An agent in New Zealand was forced to refund his commission to a seller he represented after that seller lost out on more than $80,000 when the agent skipped a crucial step in selling real estate.
The client hired Michael Edward to sell two units. Edwards, however, did not get the seller to sign an agency agreement. He also did not perform an adequate appraisal and market analysis on the property before listing and selling the units.
The buyer of those properties, however, recognized their true value and sold the units for an extra $82,500 – just a few days later.
The seller complained to the national real estate authority, requesting a refund of the commission he paid, in addition to compensation for the amount that the units were up-sold for.
The Real Estate Agents Authority, which regulates the New Zealand real estate industry, said it couldn’t justify the $80,000 compensation, but did force Edwards to repay his client whatever commission he originally received. The authority also censured the agent and his brokerage, Jones Lang LaSalle.
Canadian agents, meanwhile, are not governed by a national body, but instead must answer to the appropriate provincial real estate acts and/or codes of ethics, which are similar across the country. In Ontario, for instance, the Real Estate and Business Brokers Act (REBBA) 2002 doesn't penalize agents for poor property evaluations.
"It really comes down to what a buyer is willing to pay and what a seller is willing to accept on a given day," says Real Estate Council of Ontario registrar Joseph Richer.
However, under RECO's Code of Ethics, an agent could be fined up to $25,000 for breaching the code - specifically section 6: demonstrating knowledge and competence in providing opinions and advice.
It’s a mistake no Canadian agent worth their salt would likely make, but this $80K mistake is driving home the importance of a proper CMA.