Cautionary tale of seller’s regret in property game
The activities of house-buying companies are in the spotlight. Laura Mcquillan and Laura Walters report.
Is the promise of a hassle-free, quick home sale too good to be true? Private homebuying companies are doorknocking desirable neighbourhoods and making owners quick sale offers, but consumer advocates warn homeowners against accepting what seems like a good price without doing their homework.
The entities concerned aren’t real estate agents – they’re developers looking for properties they can on-sell for a greater profit – and between them, they’ve spawned hundreds of consumer complaints.
But are they predators taking advantage of would-be sellers, or are a few bad eggs spoiling it for the rest of the industry? And how can potential home-sellers stay safe?
Private house-buyers are in the spotlight after an elderly Auckland woman, Sarah Ewe, signed off on the sale of her family home hours after responding to a leaflet from Auckland House Buyers.
As the settlement date approached, she told NZME she wanted to pull out of the sale, saying she didn’t realise what she was signing, but it was too late, and the company was refusing to let her keep her house.
Then her lawyers and those representing PWG Ltd – the company behind Auckland House Buyers and Propertywise – came to a confidential agreement that would allow Ewe to get out of the deal and keep her property.
A statement released on behalf of Ewe and Peter Lee, the owner and director of PWG, said it was ‘‘undisputed’’ that late last year Ewe had been considering selling her home and had obtained an assessment on the possible value of it from a real estate agent.
Later, she responded to an unsolicited letter sent by Lee to sell her property directly to Propertywise.
Lee said as far as he was aware, Ewe intended to proceed with the sale and did not have any issues with the deal. Lee had already paid the deposit on the house.
However, Ewe told media she was unhappy with the deal and did not understand what she was signing at the time.
Following the negative publicity, Auckland House Buyers deleted its website.
Auckland House Buyers and Propertywise promotional videos were also deleted, along with some social media content and accounts.
Lee said he was ‘‘shocked and distressed by the accusations made about him and his business’’.
The statement issued by a public relations specialist on his behalf said as principal of Auckland House Buyers and Propertywise, he was ‘‘well-versed with the process of home buying and complies with the law in all respects’’.
The businesses purchased houses directly, without the commission usually paid to real estate agents.
Throughout the private home buying process, vendors were able to seek independent legal advice and valuations, but for whatever reason Ewe did not, he said.
Lee said the last page of the contract Ewe signed contained a recommendation that both parties seek professional advice before signing.
‘‘Once signed, this will be a binding contract with only restricted rights of termination,’’ the sale agreement said.
‘‘Mr Lee believes he has conducted himself ethically and fully within the law during the sale process,’’ the statement said.
League player Wairangi Koopu fronted an online ad campaign for the company about 18 months ago but says he is now trying to sever ties.
Koopu says he was paid ‘‘a couple of grand’’ to shoot the ads, which was his only involvement with Auckland House Buyers.
He got the job through his agent and doesn’t know much about the company or what it does, he says.
‘‘I got the gist of what they did: cut out a real estate agent and offered what I thought would be a fair price, and save them real estate agent fees.’’
Koopu says he’s investigating whether he can have his online ads taken down.
‘‘After reading the article I was really keen on trying to distance myself as much as possible.’’
Auckland House Buyers is one of numerous house-buying companies that have popped up across New Zealand during the past decade. And while their promise of zero commission might sound cost-effective for sellers, it can often mean much greater costs down the track.
The Homeowners and Buyers’ Association (Hobanz), a consumer rights group, says it’s received hundreds of complaints about such companies during the past decade.
‘‘This sort of conduct is not uncommon, sadly, and we’ve seen quite a lot of it,’’ Hobanz president John Gray says.
‘‘We don’t know of any good ones . . . We only deal with the ratbags.’’
Often, it was elderly people who were approached.
He urged anyone approached by such a company to be cautious. If offered a deal, they should contact their lawyer before signing any agreement, and get an independent registered valuation of their land, instead of relying on an electronic one.
‘‘The total cost might come to $2000, but in the context of selling a home for over $500,000, that’s an essential expenditure.’’
Hadar Orkibi, of Property Buyers Auckland, is in the same business as Auckland House Buyers, and he’s worried about being tarred with the same brush.
‘‘It’s disappointing that an article has come out like that in a way that could spark the idea that all private investment companies like ourselves are trying to take advantage of sellers,’’ he says.
His company posted a statement on Facebook to ‘‘make it clear’’ it was not associated with its embattled peer.
‘‘Each company works in a different way,’’ he says, laying out his own policies for ensuring sellers head into a deal with their eyes wide open.
‘‘We often put a clause in it that gives the seller the opportunity to consult with their lawyer before signing the agreement, or their seeking their lawyer’s approval of the agreement before it becomes fully binding. Even if they sign an agreement, their lawyer needs to approve it. And then there are no hiccups.’’
He says an advantage of selling to a private home-buying company is a fast sale period, ideal when sellers are short on time. And, he adds, most sellers contact him, not the other way around.
‘‘Some people don’t want the hassle of open homes and traffic through their house. They could have personal reasons, health reasons, sometimes they’re old and don’t [want] to be tidying up the house . . . Sometimes it’s a marriage split and they just don’t want to deal with the hassle.’’
That, and sellers don’t have to pay commission, as they would to a real estate agent.
His company makes money by ‘‘adding value’’ to the properties it buys, ‘‘whether it’s by subdividing, whether it’s by renovating’’, before on-selling.
Beyond a conventional real estate agent or a private homebuyer, sellers can do the job themselves – either alone, or with the help of a company like Homesell.
It bills its team as ‘‘private sale property experts’’ who take zero commission, but their work couldn’t be more different to that of Auckland House Buyers et al, managing director Chris Caldwell says.
‘‘I’m in the industry, so it’s fairly clear to me that they’re a bunch of property investors buying houses, trying to buy them as cheaply as possible . . . whereas we are assisting people to sell their homes privately.’’
Sellers pay for a bundle that includes listing their property across websites, including Trade Me, and print, as well as professional photos, sign boards and brochures, and advice on showing potential buyers through their home, and negotiating the sale.
Caldwell says even as businesses like his take off, there’s still a place for traditional real estate agents – ‘‘some people don’t have the time or the inclination to do it themselves’’ – and it’s unlikely private home-buying companies will disappear any time soon.
‘‘I think everyone is always looking for a good deal, and there are some people out there who are going to be a little more unscrupulous in their behaviour and the manner in which they approach people . . . I think it’s difficult to get rid of them, but I think with proper guidance and advice, and there’s certainly plenty of tools available, to buyers to enable them to not fall into the trap of underselling.’’