Real Estate - Rogues Or Well Meaning Fools?

I have just finished talking to a purchaser client who has received her termite inspection report.  The report indicates that she must spend thousands of dollars for pest treatment because of the presence of termites.

Of course, the client asked about her rights and I had to give her the same bad news I regularly give to clients in her position - the real estate agent is either a rogue or a well-meaning fool, and the client has to suffer the consequences either way.

What I mean by this is that the client trusted the real estate agent (I know, I'm always telling clients not to trust real estate agents, but they do anyway) to draft a special condition which would allow her to end the contract if there was a "pest problem".

The real estate agent readily obliged, using the standard special condition (yes, I know that's an oxymoron) distributed by the Real Estate Institute of Victoria (REIV) to its members.

Given that real estate agents are not lawyers, and are therefore prohibited from providing legal advice and drafting contract conditions (putting the obvious conflict of interests aside for one moment), any real estate agent who purports to be assisting a purchaser by inserting the standard condition into the purchaser's formal offer is either a rogue (doing it deliberately with the knowledge that the purchaser is being cheated) or a well-meaning fool (who doesn't understand the meaning of the condition being used).

Purchasers please take note!  Do not, under any circumstances, allow a real estate agent to advise you on the preparation of your offer.  Always obtain legal advice from your own lawyer first.  Even better, take advantage of our pre-purchase legal advice and stay safe.
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Finance Approval Expiry

While providing pre-purchase legal advice to a client during their cooling off period this morning we noted that the settlement period was nearly 12 months.

The client was not aware that their finance approval would not last for such a long period of time, and that they may find that they are locked into a contract they can't fulfill if circumstances change and they can't access finance.

To make matters worse, the real estate agent had drafted the contract with a 20% deposit requirement, and a special condition stating that the deposit must be released early.  All kinds of legal arguments will come into this one!

Needless to say, our advice will be to cool off, and renegotiate the purchase!

Visit our website at www.LawyersConveyancing.com.au.

Holding Deposit? No Such Thing!

When a purchaser wants to submit an offer on a property the estate agent will often request what is termed a "holding deposit". It is important that consumers understand that there is no such thing as a "holding deposit" in real estate.

The term "holding deposit" implies that once the requested amount (usually $500 or $1,000) is paid the vendor cannot sell the property to anyone else. Of course, the purchasers believe that they cannot purchase another property without losing the "holding deposit".

In fact, neither the vendor nor the purchaser is bound by the payment of a "holding deposit".  The contract determines how much deposit is to be paid, and the date by which it is to be paid. The agent has no say in the matter at all. An agent who refuses to submit an offer to the vendor is not acting in the vendor’s best interests, and breaks the law by failing to communicate the offer to the vendor as soon as possible. This means that if a better offer is submitted to the estate agent, the estate agent must ignore the "holding deposit" and submit the better offer to the vendor, and vendor is free to accept the better offer.

Why does the estate agent demand a “holding deposit” from the purchaser if the agent knows that it cannot bind either party? The sole purpose is to control the purchaser. By taking hundreds of dollars from the purchaser, the estate agent creates something of a psychological hold over the purchaser, so that the purchaser is less likely to change their mind. Add to this is the knowledge that "cooling off" involves a loss of money, and the control becomes even stronger.

Estate agents who demand a "holding deposit" should be asked whether the vendor has confirmed to the estate agent that no further offers will be entertained after the payment has been made. Only if an acceptable response is received should the payment of a "holding deposit" be considered.

Visit our website at www.LawyersConveyancing.com.au.