The Cost of Misrepresentation
Sep 07, 2023
In terms of clause 34.3.1.8 of the PPRA’s Code of Conduct, property practitioners are prohibited from knowingly or negligently making material misrepresentations concerning the likely market value or rental income of immovable property to a seller or lessor thereof, in order to obtain a mandate in respect of such property.
Trust is the cornerstone of every transaction. Potential buyers and sellers rely heavily on the expertise and integrity of estate agents to make informed decisions. Unfortunately, when an estate agent misrepresents the value of a property, the consequences can be far-reaching.
- Financial Loss for Buyers
For potential buyers, relying on inaccurate property valuations can be financially devastating. Purchasing a property at an inflated price due to misrepresentation may lead to overpaying by a significant amount. This can result in years of financial strain and possibly even negative equity, where the property's value is lower than the outstanding mortgage balance.
- Damage to Professional Reputation
An estate agent's reputation is their most valuable asset. When clients discover that they have been misled, the agent's reputation can suffer damage. Word of mouth travels fast in the real estate industry, and one negative experience can tarnish an agent's credibility. Trust is difficult to rebuild once it's been shattered.
- Impact on Sellers
Sellers who rely on the advice of an estate agent to set an unrealistic asking price may find their property languishing on the market. Overpricing a property can deter potential buyers, resulting in a longer selling process and, in some cases, a lower final selling price than if the property had been accurately valued from the start.
Therefore, the Result is No Result.
The Mandate of Property Professionals is to sell or lease a property, not to test the market.
Where trust is paramount, honesty and transparency should always be the guiding principles. Estate agents who provide accurate valuations and act in their clients' best interests not only protect their reputation but also contribute to a healthier and more ethical real estate industry.
Author: Eva August - National Operations Manager at Century 21 South Africa
7 September 2023
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