In what circumstances can a real estate agent bid at an auction for a property they have listed?
Correct Answer
A) Only with the vendor's written consent in the prescribed form, plus an independent valuation
Under Real Estate Agents Act 2008 s 134, a licensee may not acquire the client's land (directly or through a nominee) without the client's consent. That consent is effective only if given in the prescribed form and the client receives a valuation under s 135: an independent registered valuation paid for by the licensee, given before consent is sought or, if the client agrees, within 14 days after. Without it, the client may cancel the contract and no commission is payable.
Why This Is the Correct Answer
REAA s 134 requires the vendor's consent in the prescribed form, and s 135 makes that consent effective only if the licensee gives the vendor an independent registered valuation at the licensee's expense.
Why the Other Options Are Wrong
Option B: Never, because a licensee may not acquire a property their agency is selling
It is not banned outright. Real Estate Agents Act 2008 s 134 allows it with the client's consent given in the prescribed form, backed by a valuation.
Option C: Only after announcing to the room that they are the listing licensee
Telling the room is not the statutory test. Without the vendor's prescribed consent and a valuation, the vendor can cancel the contract and no commission is payable.
Option D: Only once bidding has passed the reserve, so the vendor cannot lose out
The reserve has nothing to do with it. Consent and valuation are needed whatever the bidding level.
Deep Analysis of This Sale Purchase Question
A licensee buying a client's property is a direct conflict: the licensee knows the vendor's position and is paid to get the best price. Sections 134 to 137 of the Real Estate Agents Act 2008 deal with it. The client's consent must be in the prescribed form, and the client must receive an independent registered valuation at the licensee's expense. That lets the vendor judge the licensee's bid against an independent figure. If the rules are not followed, the vendor may cancel the contract and no commission is payable, even if the vendor does not cancel. The rules also cover people related to the licensee, such as a spouse or employee (s 137).
Background Knowledge for Sale Purchase
Real Estate Agents Act 2008: s 134 (licensee or related person acquiring the client's land or business needs the client's consent in the prescribed form); s 135 (valuation by an independent registered valuer at the licensee's expense, before consent or within 14 days with the client's agreement); s 136 (written disclosure of other financial benefits); s 137 (who counts as a licensee and a related person). The client may cancel a contract made in breach, no commission is payable, and paid commission can be recovered.
Memory Technique
Two keys open the door for a licensee buying a client's property: the client's consent in the prescribed form, and an independent registered valuation paid for by the licensee. Without both, the client can cancel and no commission is payable.
When a licensee or their relative wants to buy a listing, look for consent in the prescribed form and an independent valuation. Answers about announcing to bidders or the reserve are distractors.
Exam Tip for Sale Purchase
Remember ss 134 and 135: prescribed-form consent plus an independent registered valuation at the licensee's expense. The penalty for getting it wrong is that the client may cancel and no commission is payable.
Real World Application in Sale Purchase
A salesperson wants to bid on a house their agency has listed for auction. Before the auction, they give the vendor an independent registered valuation they have paid for and obtain the vendor's written consent in the prescribed form. Only then do they register to bid. Without those steps, the vendor could cancel the sale and the agency would earn no commission.
Common Mistakes to Avoid on Sale Purchase Questions
- •Thinking licensees can never buy a client's property
- •Treating disclosure to bidders as the legal requirement
- •Forgetting the independent valuation at the licensee's expense
Related Topics & Key Terms
Key Terms:
More Sale Purchase Questions
A property is sold at auction for $850,000 with a 10% deposit required. The successful bidder has concerns about the LIM report after the auction. What is their legal position?
What is the primary purpose of a LIM (Land Information Memorandum) in the sale and purchase process?
What deposit is most commonly agreed in New Zealand residential sale and purchase agreements?
When does an Agreement for Sale and Purchase become unconditional?
In a property auction, when is the sale considered complete?
- → How is the settlement date set in a New Zealand residential sale and purchase?
- → What typically happens to the deposit when an unconditional sale and purchase agreement is signed?
- → During settlement, what document transfers legal ownership of the property from vendor to purchaser?
- → A property is passed in at auction for $800,000 with a reserve price of $850,000. The highest bidder approaches the vendor immediately after. Which statement is most accurate about the subsequent negotiation?
- → When does an Agreement for Sale and Purchase become unconditional if it contains a finance condition with a 10 working day timeframe?
- → What is the typical deposit amount required immediately after a successful auction bid in New Zealand?
- → Under the standard TLANZ/REINZ Agreement for Sale and Purchase, who is typically responsible for paying rates from the settlement date?
- → At an auction, the reserve is $800,000 but bidding stalls at $750,000. The vendor then negotiates with the highest bidder and they agree to sell at $780,000, signing on the auction terms with no conditions. What type of sale is this?
- → A purchaser has included a finance condition with a 10 working day deadline. On day 8, they receive loan pre-approval but final approval is pending. What should they do?
- → What happens if a purchaser fails to pay the deposit by the specified deadline in the Agreement for Sale and Purchase?
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