KEY POINTS:
A report into the financial affairs of The Joneses showed the business was in a bad way and "urgently" needed money from sharemarket investors.
WHK Corporate Finance, independent advisers on the allotment of securities, questioned both the business model of the maverick agency and its finances.
It noted the firm wanted to transform the residential real estate market and get a slice of $1.2 billion in sales revenues.
But it said in a hard-hitting report issued on January 30 that the firm was in a crisis mode and needed money desperately to survive.
Its model was unproven and it was a new business, WHK said.
"Funding is urgently needed," the report said.
Hopes of cheaper house sales faded for many people yesterday when flat-fee real estate agency The Joneses went into liquidation.
The company told sellers it had asked for liquidators to be appointed to the business, which has about 300 houses for sale.
Hundreds of people who paid thousands of dollars in deposits to sell their houses with The Joneses were caught in the company's downfall.
Yesterday, The Joneses sent notices to vendors and others saying it would cease trading and appoint Meltzer Mason Heath as liquidators.
"This is one of the hardest decisions that we have ever had to make and not one that we ever thought we would have to make," Lynn Lacy-Hauck, of The Joneses, wrote.
The firm burst on to the real estate scene in late 2006, offering to sell houses for a flat fee that it said was less than half the average commission charged by agents.
Fees started at $7995, regardless of the asking price, and the business rose to prominence as director Chris Taylor attacked rivals.
"The fundamentals of the way the real estate system works now are flawed due to the focus on commission-based sales," he said in 2006.
"The commission system ... is unfair to customers and often results in poor service delivery. Competition between agents to win commissions doesn't benefit sellers or buyers."
But late last year, it emerged that The Joneses needed cash and was poised to list on the stock exchange.
It said money from investors would be used to finance expansion.
"This business was never intended to be a corner shop," Mr Taylor said in December. "We set out to change the face of real estate in New Zealand and that means being big."
When the stock and housing markets slumped, The Joneses said it still intended to list.
But yesterday Lynn Lacy-Hauck blamed the markets and lack of capital for the company's problems.
Late last year, The Joneses upset the Real Estate Institute, which considered laying a professional charge after Mr Taylor said New Zealanders were paying too much money for indifferent service.
The institute eventually decided not to proceed, a move Mr Taylor welcomed, saying his comments were based on the institute's own research findings, which showed consumers held the industry in low regard.
Bryan Thomson, chief executive of New Zealand's largest agency chain, Harcourts, blamed The Joneses' failure on a lack of investment.
"They went to the market on a low-fee basis and I can't see the model they have gave them the ability to invest in their people," Mr Thomson said.
"I'm not surprised it's failed, though I never like to see this happen to any business."
Real Estate Institute national president Murray Cleland said he was not gloating about The Joneses' liquidation, but it proved the worth of agents using mainstream methods.
"The Joneses' model was not successful, and I think that's just the cost of selling real estate," he said. "Discount models don't work."
The director of the Massey University Property Foundation, Professor Bob Hargreaves, said The Joneses' competitors would be "very happy" because of the amount of business it could have taken away from other companies.
He said the company displayed "probably quite unfortunate timing" in its decision to seek a stockmarket listing, because of the uncertain nature of world stock markets and low sales in the real estate industry.
He said aspects of The Joneses' way of selling homes could work.
Other companies that had tried to charge a flat fee in New Zealand had failed, but paying agents salaries worked in other countries like the United Kingdom and could work here.
"But when an industry is 90 per cent driven by commission like it is here, the best agents are always going to go where they can get the most money."
WHERE TO FOR VENDORS?
* Selling your place with The Joneses? Not any more.
* All sales authorities are now cancelled.
* The agency advises you get another agent.
* Tell The Joneses who the new agent is.
* All advertising will be transferred.
* So will all open-home registers and photos.
* Details of "interested buyers" will be shifted.
* Marketing flyers are available to pick up.
* Call The Joneses on (0800) 661-331 if you need help.
HIGH COST OF A CHEAP SALE
Would-be sellers are counting the cost of listing their houses with The Joneses after the company went into liquidation.
Toby Woollaston registered his One Tree Hill home with The Joneses three weeks ago, and says he has lost about $1400.
He paid $1800 for the advertising of his house, and had received only one advertisement, in the Property Press, valued at $400.
Mr Woollaston said the company had told him he might get that money back.
But he had little faith that he would be reimbursed. "I have written that money off in my mind."
He did not pay the flat fee of $7995, which was held until the house was sold.
Linda Blain, an Albany office manager, said she expected to lose money after listing her Te Atatu South house with The Joneses.
On Friday, she paid more than $800 for advertising, but now expects to lose this.
"I went with The Joneses because I wanted to keep as much equity in the house as possible. Plus it's a new company and if no one supported them, they wouldn't have taken off."
