Hundreds of new people are joining the real-estate profession with dreams of making a fortune in the booming $77 billion housing market – and with it comes a 6 per cent increase in complaints.
That has led veteran agents to warn it was becoming an “industry of last resort” for people – particularly older Kiwis – desperate for a way to make a quick buck.
The agents said many were being lured into real estate with false promises of pots of gold, but later failed to make money and dropped out within a year or two, leading to risks some would cut ethical corners or provide poor service.
But the real estate regulator and industry lobby groups said they were yet to see a significant rise in serious complaints, and said most agents had delivered quality service during the difficult Covid-19 pandemic.
Michael Boulgaris – owner of Auckland luxury firm Boulgaris Realty – said there was plenty of money to be made selling houses, but most spoils went to a pool of high-earning agents.
“That’s why complaints will be rising, you’ll see agents who aren’t making money becoming desperate and they start saying anything for a sale,” he said.
Kiwis’ passion for buying and selling houses reached new heights in the past year as the market skyrocketed through one of its biggest booms in two decades.
More than 90,000 homes sold in the 12 months to March 2021 for a total value of $77.3 billion, the Real Estate Institute reported.
That was up from $55.8b and almost 79,000 sales the year before and $50.6b and 76,000 sales the year before that.
In recent months listings have tightened significantly on the back of the normal seasonal slowdown and Government measures to tackle investor-driven demand.
The booming market coincided with some sectors of the economy suffering under Covid-19’s economic impacts, leading real estate to become – for the first time – one of the most-searched-for jobs on the Careers NZ website last year.
Thirty-one per cent more Kiwis than a year earlier also made the decision to quit their old jobs in the 12 months to March 31 and apply to become agents, the government regulator Real Estate Authority said.
That took overall agent numbers up from 15,512 to 16,195.
The number of official complaints against agents had risen 6 per cent, after falling in the previous year. Home buyers and sellers additionally made 32 per cent more phone calls and enquiries to the REA about potentially laying a complaint.
Wendy Alexander, chief executive of agents’ lobby group the Real Estate Institute, said complaints hadn’t risen at a higher rate compared to the number of homes being sold or new agents joining the industry.
That meant the increase was likely in “balance” and less concerning.
She also said the complaints period covered disruptive Covid-19 lockdowns and the booming market, periods that could lead to added frustrations among buyers and sellers doing less due diligence than normal out of a “fear of missing out”.
REA head Belinda Moffat said the number of serious complaints against agents had remained stable.
Her team would be concerned if competitive agents were “fighting to the point where they are not operating ethically”.
“But it is not necessarily what we are seeing so far.”
She said new agents did have to be qualified and licenced each year by the REA, they had to be “fit and proper”, and had to be supervised.
Yet, despite that, one real estate outlet owner and 30-year veteran, who didn’t wish to be named, said it was too easy and cheap for wannabe agents to become accredited.
Many were lured in by pep talks from top-selling Porsche-driving agents, he said
However, most agents only made money from commission, meaning if they didn’t sell, they didn’t earn an income.
“They get sucked into the story that you make a lot of money,” he said.
“But it is hard, hard, grind work.”
REA data indicated that after one year, 21 per cent of new agents had dropped out of the industry, while 33 per cent dropped out after two years.
OneRoof editor Owen Vaughan said that with listings at low levels, and top agents often taking the lion’s share in their patch, new agents could find it difficult to break into the market.
Currently the ratio of agents to available listings was 1:1, which meant some agents may be going without.
Boulgaris said new agents often showed up with no networks of buyers or sellers, no experience and little money to invest in upskilling, yet were thrown into “dog-eat-dog” competition with experienced agents.
“What makes them think they can come into real estate with zero investment and make money, it’s not a miracle, it’s not magic.”
Boulgaris said being an agent was less about the glamour and more about being a hotel maitre d’, bending to the wishes of customers with your phone on-call 24 hours a day.
Both agents were critical of what they called “flooding the market”.
That meant that – because agents were only paid sales commissions rather than salaries – agencies could afford to hire hundreds of new agents.
“We are constantly looking to flood the market,” the unnamed veteran agent said.
“The more the brand is out there, the more open homes and cars driving around with signs on them, the more likely you are to win business,” he said.
And so while individual agents might make a paltry income from selling five houses a year, if 10 of them did that, it was 50 homes taken away from competitor companies, he said.
The worry was desperate agents could be tempted to bend the rules by telling home sellers unrealistic sale price expectations, or offer to take lower commissions and deliver poor results, he said.
He suggested agents should earn less from commission with agencies, instead forced to top up their incomes with small retainers or salaries.
This would ultimately reduce the total number of agents because agencies could only afford to hire those agent who performed, he said.
The debate came as the REA today launched its new strategy and four-year plan.
Chief executive Moffat said the REA was continuing its drive to regulate and support agents as well as educate home buyers and sellers about their rights, as it has done through its Settled.govt.nz website.
However, a new push aimed to support more Māori and Pasifika buyers into homes by providing better information to customers and agents and also reach out to other diverse communities, including disabled home sellers and buyers.
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