The property initially sold for almost $1 million under its capital value at the time. Photo / 123RF
The property initially sold for almost $1 million under its capital value at the time. Photo / 123RF
Two elderly siblings were “devastated” to find a section they had sold was put back on the market and sold within 36 days for a $790,000 profit.
The pair, one of whom has since died, complained to the Real Estate Authority that three realtors involved in the two transactions had abused their trust through their conduct.
Following the complaint, the authority’s Complaints Assessment Committee found the two realtors who valued the property and sold it first had not broken any rules, but the third realtor, who sold the property for a profit on behalf of the buyer, had breached his fiduciary duties to the siblings.
According to the facts laid out in the committee’s recent decision, the complainants were brothers who owned a large section inherited from their parents.
They tried selling the site but after having no luck, they were approached in May 2020 by two realtors, whose names were redacted from the decision, and asked if they would consider selling it off-market.
A potential buyer was then identified by the realtors’ colleague, Elyas Salimi Sarkhab. While Sarkhab was employed by the same agency as the realtors at the time, he was about to leave to begin employment with another firm.
The brothers, who were also not named, listed the property with the two realtors, and it sold for $2,290,000 in December 2020. At the time, the capital value was $3,225,000.
Thirty-six days later, the new owner listed it for sale and it sold for $3,080,000.
The brothers alleged the two realtors had worked with Sarkhab to on-sell the property, the location of which was not noted in the decision, and make the new buyer $790,000 in profit.
They claimed the three had abused their trust by stripping them of that additional money.
They told the committee the transaction had a severe and negative impact on their health.
The brothers argued the Comparative Market Analysis completed by the two realtors had undervalued the section by almost $1 million.
However, those realtors submitted that New Zealand had just emerged from a Covid-19 lockdown and the property market was uncertain.
The committee agreed, stating there was no exact science to preparing such an analysis and there were plausible reasons for the low valuation, given the uncertain market conditions at the time.
No collusion
Following the investigation, the committee found there was no evidence of collusion between Sarkhab and the realtors to on-sell the property at a profit, as alleged.
It ruled the two realtors had not broken any rules and were not guilty of any unsatisfactory conduct.
The committee also found the property appraisal they completed did reflect the market conditions at the time and that the on-selling weeks later was due to a change in circumstances rather than to make a profit.
However, the committee found Sarkhab guilty of unsatisfactory conduct concerning a breach of his fiduciary duties to the brothers by failing to tell them he had agreed to on-sell the property.
“Given Mr Salimi Sarkhab’s fiduciary relationship with the complainant, the committee considers that he should have advised the complainant that he had entered into an agency agreement to on-sell the property.
“This did not occur,” the decision stated.
But it was not found that the section had been undersold to the buyer or that Sarkhab colluded to on-sell it at a profit.
Sarkhab was fined $1000 and an order was made to reduce his commission relating to the property by $4500.
Real Estate Authority chief executive Belinda Moffat.
The decision noted the brothers’ complaint was Sarkhab’s first in eight years of being in the profession.
Following the release of the decision, Sarkhab told NZME he did not know he was supposed to tell the previous owners, the brothers, the new owner intended to sell.
“He [the buyer] was put in a corner where it could have been really ugly for him because if he couldn’t have sold, then he would have been in a huge financial struggle, to the point where he put his other property on the market,” he said of the buyer.
“I think one of the reasons they [the brothers] felt ripped off was because they felt it had all been planned out.”
Sarkhab’s manager, Wayne Maguire, was found guilty of unsatisfactory conduct for inadequately supervising Sarkhab regarding the property. However, a penalty order was not made against him.
Real Estate Authority chief executive Belinda Moffat told NZME the ruling highlighted the importance of the fiduciary obligation real estate agents owe their clients.
“In general terms, if a buyer has signed a sale and purchase agreement to buy a property, they are legally entitled to on-sell their interest in that property before the settlement date of the original purchase,” she said.
“While it is understandable that a vendor may be unhappy to see an interest in their property on-sold for a profit, a range of factors may influence the price achieved for an on-sold property interest. This includes the fluctuating market.”
Jeremy Wilkinson is an Open Justice reporter based in Manawatū, covering courts and justice issues with an interest in tribunals. He has been a journalist for nearly a decade and has worked for NZME since 2022.
