Source: MIL-OSI Submissions
Source: Real Estate Authority
It’s no secret that selling real estate is all about the right kind of marketing, and real estate advertising is designed to show a property in the best light. An advert might focus on the sun-drenched location while neglecting to mention the busy road, for example, or highlight the spectacular views rather than the difficult access from the street. Glossing over a property’s quirks if they are likely to be easily spotted at an open home (or by reading the marketing material closely) is one thing, but lying by omission or design about more serious matters is risky.
“When thinking about selling, it’s a good idea to get legal advice about your obligations before you sign an agency agreement,” says Real Estate Authority chief executive Kevin Lampen-Smith.
Most agency agreements, which set out the terms and conditions of your contract with the real estate agent, require you to confirm that you do not know of any problems with the property and that you haven’t withheld any information about it. As a seller, you should also confirm that your property has all the consents and code compliance certificates for any building work and if you have given consent to any works at a neighbour’s property because this is likely to impact on the view or enjoyment of your property.
“This is important for several reasons. “Real estate agents have clear obligations when it comes to disclosure. They must not mislead a seller or a potential buyer or withhold any information. While it’s not up to the agent to uncover hidden issues with a property, they must tell any prospective buyers what they know,” says Lampen-Smith.
Under the Real Estate Agents Act 2008, if licensed real estate agents suspect that a property may have a defect then they are obliged to ask the seller about it and, if confirmed, advise potential buyers of any risks. For example, if a property is next door to a proposed new development, or if it’s in an area that’s been subject to flooding, the agent must tell prospective buyers rather than turning a blind eye. If your property is prone to weathertightness issues – thanks to its age or cladding – then the agent will need to disclose this to prospective buyers.
If you choose to get additional checks on your property, it’s wise that the report is done by a qualified building inspector who has professional indemnity insurance, understands the strict legal requirements of their role and carries out their work in line with the New Zealand Standard for Residential Property Inspection (NZ S 4306:2005).
“If you know there are issues with your property, whether it’s something small like a garage door not working properly, or a bigger deal like an unconsented deck, it’s best to discuss them with the agent you are working with. They can help you understand the importance of being open and honest and will guide you through what could happen if you don’t disclose. They can also help you decide how to tackle a problem – whether that means fixing it or sharing the information with potential buyers. Your agent isn’t able to tell buyers about problems with your property without your agreement. If you can’t agree, they may decide not to take your listing,” Lampen-Smith says.
“If you knowingly mislead a buyer, you may be in breach of the terms of your sale and purchase agreement and they may have the right to cancel the sale or re-negotiate a reduced buying price. They can even take you to court and claim damages.”
“These rules for disclosure offer more protection to buyers than the traditional approach of ‘caveat emptor’ (let the buyer beware), which assumed that the seller would always know more than the buyer and any sale was at the buyer’s risk. However, buyers should always do their own research about a property before signing a sale and purchase agreement. Buyers should also ask the agent about anything they are concerned about – no matter how trivial it may seem. It’s far better to be aware of an issue as early as possible than finding out when it’s too late,” Lampen-Smith says.
Buying a house is not only a matter of weighing up the numbers and doing your homework, it’s just as much about the feeling you get. When thinking about what you have to tell buyers about your property, it’s a good idea to flip things around and ask yourself what you would want to know if you were in their shoes and had fallen in love with a property.
For independent guidance and information on buying or selling, check outwww.settled.govt.nz