Wellington, December 3, 2018
Kevin-Lampen Smith
Recent research by the Real Estate Authority (REA) has shown that many people have a very relaxed approach to being honest when they are selling a property.
Some people justify not coming clean about everything because they think the onus is on the buyer to do their homework, or that if they can get away with it then it’s ok not to tell the full truth.
People tell themselves this behaviour is ok because they believe that successfully selling their property is the only thing that matters.
The need to sell, and to get a good price, is often seen as a higher priority than the need to be completely honest.
Full Disclosure
Sellers thought that full disclosure would have an impact on whether the sale would go through.
One respondent said that they did not want to open up any potential problems and that they were completely selfish about it.
They were concerned that being honest about any problems with the property would mean that no one would want to buy it.
Agent’s responsibility
If, like most New Zealanders, you are selling with a licensed real estate agent, they will play an important role in this process.
When you sign an Agency Agreement (the legally binding document that sets out the contract between you and the real estate agency) you are asked to disclose or be honest about any known defects.
If you tell the agent about a significant problem with a property but ask them not to tell anyone else, they may need to cancel the agreement and walk away.
When you are talking to an agent about selling the property, the best course of action is to tell them everything you know about the property, no matter how small you think it is.
They are the experts and their professional reputation is at stake if they mislead a buyer.
Consider as a buyer
If you are still not sure what to disclose, the real test is to put yourself in a potential buyer’s shoes. If you were the buyer, would you want to know about unconsented building work, potential leaks or unstable ground?”
In an ideal world, every potential buyer will do all the necessary research about a property. The consequences of not doing so are very real.
Selling a property is stressful enough without adding in the threat of the sale being cancelled or of possible legal action further down the track.
Due diligence
At best, any serious problems will be uncovered by due diligence and you’ll look like a bit of a fool, but the buyer will either walk away or begin negotiations that take these defects into account.
At worst, if the sale goes through and the buyer then discovers that they have been sold a lemon, you may end up in the Disputes Tribunal or engaged in more serious court action.”
Neither scenario will leave you feeling very positive about the experience and has the potential to have a negative impact on your future.
If you are upfront with your real estate agent about everything (and you talk to the Council about getting any additions or alterations certified), you will be on a surer footing when it comes to negotiating with potential buyers further down the track.
It might seem unfashionable in the era of fake news, but honesty is always the best policy.
Kevin Lampen-Smith is the chief executive of the Real Estate Authority (REA), the independent government agency that regulates the New Zealand real estate industry. For more information about buying or selling property, check out settled.govt.nz.
