Lane Nichols is a senior NZ Herald reporter

A tale of two houses - Turning a quick profit

An Auckland property at 71 Fitzroy St, Papatoetoe. Photo / Greg Bowker
An Auckland property at 71 Fitzroy St, Papatoetoe. Photo / Greg Bowker

Property deals involving two South Auckland houses have seen the Real Estate Agents Authoritytake action against three agents. Lane Nichols investigates the transactions.

PROFIT71 Fitzroy St, Papatoetoe

Karlene and Mark Mager met real estate agent Aaron Hughes on June 24, 2014 and later listed their three-bedroom 1940s family home for sale with Barfoot & Thompson's Papatoetoe office.

Hughes prepared a comparative market analysis for the property but failed to include a valuation appraisal or check whether the 1000sq m section could be subdivided.

He advised the Magers the best way to find out what the property was worth was to market it and take it to auction, neither of which occurred due to cost constraints and their desire for a quick sale.

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Mager, a 49-year-old electrician, said Hughes had "the gift of the gab".

He initially seemed "reasonable - a fair enough sort of person".

"I've talked to a lot of people and you can usually tell a car salesman."

They signed an agency agreement on July 15, hoping to sell their home for between $650,000 and $680,000.

A short time later Hughes presented an offer of $610,000 from investor Gulab Singh Padam Singh Bisht. A sale price of $660,000 was eventually agreed and a sale and purchase agreement was signed on July 21. It included an "on-sell clause" stating the property was being bought for investment purposes and "may be resold prior to or after settlement".

Hughes gave the sale and purchase agreement to his branch manager Avind Lal, who immediately made inquiries about whether the property was subdividable. It was.

Later that day, Lal contacted investor Ramesh Rajini who he knew had experience in subdivisions. Rajini liked what he saw and signed a purchase offer for $760,000. Though the ink was not yet dry on the Mager sale, Hughes presented the new offer to Bisht. It was accepted, meaning the property had on-sold the same day of purchase for an additional $100,000 - 15 per cent more than what Hughes secured for the Magers.

Documents prepared by the Real Estate Agents Authority show Hughes received commission on both sales, totalling nearly $45,000. Bisht made an instant $100,000 profit, less Hughes' cut, in under 24 hours.

Aaron Hughes and Avind Lal.
Aaron Hughes and Avind Lal.

Hughes was charged with misconduct. Prosecutors said he failed to meet his fiduciary duty causing his clients significant financial loss.

He also failed to expose the property to other Barfoot licensees or establish whether they knew of other potential buyers.

"Mr Hughes must have known that he was failing to achieve the best possible price for the Magers, or at the very least was indifferent about doing so," the REAA said.

His actions were tantamount to dishonesty and demonstrated "his preparedness to put his own interests in achieving a quick sale and multiple commissions" ahead of his clients' interests.

For his part, Lal admitted serious misconduct for incompetent or seriously negligent real estate work and failing to properly supervise Hughes.

He has voluntarily suspended his license but accepts a formal suspension of his licence is inevitable.

Mager said he and his wife were alerted to Hughes' offending by Barfoot bosses.

"They explained that as soon as the property had been handed over, it had been resold for an extra $100,000. I was pretty pissed."

Thepair took legal advice. Barfoot eventually "put a package together for us", Mager said. "They gave us the extra $100,000 and gave us back our commission. They even paid for the lawyer."

14 Carlie St, Papatoetoe

An Auckland property at 14 Carlie St, Papatoetoe. Photo / Greg Bowker
An Auckland property at 14 Carlie St, Papatoetoe. Photo / Greg Bowker

This humble, three-bedroom, 1950s house had been the Hedge family home for half a century.

But in 2014 it became the focus of frenzied investor activity that saw it sold three times in just 11 days for nearly $100,000 in capital gain.

David Hedge had finally convinced his mother, a widow in her 80s, to sell and move into an apartment.

Their old home sat on an 842sq m section and was subdividable - an irresistible recipe for property speculators.

