Estate agents should not make any misrepresentation to prospective purchasers on valuations of properties or make any promise on mortgage terms. Otherwise, they may be subject to disciplinary action by the Estate Agents Authority.
An estate agent arranged for a prospective purchaser, a couple, to enter into a provisional agreement for a HK$3.96 million sale and purchase transaction.
Before entering into the agreement, the agent told the couple that the property’s valuation by the bank was HK$4.1 million and they could obtain an 80 percent mortgage loan.
However, it turned out that several banks valued the property within the range of only HK$3.35 million to HK$3.42 million. Moreover, the mortgage loan amount they were offered was just up to 50 percent of the property price because the property was not intended for self use.
Hence, the couple cancelled the transaction and lodged a complaint with the EAA.
The EAA disciplinary committee found that the estate agent had made a misrepresentation to his clients on the valuation of the property.
Thus, he was in breach of paragraph 3.4.1 of the code of ethics issued by the EAA, which stipulates that “estate agents and salespersons should protect and promote the interests of their clients.”
In addition, he also failed to keep himself informed of the maximum loan-to-value ratio before advising his clients on the amount of mortgage loan they would be offered.
That put him in breach of paragraph 3.2.2 of the code of ethics which stipulates that “estate agents and salespersons should keep themselves informed of any laws, government regulations, essential facts and developments in the market.”
The committee decided to reprimand the estate agent, fine him HK$4,000 and attach conditions to his license, requiring him to obtain 24 points under the EAA’s continuing professional development scheme in 24 months.