Real Estate Consumer Education (Sort Of) In South Australia

[Author – Tim ODwyer]

This article is a follow-up to Neil Jenman’s exposure of the South Australian government’s failure to implement promised real estate reforms in that State.

In July 2004, some nine months after the South Australian government announced that it had researched and accepted findings by John Rau M.P. and would bring in significant reforms “for the sake of consumers”, that State’s Office of Consumer and Business Affairs (OCBA) produced a booklet entitled “Buying or Selling a Home”. 

While the Rau reforms remain on hold, this booklet is intended as a guide for consumers who get an early warning that the booklet is “not a comprehensive account of the law or a substitute for professional advice.” Sadly, it begins with this consumer-unfriendly disclaimer: “Although the information in this booklet has been researched and presented with due care, OCBA accepts no responsibility for any errors or omissions which may have occurred within the publication.”

What follows is a selection of statements from this “guide” together with my caustic comments in brackets.

  • “Whether you purchase a house privately, through an agent or at auction, the thrill of finding the right house, in the right area, at the right price, never wanes.” – page 3 (So far, so good.)
  • “When buying a home: be well informed of your rights, shop around, be prepared to negotiate, don’t be afraid to ask questions if you are unsure, don’t rush your decision-making, read everything before you sign anything.” – page 3 (No mention at this stage about obtaining independent legal advice or a valuation before signing anything – as the Queensland government warns its residential buyers. Nor, as the Deep North warns in the fine print, to exercise “extreme caution” in accepting advice from anyone referred by the vendors or their agent.)
  • “Always remember that a real estate agent is usually engaged and paid for by the vendor (seller) and therefore acts for the vendor – not you as a buyer.” – page 4 (This important warning should be BRIGHT RED AND IN LARGE, BOLD CAPITAL LETTERS – but it is not.)
  • “If you find a suitable property, inspect it thoroughly and speak with the selling agent to check if there are any easements, caveats, covenants or other encumbrances that may prevent future alterations to the house or effect how you may use the property.” – page 5 (Needless to say, there is no warning to buyers that, whatever answers or disclosures they receive, independent advice from a solicitor or conveyancer should be obtained before a contract is signed.)
  • “Keep an eye out for potential structural problems.” – page 5 (Commendably, the guide lists several matters buyers should look out for. The obvious and correct implication here is that agents and vendors won’t volunteer anything about “potential structural problems”. By the way, the list includes cracked, damp or mouldy walls, sloping floors, large cracks, lifting tiles, peeling/blistering or bubbling paintwork, pools of water, sagging roof framing and cracked or broken roof tiles.)
  • “There is intense competition among lenders who offer a variety of packages, options and methods of payment. The loan that appears to be cheapest because it has the lowest interest rate may not be the cheapest option in the longer term, when fees, ongoing charges, and penalties are included.A mortgage broker can assist in finding the right loan but you are not obliged to use one.” – page 8-9 (Why not also warn buyers never to use a lender or broker recommended by the vendor’s agent? And how about asking how long it will realistically take for the loan to be approved, documented and advanced?)
  • “Do not sign the loan agreement without carefully reading and understanding its contents.If you are unsure of anything in the (loan) contract, ask for clarification from the lender or seek independent advice from a solicitor, accountant or conveyancer.” – page 14 (The warning should be straight forward: Don’t sign anything without having taken independent professional advice.)
  • “Some (private sale) vendors choose to use a registered real estate agent to assist with advice and documents to allow the vendor to sell the home themselves. The vendor shows the home and answers questions about the property, but the agency handles the negotiations, contract, and arranges all of the legal documents right through to settlement.” – page 17 (The rhetorical question here may be: who needs solicitors or conveyancers for “all the legal documents right through to settlement”?)
  • “Contract documents are normally signed and a deposit paid on the day of the auction. The auction process can be very emotionally charged and if you are unsure about bidding at an auction, you should consult a specialist, preferably a competent person to act as your advisor.” – page 18 (No warning to watch out for deceptive auctioneers’ bids or non-genuine vendor bids, or that auction contracts cannot be made subject to finance or other special conditions – unless you have done a deal with the vendor through the agent and got it confirmed publicly for the benefit of all bidders at the start of the auction.)
  • “Rent-to-buy schemes or ‘wrapping’ . are high-risk schemes for the buyer as ownership doesn’t pass to you until full settlement has been made. The missing of a payment may see you lose your ‘investment’ (rent payments).” – page 18 (The guide mentions that in South Australia contracts for the purchase of real estate by instalments are void, yet it indicates that OCBA is concerned that these practices are emerging in South Australia. Whatever, the perennial message should again be not to sign up for any such scheme without prior independent legal advice.)
  • “During the buying process you can generally expect an agent to . organize for the signing of the contract. Remember that an agent is usually hired by the vendor and therefore will be working for the vendor.” – page 19 (All the more reason to shout out loudly once again: Don’t sign anything without first obtaining independent legal advice. Maybe this warning should be in bold different colours at the top and bottom of each page of the booklet?)
  • “If you are not confident negotiating with the selling agent, you may want to get a solicitor, conveyancer or buyer’s advocate to negotiate for you. You will be charged a fee if you do.” – page 20 (Bloody hell! What a wishy-washy approach to consumer education! Whose bright idea was it to spook buyers with an unfortunate reference to being “charged a fee”?)
