Real Estate agents told to drop pricing tricks

Real Estate agents who trick house buyers by advertising false low prices have been given a warning by the Commerce Commission to stop the practice or face legal proceedings.

To show it is serious, the commission is bringing court action against one agent next month.

The commission and the Real Estate Institute are concerned that potential buyers are being fooled about price expectations on some houses advertised under the "buyer inquiry" format. That can happen when agents advertise houses at well below the minimum price the vendor hopes to sell for.

As a result, disgruntled house hunters waste time investigating properties they mistakenly believe they can afford.

Real Estate Institute president Howard Morley condemned misleading property advertising, saying any agent who acted deceptively deserved punishment.

"There's no room for misleading and if this has been done, those who are doing it need to be brought to task," he said.

The commission is taking agent Tim Whitehead to court for allegedly making misleading suggestions about the price a house would sell for.

Mr Whitehead is to appear in the Wellington District Court on March 22.

The commission claims that he advertised a property with a "buyer inquiry over" or "buyer inquiry of" $380,000, even though he knew the vendor would not accept less than $400,000.

At the time, Mr Whitehead was working for Harvey Group member Celestine Realty on Kent Tce, Wellington.

Ross Barraclough, a director of Celestine and Harveys, defended Mr Whitehead, saying he was trying to sell a house initially advertised for $450,000 which drew little buyer interest.

A disgruntled buyer - not the vendor - had complained about the price advertised.

Mr Whitehead refused to discuss the case.

Mr Barraclough said advertisements were placed in the Dominion Post and Property Press in early 2004 asking for buyers from $380,000 at a time when the market was fiercely competitive.

"I don't believe anyone was hurt. A friend who is a barrister said it was the best thing we could ever do to give some price guidance because otherwise people are just flying blind."

The commission said it had decided to prosecute Mr Whitehead and seek a settlement with Celestine Realty, although Mr Barraclough also denied the commission had sought any settlement with Celestine.

A commission spokeswoman said Mr Whitehead had pleaded not guilty to breaching the Fair Trading Act when he made an initial appearance last year. In 2000, the commission launched a campaign to eliminate misleading price banding, saying it considered the Fair Trading Act had been breached if the vendor would never sell at the lowest price on the band.

Australian real estate ethics crusader Neil Jenman said the buyer inquiry deception had been so widespread there that the Australian Competition and Consumer Commission took legal action.

"Agents believe that lying on price is almost essential. How else, they argue, do they attract sellers other than by over-inflating the likely selling price and how else can they attract big crowds of buyers other than by under-quoting the likely buying price?"

But Gary Ahearn, a director of the RE/MAX NZ real estate chain, said the case against Mr Whitehead dated back two years and criticism of buyer inquiry advertising was not entirely justified because an initial price expectation could change through the sales process.

He cited his own case of selling an Australian home for $85,000 less than he originally asked because he had found a house in New Zealand.

"Agents need to educate the buying public that if they ask for a range, we can't be stuck to it and if vendors give a price range, then that range should be flexible," Mr Ahearn said.

He called for the institute to take a firm stance. "Don't hold the agents to the range."