As a seller, how much do you need to tell your buyers?
IF YOU’RE selling your home, how much to do you have to disclose about its condition to a prospective buyer?
More than you may think – or would like to.
Real Estate Authority (REA) research shows many sellers have a ‘‘very relaxed’’ approach to honesty.
REA chief executive Kevin Lampen-Smith says some people justify not coming clean about everything because they think the onus is on the buyer to do their homework, or that it’s okay not to tell the full truth if they can get away with it.
‘‘People tell themselves this behaviour is okay 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.’’
Lampen-Smith says sellers thought that full disclosure would have an impact on whether the sale would go through.
‘‘One respondent said they didn’t 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.’’
Lampen-Smith says licensed real estate agents play an important role in making sure everything a potential buyer should know about a property is made clear.
‘‘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.’’
Lampen-Smith says that when you’re talking to an agent about selling a property, tell them everything you know about it, no matter how small the details.
‘‘They’re the experts and their professional reputation is at stake if they mislead a buyer.
‘‘If you’re 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 would do their homework about a property first, like visiting the REA’s own website, settled.govt.nz, Lampen-Smith says.
‘‘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’ve been sold a lemon, you may end up in the Disputes Tribunal or engaged in more serious court action.’’
Lampen-Smith says neither experience will leave you feeling positive and could have a negative impact on your future.
He says if you’re upfront with your real estate agent about everything, and talk to the council about getting any additions or alterations certified, you’ll be on a surer footing when negotiating with buyers.
‘‘It might seem unfashionable in the era of fake news, but honesty is always the best policy.’’