All too often clients adopt a blas?, carefree attitude when dealing with a real estate agent on the purchase of a property.
If your own home has sold, or is being promoted for sale privately, there may be no real estate agent acting for you to ensure the dates and details of any agreement you sign for the purchase of another property mirror/coincide with those in your sale agreement.
It is regularly overlooked that any agent you come in contact with, when attempting to purchase a property, is solely acting for, and answerable to the vendor (seller), as it is the vendor who pays the agent's commission. Such agent will usually be the property's listing agent. Their only legal obligation to you is that any particular information about the property they convey to you, is done accurately and truthfully - that is, there is no misrepresentation.
- You might tell the agent you have sold your property. In reality however, there may only be an agreement to sell, which is subject to, for example, your purchaser satisfying finance, title, and property check conditions in three weeks time!
- The agent then prepares your offer to purchase the property of your dreams, but has no reason to make it conditional upon either the unconditional sale of your home and or, the arranging of satisfactory finance.
- Your sale 'falls over' because the purchaser has seen another property they prefer to yours, and have their solicitor use the finance condition to cancel the agreement by advising your lawyer that their client has not been able to arrange "suitable finance" (although there are issues with this particular clause). There are also a number of other legitimate reasons for your sale not to proceed, depending on the contract wording.
- As the title and Land Information Memorandum for your new property are satisfactory, you are not able to legally cancel your purchase agreement. If you do, legal proceedings, costs and damages against you are likely to follow in rapid succession.
- If you are unlucky enough not to find an alternative buyer for your property, who is able to settle (pay you the purchase price) on or before the day you must settle your own purchase, expensive bridging finance will be needed until you can sell. Its availability cannot however always be guaranteed.
- When you are forced to confirm your purchase, a sizable deposit will be payable to the real estate agency for the listing agent's commission. Bridging finance or a family loan, may be needed for this also.
- In the above example, as the agent has wrongly, but possibly justifiably assumed your sale has been concluded/settled, it is likely the settlement dates for both the sale and purchase will not coincide. You may have to vacate your home weeks before you can move into the new one, involving extra rental, extra furniture removal charges, and probably much grief and anxiety.
- If you're due to settle your purchase before you receive funds on the sale of your own property, bridging finance will still need to be raised - involving extra bank and lawyer's costs.
Understand the terminology - speak with your lawyer whose advice/instructions to you or to the vendor's agent will be clear and unequivocal.
If you tell an agent "I have sold my property", although the agent should, as a professional, clarify precisely at what stage your sale transaction has reached, this phrase could mean either:
- You have received an offer to buy your property, which you are considering. But there is no valid and binding agreement;
- You have made a counter-offer and you are awaiting the purchaser's response. Again there is no valid and binding agreement.
- There is a signed agreement, but the purchaser still has a week or two to satisfy a few conditions. Although there is a valid and binding agreement, either party has the option of cancelling, if any condition is either unable to be fulfilled, or unfulfilled within the required time frame. This is therefore a CONDITIONAL agreement.
- There is a signed agreement and all conditions have been fulfilled by the purchaser. Here we have an UNCONDITIONAL agreement and neither party may escape its requirements without the consent of the other.
- You have received from your purchaser the sale price in full and the money/surplus after mortgage repayment etc, is sitting in your bank account.
The need for clarity, diligence and alertness is demanded when entering into contractual agreements for the sale and/or purchase of what, for most, is their most valuable asset.
The above is merely an outline of some things to consider when selling or buying property.
However, it is our recommendation that you should not accept or make an offer on property without first discussing the terms with your lawyer BEFORE YOU SIGN.
Despite what some people believe, involving your lawyer at this early stage should not 'hold up' the process - it is often to the contrary, and may well save you unnecessary legal fees which often result from poorly and ambiguously worded documentation.
Contact us now if you would like us to assist you through your sale and/or purchase process.
Sept 2004
All information in this article is to the best of the author's knowledge true and accurate. No liability is assumed by the author for any losses suffered by any person relying directly or indirectly upon this material. It is recommended that you should consult a senior representative of Rotherhams before acting upon any information provided in this article.
