Agents and purchaser’s conflict of interest

Real estate agents are acting for the vendors and their commission will rely on getting a sale. The agent will liaise with and may advise both parties to the sale. The conflict of interest does not mesh well with your own interests. We are aware that agents are deliberately steering buyers away from competent companies. Please let us know if the real estate agent recommends that you do not engage us.

The vendor(s) agent is required by law to disclose any defects that the agent becomes aware of to potential buyers and may be liable to any future owner in event of nondisclosure. Real Estate Agents Act Rules of Conduct (2012) item 10.7: ‘A licensee is not required to discover hidden or underlying defects in land but must disclose known defects to a customer’.

Most agency contracts require vendors to disclose defects however the things that you will want to know about may not come out in the open until a pre-purchase home inspection (or builder’s report) is made on the property.

Once agents know or suspect that the house is leaky or has other serious defects they have a duty to tell all prospective buyers. The many homes bought with significant leak problems or defects were made by builders and in most cases an agent acted for the vendors in the sale. Any recommendations by the vendor’s agent may not be in your best interest. An agent should not recommend an assessor because their commission of sale creates a conflict of interest with the potential buyer. An inadequate appraisal may facilitate the sale by failing to note significant defects.

In a general sense, house sales in New Zealand are subject to the legal principle of caveat emptor, which means buyer beware. Under caveat emptor the buyer alone is responsible for checking the quality and suitability of goods before a purchase is made. If an agent knows of a problem or suspects one they must pass that information on to prospective purchasers. Interested buyers must be notified of defects identified in earlier unfavourable building reports even if a subsequent report provided by the vendor clears the property.

We recommend you always seek legal advice regarding matters of property transactions and building reports.

Agents conflict of interest with prospective buyers