The Front Page: Dodgy real estate deals – how much can you trust what you’re told?

Buying a home remains risky business in New Zealand. Photo / Getty Images

Two recent cases involving leaky homes revealed that the housing market can be fraught for prospective home buyers.

The first case involved an 81-year-old businessman who, with his wife, doctored a Land Information Memorandum (LIM) report so they could sell their leaky home at full market price.

In another case, two realtors waited until the sale of a house was finalised before disclosing a building report that showed areas of the property had moisture readings nearly eight times the normal range.

NZ Herald senior reporter Lane Nichols has reported on real estate disputes for a number of years, and tells The Front Page podcast families who fall victim to wrongdoing can be left tens of thousands of dollars out of pocket.

In the recent matter involving the doctored LIM report, Nichols says the buyers purchased the home only to discover years later that the actual LIM report held by Auckland Council referenced “major moisture-related cladding defects”.

Four years later, at a time when the market was running hot and property prices were rising fast, the couple sold the property at a loss of $25,000 – but this does not take into account how much they lost in potential capital gains over that period (one estimate suggested the loss was as high as $290,000).

Beyond the financial harm that this family suffered, Nichols says that cases like these could also have further-reaching consequences in terms of the level of trust people have in LIM reports.

“One of the concerns from the prosecution was that anything that undermines people’s trust in those official documents is really serious offending,” says Nichols.

The one positive is that cases like this do sometimes help to drive change within the industry.

“Back in 2015 when this happened, it was apparently quite normal for agencies to receive documents such as LIM reports direct from their clients, the vendors. However, [Barfoot & Thompson boss] Peter Thompson said that subsequent to this happening for a number of years, agencies now seek those property documents direct from councils to take out the middleman, so to speak.”

So, how much can we trust real estate agencies? And is enough being done to ensure home buyers are making informed decisions about where they decide to put their life savings?

Listen to the full episode of The Front Page podcast to hear more from Lane Nichols on what happens when real estate deals turn sour.

The Front Page is a daily news podcast from the New Zealand Herald, available to listen to every weekday from 5am. It is presented by Damien Venuto, an Auckland-based journalist with a background in business reporting who joined the Herald in 2017.

You can follow the podcast at iHeartRadio, Apple Podcasts, Spotify, or wherever you get your podcasts.