After canvassing various firms, Hedge settled on local Barfoot agent Aaron Hughes.

"He was my preferred option," Hedge said. He seemed "honest and upfront".

Hedge, who had power of attorney for his mother, signed an agency agreement with Barfoot on September 9. The property was to be fully marketed and the listing sent out to other Barfoot agents for exposure to more buyers.

However, Hughes did not provide a written appraisal. The property was never marketed nor entered into Barfoot's listing system.

Hughes brought several investors to see the house and presented a $610,000 purchase offer to Hedge on September 11 from property developer Gulab Singh Padam Singh Bisht.

A sale and purchase agreement was signed later that day for $630,000 - $70,000 over CV.

A few days later, on September 15 or 16, Bisht on-sold the property privately to WBP Ltd for about $655,000 - investigators could not determine the exact figure and the transaction is not listed on property records.

Kymm Hape valued the property at between $710,000 and $725,00.
Kymm Hape valued the property at between $710,000 and $725,00.

On September 16, WBP director William Watson contacted Hughes' Papatoetoe Barfoot colleague Kymm Hape, saying "he wished to list the property and on-sell it".

The next day, Hape gave Watson a written appraisal valuing the property between $710,000 and $725,000.

Watson signed an agency agreement with Hape on September 22.

The same day, property developer Anthony Bidesi agreed to buy the modest house from WBP for $725,000.

It had been sold three times in less than a fortnight, with its price jumping by $95,000.

Bidesi told the Weekend Herald he was led to believe by another Barfoot agent that he was buying the property from a sick, old lady who was moving into a rest home, and that she would not accept less than $725,000.

He was surprised when the sale and purchase agreement was emailed to him with the vendor's name listed as WBP Ltd.

"I smelled a rat."

Bidesi investigated and confirmed the property had been on-sold since the initial purchase.

He wrote to Barfoot management on September 24 saying he had been misled and that he believed standards of professional conduct had been compromised by the firm's agents.

He was summoned to a meeting the next day with two senior Barfoot managers.

Bidesi told the Weekend Herald they offered to pay his legal fees and for a valuation, later helping to negotiate a cheaper sale price for the house of $670,000 as a result of his "due diligence investigations".

"They suggested to me there would be an internal arrangement regarding the commission ... to facilitate the reduction in price.

"They were trying to resolve the matter amicably without it blowing up.

"The implication was there that it could be resolved internally."

Bidesi said he raised the prospect of taking the matter to the REAA because of the misrepresentation and fears the Hedge family had sold their home for below market value.

However, there was no suggestion of him being silenced in return for the firm's assistance, Bidesi stressed.

He pulled out of the sale the next month and the home was eventually on-sold in December 2014 for $710,000 to current owners Adeeb and Mariam Youkhana.

A colleague of Bidesi filed a complaint with the REAA, resulting in an investigation and charges against Hughes and Hape.

Hughes pleaded guilty to misconduct while Hape pleaded guilty to a lesser charge of unsatisfactory conduct. The Real Estate Agents Disciplinary Tribunal has reserved its decision.

Hape's lawyer Tim Rea told yesterday's penalty hearing his client's offending was at the lower end of the scale and the only aberration on an otherwise "unblemished" 23-year career.

Meanwhile, Hedge this week confirmed his family received a financial settlement from Barfoot after the on-selling came to light.

"We came to an agreement. This was about the morality of the whole thing and the reputation of Barfoots."

He said he wasn't particularly worried about the price his old home fetched, and just wanted to ensure his mother was looked after.

"I wasn't looking for the nth degree of profit, but I expected to get a good market value."

He chose not to lodge his own complaint with the REAA to protect his mother from more "fuss" relating to a transaction that was supposed to be stress-free.

He was concerned to read about the Mt Wellington transaction earlier this year, and asked why Hughes wasn't sacked by Barfoots nearly two years ago when his case was revealed.

"I mean, two years. What else goes on in two years?"

- NZ Herald

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