Susie: — report by Consumer New Zealand is showing financial ties between real estate agents and mortgage brokers could mean home buyers are being duped.
The report shows some real estate agents are offering clients a mortgage broker who is from within their own company and earning a commission for it without the consumer’s knowledge.
The report also suggests some real estate agents are pressuring mortgage brokers to get information on how much a home buyer can afford to pay for a property. Head researcher at Consumer New Zealand, Jessica Wilson, wrote the report and she’s with us. Good morning.
Jessica Wilson: Morning, Susie.
Full Audio Interview (transcription below):
Susie: So are these bending the rules or are they actually breaking them in these situations?
Jessica Wilson: Well, look the law could be a lot clearer. Both real estate agents and mortgage brokers have obligations to act with care and skill and not mislead consumers.
So, arguably, if a broker or an agent isn’t telling the consumer about the commission kick backs that are going on, then the law could be breached.
But what we’d like to see is a lot clearer disclosure requirements for it to be crystal clear that this information does have to be told to consumers when they’re going to see a real estate and that agent says, “Would you like to go and see this broker?” but doesn’t disclose there’s a kick back involved?”
Susie: Because these should be separate?
Jessica Wilson: In our view, yeah. Yeah, that’s right. You go to a mortgage broker; you want to get independent advice. You don’t want the risk that your information might be passed onto the real estate agent and they know how much you can bid on a property.
Susie: Yeah. Because exactly what is the kind of shake down of that, that the system could be rorted and people could end up, well, paying over the odds.
Jessica Wilson: That’s right. Well, industry insiders we’ve talked to have said it’s not unheard of for an agent working in the same office as a broker to put pressure on the broker to find out how much the home buyer can afford to pay on that property.
With that information, of course, the agent can hold out for a higher price, more than the market would otherwise sustain.
Susie: Do you have evidence that this, in a significant way, drives the cost of housing up?
Jessica Wilson: Well, I’m not sure if it’s significant, but these are issues that we think actually need investigation by market regulators to ensure that consumers aren’t being ripped off and advice isn’t being skewed by these commission payments.
Susie: Are there particular buyers in the system that could be more at risk of this being a significant problem?
Jessica Wilson: Well, commonly, the people who are most likely to see mortgage brokers are first time buyers, so those are the buyers most at risk in our view.
Susie: What then can people do to try to protect themselves, especially if this is the first time that they’re actually going into this system and trying to navigate it?
Jessica Wilson: Yeah. Well, our advice would be, if you’re referred by a real estate agent, if you turn up at an open home and the real estate agent casually enquires if you’d like to see a mortgage broker, ask them are they getting a kick back for their referral; what’s the financial tie between them and the broker?
And ask the broker that same question. What financial ties do they have to real estate companies? The onus really shouldn’t be on the consumer to have to demand this information. That should be being disclosed.
Susie: So what precisely do you want to see as a change as a result of the information you’ve uncovered?
Jessica Wilson: Well, one thing we’d like to see to be a minimum would be written disclosure requirements for this information to be provided. But, more broadly, we’d like to see some investigation of the market to make sure that commissions aren’t skewing advice and that consumers are getting advice they can rely on.
Susie: Because presumably there would be no advantage in leaving the situation as it currently stands?
Jessica Wilson: No. Well, that’s right. With house prices as they are, you don’t want any other influences that could be ratcheting up the price as well.
Susie: Thank you very much for your time. Thanks for coming in as well to the Wellington studio this morning. Jessica Wilson there from Consumer New Zealand.
Source: Radio New Zealand
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