Revealed: the risks of DIY home sale

Source: Leigh van der Stoep – Sunday Star Times

THE DANGERS of selling your house privately have been exposed, after a woman who tried to back out of such a sale was ordered by the courts to honour the deal.

Auckland woman Catherine Burton, aged in her 80s, sold her house privately for less than two-thirds of its market value and later, regretting the move, refused to settle.

The new owner took Burton to court and won, and now Burton must also pay high court costs of the dispute, which could total tens of thousands of dollars.

Experts say the case shows those trying to save money by selling their house without a solicitor or an agent take a big risk.

The buyer, Edward Sayers, a lawn-mowing contractor in his late 60s, offered to buy the unit in Ellerslie, Auckland, from Burton in 2006 after she inherited it from her brother.

He became interested in the unit – one of three – while mowing the lawn of one of the neighbouring properties, and thought he would be able to buy it at a good price because of its dilapidated condition. Burton’s brother had been a hoarder, and the poor state of the property had prompted Auckland City Council to give notice that it could be a health and safety hazard.

Sayers sent Burton a letter offering $125,000 for the property, which both parties thought was probably worth around $155,000, based on the previous year’s council rating valuation. In a reply letter Burton also said she doubted the property would be worth more than $125,000 due to its condition, but indicated that there was other interest in the property. Neither party ordered an independent valuation.

Six weeks later Burton accepted Sayers’ offer of $125,000 and five days later they signed a sale and purchase agreement. Burton, the court found, did not consult a lawyer on the agreement, because she wanted to save money. Sayers had suggested she get legal advice.

When the other interested buyer came back to Burton more than a month later, he was upset to learn it had been sold. The man phoned Sayers accusing him of taking advantage of Burton, and told her to seek legal advice.

Based on this, Burton then refused to settle the agreement, claiming it was an unfair bargain. Sayers – and a nephew who had helped him with the deposit – took court action.

Justice Geoffrey Venning ruled that although the actual value of the property was closer to $190,000, and the purchase was “a bargain”, Burton had not been deliberately taken advantage of.

Sayers himself did not know the true value of the property and had advised Burton that she should take legal advice, Venning said.

“This is not a case of experienced or successful business people taking advantage of an elderly lady,” he said.

When contacted by the Sunday Star-Times, Burton said she was unhappy with the outcome but did not wish to comment further.

Her lawyer Kevin McDonald said an appeal was possible.

Sayers, who is now 70, was pleased with the judge’s decision but was unhappy the issue had dragged out over three-and-a-half years. He still does not have access to the property, and is anxious to start cleaning it up and making it liveable. He believed his offer was fair and reflected what he thought the property was worth. Legal fees to fight the case had been “horrendous”.

“The vendor will get very little money from this venture, which is a shame and completely avoidable,” he said.

Auckland University associate law professor David Grinlinton said for a contract to be overturned there had to be strong evidence of “unconscionable behaviour”, where one stronger party knowingly took advantage of a weaker party’s disabilities.

He urged buyers and sellers to get legal advice because property sales were complicated, and the transaction often involved large amounts of money.

“When people enter into contracts, they are entering into legally binding agreements that can be enforced by the other party. Where a lot of money is involved, you are really foolish to enter into those contracts without taking proper legal advice. The law won’t intervene to help people out if they make bad decisions.”

Another property law expert said although using a real estate agent was optional, not using a lawyer was “just stupid”. A solicitor would have told Burton to get an independent valuation, a cost of just several hundred dollars, but instead “this has cost her thousands”.

Peter McDonald, president of the Real Estate Institute of New Zealand, said the case was a prime example of why people were better off using an agent to sell their property. He said the new Real Estate Agents Act, which came into effect last year, gave buyers and sellers “huge consumer and legal protection”.

Agents were required to provide sellers with evidence of how they have reached a suitable price at which to market the property, and were also compelled to advise both parties to engage a lawyer when signing.

“People think they can save money, but they’re not,” said McDonald.

“I do feel sorry for the woman. I wouldn’t want my mother in that position.”