and "certainly " had no way of knowing in advance how much a home would fetch at auction.

"This is even more true in a market that is moving quickly, such as what we've seen over the last six-12 months," said institute chief executive Wendy Alexander.

But the Real Estate Authority, the government body overseeing the industry, said agents could be penalised if they provided misleading price expectations. That included advertising properties at prices that didn't reflect what the seller wanted.

Chief executive Belinda Moffat pointed to a September 2019 REA Complaints Assessment Committee decision to fine an Auckland agent $1500 for advertising a home for offers from $700,000 when the seller expected a sale closer to $880,000.

Hodgson said she had run into similar issues when offering on homes that weren't up for auction.

Twice — once for a Mt Eden home and again for a Waiheke property — she'd offered about $1.4m based on what the agents had said the seller wanted. Yet both times, the sellers rejected the offers and eventually withdrew the homes from sale.

In another instance, a private seller advertised a separate Waiheke home for sale online at $1.25m.

Hodgson put in an offer at this price, but the seller delayed and emailed her back a month later, saying he had received a new $1.3m offer and would she pay more.

She didn't. But the seller kept raising the price in this way until he now had the home listed for sale at $1.5m.

REINZ's Alexander said agents had to give all written offers to a seller, even if the price was below what the owner would sell for. "Most agents will do their best to explain to purchasers that this might not be enough to get the vendor to sell."

Alexander also said private sellers were not governed by the same REA rules as licensed real estate agents, meaning buyers were not protected by its code of conduct.

The REA's Moffat urged buyers to do their own research when making offers on homes.

That included "seeking a registered valuation" and researching the sales of similar properties.

Moffat acknowledged this could cost extra money, but said it would likely be worth it in the long run.

Hodgson wants agents and sellers to be forced to give better price guides. "I feel like it's the Wild West out there, and there are no rules."