An Auckland warehouse owner facing having to pay his real estate agent two $51,000 commissions to sell the same property believes agents should have to do more to ensure buyers have the cash to buy.

Owner Craig Bavinton says his sale fell through unexpectedly in June and believes it’s a situation that could also catch out mum-and-dad home sellers now banks are increasingly making it harder for buyers to get loans.

He says his agent connected him with a buyer this year who offered to pay $1.85 million for his Ōtāhuhu warehouse and salesroom.

At the time of signing the purchase agreement, the buyer indicated they had an approved bank loan.

However, the buyer hadn’t secured a loan so was unable to fully pay for the property.

Bavinton acknowledged he received a $185,000 deposit that he now gets to keep but said he ultimately could end up losing money because the deal has been dragging on longer than six months.

He’s also had to relist the property for sale, leading his agent to ask for another full commission despite already receiving $51,000 for the initial incomplete sale.

The agent did not wish to comment.

But property pundits and lobby groups said agents’ jobs are to connect sellers with buyers, not to vet buyers’ finances.

That is why most sale agreements contain clauses that penalise buyers for failing to pay by settlement date.

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However, Bavinton said it can be difficult and costly to enforce these penalties and believed agents should have a duty to help prevent sellers getting into his situation in the first place.

“Apparently agents can keep their commission even if the sale hasn’t gone through and even if they had informed me the sale was not subject to finance but had not even checked that was the case,” he said.

While Bavinton is an investor, he believed the slumping housing market left mum and dad home-owners at increasing risk of finding themselves in a similar position.

This week the Reserve Bank hiked its Official Cash Rate by its largest single rise, of 0.75 basis points.

That’s likely to lead banks to examine buyers’ finances even more stringently before lending them the money needed to buy properties, Bavinton said.

“With the market going the way it is, there’ll probably be a lot of sales falling through,” he said.

Bavinton said ultimately the buyer who failed to pay him on settlement date is the person most at fault.

But he also took issue with when real estate agents are paid their commissions and what steps they take to ensure buyers are actually able to afford the properties they make offers on.

Currently, most sales contracts stipulate agents are paid their full commission when a buyer agrees to unconditionally buy a property.

At that point, the buyer typically pays 10 per cent of the sale price to the seller as a deposit, with the remainder to be paid on the final settlement date.

The seller then pays the agent their commission fee out of the deposit.

If the buyer doesn’t pay the remainder of purchase price by the settlement date, the seller can keep the deposit and try to resell their property to another buyer.

The seller can also take legal action against the first buyer to try to recover lost costs.

But Bavinton said it’s not that easy.

He’s been advised by his lawyer that early indications are the buyer of his property does not appear to have assets in New Zealand that can be used to recover costs for their failure to pay by settlement.

It means Bavinton stands to lose money, he said.

His rental has sat empty for more than six months, leading to losses of about $10,000 a month in rent and expenses, such as the mortgage and rates payments, he said.

His agent also now recommends Bavinton accept new offers that are at least $100,000 less than the $1.85m offered in April this year because market prices have fallen since then.

The agent is also asking for another full commission and recommending Bavinton spend more on marketing.

“In a softening market, you cannot sell a secret and marketing is a must, in my humble opinion, to prevent your property from being seen as another tree in the forest,” the agent told Bavinton in an email seen by the Herald.

Bavinton believes agents should be required to ask prospective purchasers for proof they have a bank’s loan or credit approval, thus indicating they can afford to buy the property.

He also believes agents should only be paid their commission once settlement is complete or perhaps receive half their commission early with the second half to be only paid on settlement.

“Without it there’s no real incentive for agents to help that sale go through to settlement because it’s more in their interest that it doesn’t go through so they can resell it and get another commission,” he said.

Harcourts St Heliers real estate owner David Findlay, who is not connected with Bavinton’s sale in any way and spoke as an industry professional, said he understood situations like Bavinton’s are tricky and can be devastating for both sellers and buyers.

He agreed tougher housing market conditions made it more likely more sales would fall through and said his team went out of their way in such situations to help the seller find the best possible solution.

However, technically an agent’s job is to simply find buyers who have the intention and ability to buy and to get them to make an unconditional offer, he said.

After that, agents lose the legal ability to control the deal and are no longer allowed to alter contracts, he said.

Contract changes at that point must be handled by lawyers, who are also responsible for enforcing penalties.

The Government’s Real Estate Authority watchdog supported this measure to ensure legal experts handled these tricky matters, Findlay said.

He said agents are also not required to check whether a buyer has an approved home loan in order to accept an offer.

Agents are instead required to simply tell buyers they need to seek legal and financial advice and that they have legal responsibilities under the purchase agreement.

Buyers are also unlikely to want to share information about their loan with agents, he said.

For instance, if a buyer has loan approval to spend up to $900,000, they might want to tell an agent they can only spend $850,000 as a negotiating tactic, Findlay said.

Jen Baird, chief executive at the lobby group representing agents, the Real Estate Institute of NZ, said sellers are protected by the penalties contained in the sales and purchase agreements and that agents worked hard to sell properties and were entitled to be paid.

“Launching a second marketing campaign for the same property means working through the entire sales process again,” she said.

Real Estate Authority chief executive Belinda Moffat said her body can not comment on specific cases to avoid prejudging any complaints against agents that may be brought to them.

But speaking generally, she said sellers can stipulate at what point agents are paid commissions in the contract they sign with them.

For Bavinton, meanwhile, the stress of his incomplete sale has added to a difficult time personally.

Family health problems mean he’s been unable to fly in from overseas to oversee the transaction and had to rely heavily on his real estate agent for guidance, he said.

The disappointment means next time, he’ll try to find an agency that will accept part of its commission payment only after settlement has been achieved.