KEY POINTS:
People selling their homes could pay thousands more in commission in the wake of a nearly $1 million ruling against an Auckland real estate company accused of a conflict of interest.
The warning comes from Consumers' Institute chief David Russell in the wake of a High Court ruling
against Takapuna-based Premium Real Estate for the way it handled the sale of an Auckland house.
Premium was found to have engaged in misleading and deceptive conduct after Mark and Deborah Stevens sold their Milford house in 2004 for $2.5 million, only to see the buyers, Mahoenui Valley Trust, sell it five months later for $3.2 million.
Justice Patricia Courtney found Premium had failed to declare a conflict of interest by not disclosing an agent's relationship with Mahoenui.
Mr Russell said "if more agents get pinged and make more claims, insurance companies are faced with a higher risk, premiums rise and in the end the poor consumer will pay.
"This puts agents on notice to behave themselves. Premium is putting a brave face on this and saying the insurance is going to pay but the reality is there will be a lot of agents who will be twitchy as a result of this case."
New Zealanders shell out an average 4 per cent on the first $300,000 of the sale price, then about 2 per cent above that.
Australians pay according to which state they live in, but their fees are closer to 2 per cent flat, regardless of the sale price. The British pay 1.5 to 2 per cent commission.
Australian-based Kiwi property author Terry Ryder estimates New Zealanders pay around $1 billion a year in agents' fees, with commission charged on a median-priced $324,000 home coming in at about $14,000.
Former Real Estate Institute professional standards manager Gordon Meyer also predicts agents could pass on rising professional indemnity insurance fees to the public disguised within the commission regime.
Real Estate Institute head Murray Cleland refused to comment on the Premium ruling while it was under appeal.
Associate Justice Minister Clayton Cosgrove said it vindicated his decision to reject the institute's pleas this year to increase agent fines from $750 to $30,000. He said rising fines would have been no deterrent in cases such as the house Premium sold.
"I find this case very disturbing," Mr Cosgrove said, "and it reinforces my view that the real estate sector, and the institute, has to sort itself out."
Vital things you need to know
Four questions to ask your real estate agent:
* For whom are you acting?
* Is there any conflict of interest?
* Are you associated with the buyer in any way?
* Is there anything else I should know?
- David Russell, Consumers' Institute