  • “It is your responsibility to find out anything that is not covered in the (Form 1) Statement. Your solicitor or registered conveyancer can help you here.” – page 13 (Still pretty wishy-washy! Buyers need also to be warned to get this important professional advice asap before cooling-off rights have expired and, if you’re bravely planning to buy at an auction, to get it well before the auction.)
  • “In most cases a standard contract of sale document is used to make a written offer.You may consult a solicitor or conveyancer concerning the need for and wording of.special conditions.” – page 21 (This is less than wishy-washy, it is as weak as .er. water! Nothing less than “should consult” will adequately warn buyers.)
  • “A land agent, solicitor or conveyancer can help you draw up the contract document.” – page 21 (Obviously the official policy is not to be too emphatic when it comes to advising consumers about the need for professional assistance. Frankly, consumers have to be told in no uncertain words that they must have rocks in their heads to let a real estate agent , who is legally obliged to act in the best interests of the vendor, help draw up any contract.)
  • “It is important to read and understand any legal document before you sign it.If you are considering these forms of ownership (joint tenancy/tenants in common) but are not sure about them, seek professional legal advice.” – page 22 (At last, something positive! But still, in three pages of commentary about “contract terms and conditions”, the only reference to seeking professional legal advice is about how a property might be legally held with co-owners.)
  • “Through a process of offer and counter-offer the agent will negotiate between the parties to obtain the highest possible price for the vendor.” – page 25 (Pity consumers aren’t warned that the agents’ process of offer and counter-offer is mostly about wearing down the parties’ resistance, that agents are trained negotiators supposedly acting in the vendors’ best interests. Vendors, of course, need to be warned about agents who look only after number one.)
  • “You should not sign your offer without carefully reading and understanding this document.” – page 25 (Nah, it would be repetitive to mention getting prior independent legal advice.)
  • “Prior to settlement, both you and the vendor should retain a conveyancer to prepare for the settlement. You may wish to use a solicitor or even consider doing the conveyancing yourself. However, unless you are very experienced in property documentation, it is highly recommended you seek professional advice and assistance to manage the necessary process.” – page 27 (Why doesn’t OCBA highly recommend seeking professional advice and assistance long before the moment of settlement? Like before signing any contract?)
  • “If you choose to sell your property yourself rather than appoint an agent, it is possible to save money as you do not pay any agent’s commission.” – page 32 (Love it!)
  • “It would be a good idea (for private sellers) to obtain advice about the contract of sale, Form 1 and any other documentation. You should obtain quotes before proceeding.” – (The first sentence is like saying, “If you intend to undertake brain surgery on yourself, it may be wise to have a handbook close by.” As to the second sentence, forget “wishy-washy”, forget “weak as water”. This is a crock!)
  • “When setting the reserve (for an auction), remember the price estimate the agent originally quoted you and don’t be pressured into setting a reserve price lower than the price estimate. Remember the agent is required to act in your best interests. Achieving a sale at auction, where the highest bid does not meet your expectations, may be in the agent’s interests because the agent will still earn commission.” – page 33 (This is good stuff – what much of Rau’s reforms were about – but needs to be shouted more loudly to vendors. In an ideal world of real estate consumer protection it would be mandatory for agents to give written price estimates and details of their so-called marketing programmes before they can be appointed.)
  • “You are permitted to bid at auction up to, but not at or over the reserve price. The auctioneer must declare prior to the auction that the vendor reserves the right to bid up to the reserve. The auctioneer must not engage in misleading or deceptive behaviour and must only accept genuine bids.” – page 33 (Again this is good stuff, but why not point this out also to auction buyers?)
  • “If you elect to appoint an agent to assist with the sale of your property it is important to understand the role they will play. You should also talk to several agents prior to selecting one.” – page 34 (It is a pity this guide has not placed more emphasis on the importance of understanding the protective role solicitors play.)
  • “You can generally expect the agent to . prepare the contract and arrange the signing of the contract.” – page 34 (Frankly, to protect buyers and vendors alike, real estate agents should have a very minimal and restricted role in the preparation and signing of contracts as has been legislated in the Australian Capital Territory.)
  • “Property advertising must not be misleading or deceptive, it is illegal to misrepresent a property in any way when advertising or marketing your property, either orally, or in writing or photographs.” (Is anyone telling this to real estate agents? But why bother, someone has remarked, when many agents are deaf and can’t read well.)
  • “If you decide to engage an agent, there must be a signed written agreement between you and the agent authorizing the agent to act for you.” – page 36 (In two pages of comment about sales agency agreements only on the last line comes this lame warning: “Seek legal advice if you want to terminate an agreement.” How about warning property owners about the importance of getting independent professional advice before entering into any agreement?)
  • “There is no cooling-off period for sellers so you will be bound by the contract of sale.” – page 40 (Why no cooling-off period for sellers? Are they regarded as second class consumers who should be permitted to have second thoughts? Never mind that cooling-off anyhow is an inadequate, inequitable and after-the event approach to consumer protection.)

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