The vendors said their neighbour laughed when they asked about the six-storey building and asked where they’d got their information from.
The vendors complained to the Real Estate Authority that the $3 million sale price they had hoped to achieve was affected by the realtor’s actions because three bidders didn’t show up to the auction.
The authority found Bailey guilty of not exercising care, competence and diligence and said while he was attempting to follow rules of full disclosure, the fact the information was raised by a prospective buyer should have raised red flags.
“The prospective purchaser could have an interest in lowering the price and deterring other prospective buyers from bidding at the auction,” the authority said in its decision.
However, Bailey’s manager at Unlimited Potential Real Estate in Auckland, Grant Lynch, told the Herald Bailey received the information from a prospective buyer who was an architect who thought he’d found a genuine issue with the property.
“There’s no way he was trying to dupe him,” Lynch said.
“I believe he thought he’d found a legitimate flaw and passed it onto Neil.”
The authority said the prospective buyer had been researching geomaps and found an overlay affecting the property.
Lynch said the architect didn’t turn up to the auction, and with the benefit of hindsight, Bailey could have done more investigation to assess the legitimacy of the evidence.
He said half an hour before the auction was scheduled to begin, the agency assured the vendors it was not too late to delay it but that they wanted to proceed.
The house didn’t end up selling at auction, but the vendors accepted an offer of $2.85m several days later.
“It was a bit of a double-edged sword for us, because if the information had been correct and we hadn’t disclosed it, then we’d likely have been facing an REA case from the purchaser,” Lynch said.
The authority said it would have been helpful for the vendors to know where the evidence given to Bailey came from, and that had the owners known it was from a prospective buyer, they might have investigated its veracity further or delayed the auction until they could.
“When the licensee was first advised of the application, he should have tried to verify the information, for example, by contacting the adjoining neighbours, particularly as he had not seen the application himself,” the authority said.
“Had the licensee used this approach, he would have quickly discovered that the information was incorrect.”
The authority said Bailey was under pressure to run a successful auction for the vendors, but said there wasn’t enough time to verify the new information.
“The committee considers the handling of the new information by the licensee was sloppy and could have been handled better, as it was misleading and could have had a material effect on the outcome of the auction.
“… the licensee was too quick to decide that he had to disclose this new information to both his client and the prospective purchasers.
“Had he taken time to first investigate the application and to understand what was being proposed, he would have alleviated the uncertainty and stress for the complainant.”
Ultimately, the authority found Bailey’s conduct was at the lower to mid-level of unsatisfactory conduct and that regardless of the circumstances of the auction, the vendors had managed to secure a price within the range that Bailey had estimated it would go for.
They declined to award the vendors the $60,000 in compensation they were seeking for stress, worry and loss of self-respect, and instead censured Bailey and ordered him to pay a $3000 fine.
