Property Flippers: Buyers’ Agency Complaint Over Six-Figure Profits

A complaint has been filed with the Real Estate Authority (REA) in Modern Zealand regarding a growing trend of property flipping, where buyers quickly resell properties for substantial profits, sometimes exceeding $100,000 per transaction. The complaint, lodged by buyers’ agency iFindProperty, alleges deceptive practices targeting vendors who may be unaware of the rapid resale strategy.

Contemporaneous Sales Surge

Cotality, a New Zealand property research firm, has observed a significant increase in these “contemporaneous sales” – where a property is resold shortly after the initial purchase – particularly in the past year. According to Nick Goodall, Head of Research at Cotality, the number of these transactions nearly doubled in 2024 compared to 2023, even surpassing levels seen during the peak of the Covid-19 property boom. Goodall describes the practice as involving offers with extended settlement periods, allowing flippers to secure a buyer before they are obligated to complete the initial purchase.

This practice isn’t new, but the scale of the recent increase is raising concerns. Maree Tassell, co-founder of iFindProperty, expressed frustration that vendors and even their agents are often misled into believing the initial buyer is a genuine purchaser. “They tie a property up to say 20 days’ due diligence and then they’re immediately sending it out to their database and putting a huge margin on it trying to onsell the property,” she stated, adding that flippers often pose as potential buyers – bringing in fake builders or valuers – to maintain the illusion of a legitimate purchase. Nick Goodall’s LinkedIn profile confirms his role at Cotality and his focus on property market analysis.

The Mechanics of a Flip

The core of the issue lies in the speed and opacity of these transactions. A flipper secures a property with a long settlement period, giving them time to find a subsequent buyer willing to pay a higher price. This difference in price, often exceeding six figures, represents the flipper’s profit. The vendor, initially believing they are dealing with a standard buyer, may not realize their property is being actively marketed to a wider pool of potential purchasers during the settlement period. This lack of transparency is the central point of contention.

The rise of property flipping is also fueled by a growing industry of “mentoring services” that teach individuals how to profit from these quick transactions, often with limited knowledge of the property market or financial resources. Tassell notes these services promote “no money down deals,” essentially instructing people to tie up properties with contracts and then resell those contracts, rather than the properties themselves. This raises concerns about consumer protection, as buyers entering into these arrangements may not fully understand the risks involved.

Legal Grey Areas and Regulatory Oversight

A key challenge in regulating this activity stems from the legal status of property traders. Joanna Pidgeon, a property law expert, explains that individuals who buy properties personally and then resell them are not subject to the same regulations as licensed real estate agents. Cotality’s YouTube channel features Nick Goodall’s analysis of the New Zealand property market, providing further context to the current trends.

However, companies that engage contractors or sales agents without proper real estate licenses may be engaging in unlicensed trading. Pidgeon emphasizes that buyers dealing directly with unlicensed property traders lack the protections afforded by transactions with licensed agents, particularly regarding potential conflicts of interest. She advises purchasers to seek independent legal advice and ensure their deposits are held in a trust account until the vendor officially owns the property, mitigating the risk of losing their deposit if the trader encounters financial difficulties.

Impact on the Market and Consumers

The increase in property flipping has several potential consequences. For vendors, it can signify leaving money on the table, as they may have accepted a lower offer than the property’s true market value. For buyers, it introduces the risk of overpaying for a property or encountering issues with the transaction if the flipper’s financial situation is unstable. The practice also contributes to market volatility and can erode trust in the real estate process.

The REA has acknowledged receiving inquiries about property-related activity and is currently investigating the matter. However, the agency refrained from commenting on specific inquiries although the investigation is ongoing, citing fairness to all parties involved and the demand to maintain the integrity of the process. IFindProperty, in contrast, proactively discloses its role as a buyers’ agent, ensuring transparency with both vendors and purchasers.

What’s Next for Regulation?

The complaint filed by iFindProperty is likely to prompt further scrutiny of property flipping practices by the REA. Potential regulatory responses could include clarifying the legal requirements for property traders, strengthening consumer protection measures, and increasing enforcement of existing regulations. The REA may also consider whether to extend licensing requirements to individuals or companies engaged in frequent property flipping activities.

The outcome of the REA’s investigation will be closely watched by industry stakeholders, including real estate agents, buyers’ agencies, and property investors. A more robust regulatory framework could support to curb deceptive practices and ensure a fairer and more transparent property market for all participants. The situation highlights the need for ongoing vigilance and adaptation in the face of evolving market dynamics and emerging trading strategies.