Isaac Davison is a NZ Herald political reporter.

Real estate watchdog to crack down on house-flipping

Photo / Graphic
Photo / Graphic

New Zealand's real estate watchdog is ramping up its crackdown on house-flipping by investing in new technology which allows it to track when properties have been quickly re-sold for huge profits.

The move will allow the Real Estate Agents Authority (REAA) to proactively chase agents involved in transactions without relying on complaints from the public.

It comes after a Herald investigation revealed a series of cases in which houses were quickly re-sold - sometimes just hours apart - for big mark-ups, leaving homeowners hundreds of thousands of dollars out of pocket in some cases.

Agents who fail to disclose to a vendor any links with future buyers can face misconduct charges and lose their licence.

But the Labour Party says such breaches are often not picked up. It wants the watchdog to have greater resources to detect flipping - especially in Auckland's bloated housing market - and for non-disclosures to be outlawed.

Faced with a series of controversial on-sales cases highlighted by the Herald, REAA chief executive Kevin Lampen-Smith said yesterday his organisation was becoming more proactive in its monitoring of wrong-doing.

Technological advances would soon allow it to quickly access and analyse data on property transactions as they occur.

"This will enable closer scrutiny of flipping without waiting for a complaint, or information from the media, months or years after the transaction before the matter is looked into," Lampen-Smith said.

Appearing at a Parliamentary select committee yesterday, the REAA revealed it had become concerned enough about the practice of flipping that it recently reviewed 300 cases in Auckland in which houses were bought and resold within 12-months.

Photo / Graphic
Photo / Graphic

The authority's chairman John Auld said the review was carried out to ensure agents were looking after the interests of their vendors and "weren't in some sort of relationship with the purchaser".

However, the review found only a handful of the transactions had required disciplinary action.

Home Owners and Buyers Association Association (HOBANZ) president John Gray said any collusion between an agent and a speculator was notoriously difficult to prove.

It was deeply hurtful for sellers when they saw their home resold for a large profit.

"There always has to be a bit of scratching beneath the surface to determine whether or not the agent got a double commission or were involved in that second sale.

In most cases, we don't see that. It's just been smart investors taking advantage of the way the market runs.
John Gray, Home Owners and Buyers Association

"The original owner, who sold the property and is now feeling aggrieved, actually got a fair market price for the house. It's the next owner who paid over the odds for it."

Labour Party housing spokesman Phil Twyford wanted the REAA to raise fines for wrong-doing.

A $3000 fine for agents found guilty of misconduct was dwarfed by the $30,000 commission fees they could receive on a sale, he said.

Twyford also hoped the REAA would follow some Australian states by cracking down on underquoting in New Zealand: when agents appraise a property at below market rate to enable an investor to pick up a bargain.

Auld said the authority had received complaints about the practice. But he said agents were not the only ones involved in marketing properties.

Banks, lawyers, insurance companies, building contractors and others were involved in "pushing information out to the public".

"What we are trying to do is educate the public to recognise their rights and their legal obligations in these transactions," he said.

The body which represents licensed realty agents is defending the industry and says sufficient checks are in place to root out misbehaviour.

Real Estate Institute chief executive Bindi Norwell said there was a "robust legislative framework in place to minimise the risk of poor practices" by agents.

Just 1 per cent of the country's 15,000 licensed agents faced misconduct or unsatisfactory conduct findings last financial year.

- NZ Herald

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