Don’t be like John
Buying a house is known to be one of the most stressful times in your life, and competing with other would-be purchasers in a heated property market doesn’t help the stress levels.
Often the pressure can be on to make a snap decision and put an offer on a property that you’ve only had a quick look around. As the Agreement for Sale and Purchase of Real Estate is likely to be one of the most important documents you ever sign, make sure you talk with us first just so you know what you’re getting yourself in for.
It’s acknowledged that the ‘cleaner’ an offer is the more appealing it is to the vendor. We often hear of buyers feeling compelled to make an offer subject to few, or no, conditions. Once the agreement is signed both parties have legal obligations that include using their best endeavours to satisfy any conditions, and failing to do so can prove costly.
If you’re looking at buying a property at auction, any bid you make above the reserve will be an unconditional offer. At the fall of the hammer, you are legally obliged to purchase the property on an unconditional basis if you are the highest bidder.
There’s nothing we can do if there is an issue with the title after the auction, so it is vital that you get in touch with us before auction day so we can research the property. We can look over the title and assess the auction pack to ensure that the property is in order.
Solicitor’s approval clause
Don’t be fooled into thinking that there will always be an ‘out’ by inserting a ‘Solicitor’s Approval’ clause into the agreement. There is a common misconception that these clauses are as good as a ‘due diligence’ clause, and that if you change your mind you can simply tell us not to approve the agreement.
We are limited to only disapprove an agreement if there are genuine legal issues, mostly associated with the form of the agreement or the title to the property. Our hands will be tied if you’ve simply made a bad decision or changed your mind.
A horror example
John Robinson (not his real name) made an offer on a property only subject to solicitor’s approval. The offer was immediately accepted without any negotiation between the parties. Over the weekend John started to get cold feet – he believed he had paid too much for the property. This was later confirmed by a subsequent valuation at the request of John’s bank; the property was valued at $20,000 less than the offer. John didn’t want to proceed with the purchase at that price. Unfortunately there was nothing his lawyer could do, as the form of the agreement and the title to the property were in order.
John had been pre-approved by his bank well above the purchase price, but the bank was only prepared to lend John 80% of the valuation. The extra money John had planned to spend doing up the property had to be put towards his 20% deposit, but it was fortunate that he did have sufficient funds to settle. It would have been a different story if John had been relying on being lent more from the bank.
The first his lawyer heard about John’s purchase was when a copy of the signed agreement was sent through by the real estate agent. Had John been in contact with his lawyer before making an offer they could have ensured a more informed offer was submitted.
Don’t be like John. If you’re considering buying property, make sure you talk to us at the earliest opportunity to let us know your plans. Not only can we talk you through the process and help make it a little less stressful, but we can also ensure you are not locked into obligations that you can’t satisfy.
Disclaimer: All the information published in "Property Speaking" articles is true and accurate to the best of the author’s knowledge. It should not be substituted for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are the views of the authors individually and do not necessarily reflect the view of this firm. Articles appearing in "Property Speaking" may be reproduced with prior approval from the editor and credit being given to the source.
Copyright, NZ LAW Limited, 2017. Editor - Adrienne Olsen, e. firstname.lastname@example.org p. 029 286 3650