Have KIWI real estate agents become more trustworthy?

PHOTO: Real estate agent. Image by rawpixel.com

Despite a turbulent property market, New Zealand consumers are feeling more empowered in real estate transactions and becoming more confident in the real estate profession as a whole, according to new research commissioned by independent conduct regulator, the Real Estate Authority (REA).

REA’s latest Annual Perceptions Research – based on field work conducted in April-May 2022 – indicates strong consumer confidence in the conduct of the real estate sector overall, with significant gains across perceptions that it is professional, well-monitored, well-regulated, fair and transparent.^[1] A consumer is someone who has bought or sold a property in the prior 12 months.

REA Chief Executive, Belinda Moffat, says it’s encouraging to see growing consumer confidence in the real estate sector as this aligns with REA’s aim to see people confidently engaging in fair transactions with trusted real estate professionals.

“We are pleased to see the indicators of high conduct standards are moving in the right direction, particularly during a time which placed additional pressures on both consumers and licensed real estate professionals, with COVID-19 restrictions and changing market conditions. However, we recognise that there is still more work to be done to continue to ensure all professionals meet the high standards expected. There is no time for complacency. We are committed to working with the sector to continue to lift standards of conduct to support increasing confidence, and to protect consumers from harm.”

The research found, 85% of real estate consumers^[2] had some to a lot of confidence in the New Zealand real estate industry overall.

Ms Moffat says consumer confidence reflects the positive regulatory impact of REA, and the work agencies and licensed real estate professionals are putting into maintaining high professional standards of conduct.

“As regulator, REA sets high expectations for real estate licensees in the Code of Conduct we oversee. We support them to meet those standards through our Continuing Professional Development programme and regular industry guidance, and those who fail to uphold the standards can be held to account through our complaints and disciplinary processes.”

The research also found:

• 86% of all consumers surveyed felt very or somewhat empowered to participate effectively in their real estate transaction.^[3]
• 91% of Māori consumers surveyed felt very or somewhat empowered to participate effectively in their real estate transaction

Ms Moffat says the average sense of consumer empowerment has remained stable, with data breakdowns indicating successful buyers’ and sellers’ levels rising, while those who were unsuccessful feeling less empowered in recent years.

“Consumers’ sense of empowerment in a real estate transaction is important because it can indicate that they are feeling well-informed and appropriately in control of their part of the buying and selling process. While the outcome of the transaction naturally appears to influence consumers’ sense of empowerment, those who felt most empowered also frequently cite the conduct of the real estate professional involved as a contributing factor.”

Ms Moffat says that for REA, identifying consumer segments that deviate from the general population is particularly useful.

“For example, in areas like consumer empowerment, we see notable variations in terms of ethnicity, and this helps to inform our work to engage with New Zealand’s diverse communities, ensuring they are aware of REA, can access our information resources about the real estate transaction process, and understand the standard of conduct they are entitled to expect from a licensed real estate professional in our country.”

The survey also indicated that consumers who highly rated their awareness and understanding of what REA does were among those with a sense of empowerment significantly above average.

Consumer awareness of REA continues to rise

The research also indicates that consumer and public awareness of REA as the real estate sector’s conduct regulator continues to grow. The research found:

• 69% of all consumers were aware of REA, an increase of 6% from 2021^[4]
• 74% of consumers identifying as Māori, and 81% of consumers identifying as Pacific Peoples were aware of REA
• 79% of consumers consider that REA provides clear and independent information
• 78% of consumers consider that REA is trustworthy and provides information accessible to everyone^[5]

REA oversees the consumer website settled.govt.nz which provides comprehensive information for consumers about buying and selling real estate, and issues guides for consumers on the agency agreement and sale and purchase agreement.  The research found^[6]:

• 84% of consumers agree or strongly agree that settled is trustworthy
• 76% of consumers felt more knowledgeable after visiting settled
• 92% of consumers found the consumer guides somewhat to very useful

Ms Moffat says this result reflects REA’s work to raise awareness with consumers about REA and its role.

“While clearly we would like all New Zealanders participating in real estate transactions to know that REA is here as an independent conduct regulator and consumer protection agency, as a young agency, we are pleased with the progress we’ve achieved to date. It’s important that buyers and sellers know where to go to receive information or to complain about the conduct of a real estate professional. Awareness of the regulatory protections supports consumer confidence and increases the likelihood that serious conduct issues are deterred or reported to us when they occur.”

Ms Moffat says people who access REA’s consumer resources (such as the Settled.govt.nz website) can better protect themselves with the benefit of REA guidance on what due diligence they should undertake as prospective buyers and what information they must disclose as sellers. Our recent work to provide our key consumer guides in seven languages is a further step in our commitment to make REA accessible to all.

Buyers gathering property information; more vendors withholding it

The research indicated that more than nine out of ten buyers (94%) obtained additional information about a property (such as a building inspection report, Land Information Memorandum or title search) before purchasing it^[7].

Ms Moffat says while this headline result is in line with REA recommendations, a closer look suggests some buyers could be doing more homework on properties they are considering buying.

“While the research suggests almost all buyers are obtaining some form of additional information, each individual type of documentation was obtained by less than half of all buyers. This suggests that some buyers are undertaking only limited due diligence, which is a risk REA recommends buyers look to avoid.”

Also of concern to REA is 29% of sellers indicating there was something about their property they were glad the buyer did not know^[8].

Ms Moffat says sellers must share information on all relevant issues with a property, including unconsented alterations, boundary issues or watertightness issues.

“If sellers are unsure on what to declare, they should discuss this with their licensee or lawyer. A seller acting in good faith should put themselves in the shoes of the buyer and think about what they would like to know if they were buying the property.”

Under the Real Estate Agents Act 2008, if licensees acting on behalf of a vendor suspect that their property may have a hidden or underlying defect, they must ask the vendor about it and advise potential buyers about any risks. A vendor must disclose any relevant information about the property to their licensee, and if the vendor refuses to permission for this information to be disclosed to prospective buyers, REA requires licensees to relinquish the listing. If serious property issues are not appropriately disclosed, this could result in legal action.

REA recognises that the research was undertaken when the market was beginning to cool, and the cooling market may raise new perspectives.

REA is releasing this research report to enable the sector to gain insights to consumer and public perception, to help improve conduct and service, and to enable other entities that work in this area to support and protect consumers.

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