The Commerce Commission says real estate agents need to heed the warning contained in a recent court case relating to pricing practices to avoid breaching the Fair Trading Act.
Wellington real estate agent Tim Whitehead was sentenced in the Hastings District Court yesterday on three charges of breaching the Fair Trading Act between 28 April 2007 and 5 May 2007. He was fined $7,500.
The charges related to three house sale advertisements which promoted a Wellington property as being available for sale at "buyer enquiry over $380,000." However the agent was aware that the vendor was not willing to accept less than $400,000 for the property.
"This case reinforces the Commission's view that a "buyer enquiry over" price must reflect a price the vendor will give serious consideration to," says Commission Chair Paula Rebstock. "If the vendor's bottom line is higher than the "buyer enquiry over" price, it is likely to be misleading."
Judge MacIntosh noted in her judgment on the case that once a property is advertised by price, there is an obligation under the Fair Trading Act to ensure it is not misleading. One of the reasons being to ensure that potential purchasers do not waste time and money trying to buy a house when there is no prospect of their offer being accepted.
"Mr Whitehead had a defence in relation to six of the charges, in that he did not know at the time that the vendor would not accept a price below $400,000. However once he became aware of this, it was not acceptable to continue to advertise the property at a price that was not going to receive the vendor's serious consideration," says Ms Rebstock.
"Buying a house is, for most consumers, their most significant purchase. The process of putting in an offer can be costly, involving for example obtaining building and LIM reports. To do that on the basis of misleading information about the price expectation can lead to a waste of the potential buyer's money," says Ms Rebstock.
Ms Rebstock says the Commerce Commission will continue to enforce the Fair Trading Act, where consumers are being misled, including misleading use of the "buyer enquiry over" pricing mechanism.
In July 2006 in the Wellington District Court, Judge MacIntosh dismissed all charges against Tim Whitehead in relation to breaches of the Fair Trading Act.
The Commerce Commission successfully appealed to the High Court, and the case was remitted back to the District Court for further consideration in light of the High Court decision.