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Who to trust when buying Property

Posted in Daniel Wein - The Solicitor September , 2012  8 Comments  Add your comment ›

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Daniel Wein from Stace Hammond

It is said that buying a house is the biggest investment someone will make in their life. It is also noted that the process of buying and moving is one of the top three most stressful things you can do – depending on the list you read it usually rates up there with divorce and bereavement.

Given the significance of a property investment and the stress involved, it never ceases to amaze me how a property transaction appears on my desk.

In the majority of cases a signed contract turns up in the mail, or most likely in a completely unreadable fashion by fax. Some time later an email or phone call follows from the client, or potential client who has been referred my details and is someone I have not yet met, advising me they have bought a house - and by the way can we act for them.

Barring a conflict of interest the answer is of course yes, we would be happy to…but lets wind this series of events back to the start…

Given the significance of the investment it may help to engage your professionals prior to the ink being dry. While in the majority of cases a residential house purchase, or even a commercial purchase for that matter, are pretty straight forward, once you have signed an agreement – either at auction, or by negotiation – its too late to get advice as to the types of clauses you may need to add in, or what you should be looking for.

The first tip in house buying, when working out who to trust, is to remember that the real estate agent is the vendor’s agent. Nothing wrong with that - the vendor pays their fee. But as agents are commission based they are always keen to make a sale so they can put food on their table. Real estate agents, by and large, have great experience and can be very helpful assisting you to put an offer together, but in the back of your mind always remember that they act for the vendor…not you.

With recent changes to the law surrounding the conduct of real estate agents, make sure you read the Real Estate Agents Authority guides that the agents have to provide. Ask agents as many questions as you can, and write down the answers they give, although you should probably ignore any figures they give in terms of expected price (remembering that they want you to think you can afford it, so that you get emotionally connected to the property)!!

If you need building reports or inspections make sure you have enquired from the inspection company as to what they will provide you with. Each company is different and there are a range of types of inspection available – from thermal imaging companies that show moisture issues, to builders that will note down every scratch and door handle missing. Again, its best to select based on what you need – if the house is modern and you are concerned with moisture then a report with thermal photos may be ideal, but if it is an older house and you want to know about the alterations and foundations you may need to use someone else.

And as for lawyers, I would recommend you at least contact your lawyer before you buy, if only to warn them its coming!! They will be able to help you with the appropriate clauses if you have concerns, or answer any questions you may have with supporting documents. This is especially true where you are buying at auction and you need to have reviewed your LIM reports and done your homework before hand. There is nothing worse than receiving a signed unconditional contract across your desk and then having the client ask questions about the various issues they may have encountered. Too late!

One small niggle I have is pre-auction offers. Often a useful tactic to try and shed a few potential buyers as they may not have had time to do their checks and homework, but each real estate company seems to have different processes for how a pre-auction offer is treated. Make sure you ask questions as to the process and how it works. If you are not comfortable with it, seek legal advice.

We had a recent example where the agent advised that a pre-auction offer must be kept open for 48 hours for the vendor to be able to accept. Unfortunately a pre-auction offer is still an offer, and the basic rules of offer and acceptance apply – the offer can be retracted at any time prior to the communication of acceptance. If you haven’t provided separate consideration for the pre-auction offer it simply forms part of your offer and you can withdraw it if you want.

That is just one example of how seemingly “standard” procedures may actually be incorrect, so make sure you seek the advice of professionals before you commit!
 

8 Comments  Add your comment ›

Edward said on 04/10 at 8:54am

when you make an offer you have the usual contractual bits including the offer to pay, terms etc. That offer is capable of acceptance by the vendor. Contract law provides that the offer is able to be withdrawn at any time prior to acceptance, provided that withdrawal is communicated prior to acceptance being received. With a pre-auction offer we have found that some agencies require you to sign a form to state that the offer will be kept open for a certain period of time. Under contract law that still forms part of the offer, and the offer must stand and fall as a whole – ie you can still revoke it at any time prior to acceptance. Until acceptance there is no legal obligation and no meeting of minds. You can agree by way of a separate contract to keep the offer open, but that needs to be a separate contract and therefore requires its own consideration, independent of the consideration contained in the main offer. Needless to say there are some exceptions – the main one being the international sale of goods as NZ has the UN Sale of Goods Act 1994 in force, which allows that irrevocable offers buts be irrevocable. An example is the case of Routledge v Grant where the defendant offered to buy a house and to keep the offer open for six weeks. The Court found the offer could be withdrawn at any time prior to acceptance irrespective of the time limit. The only way to keep the time limit open would have been for the parties to have effectively agreed an option which would have needed to have been sorted out in a separate contract. So the issue isn’t consideration itself, it’s the basic principles of offer and acceptance. Short of some further consideration being offered the requirement to keep the offer open is meaningless.

pommy3456@hotmail.com said on 27/11 at 8:56pm

here's one you could clear up for me. I wanted to pace a pre-auction offer ona property just subject to a satisfactory LIM report that the agent wassupplying. I was told I couldnt as the auction contract was yet to be made available and the offer must be unconditional. I wanted to complete a standard sale and purchase agreement and the agent refused to help. My pre-auction albeit one condition offer was not written up. I was prepared to offer $645,000 but refused to go to auction. The home sold for $570,000 and my offer was never made. When I questioned the Manager he advised it was the terms of their auction. I questioned whether the seller had any say in the way pre-auction offers were written and how they would feel if they were aware of the amount of money they lost out on and was told in no uncertain terms that no they dont have a say Do I have a reason to make a formal complaint as i believed the rules were that every offer must be presented.

vipin said on 20/11 at 6:04pm

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