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NZ Herald
6 days ago
- Business
- NZ Herald
Warning after real estate agents caught altering property sale agreements
He said if the title requisition right was unaltered and there was a problem with it, the purchaser had time to get the defect fixed or to back out of the deal if necessary. But if it was not, he said, buyers could be put in an impossible position. 'There's not often defects on the title but it does happen, and it happened to me recently where there was a cross-leased title involving four different properties and there was an error on the title. 'To get that fixed is very difficult and very costly and can take quite some time because you need to involve surveyors, banks.' The purchaser's lawyer would have to alert the bank to the problem. 'If there is a defect on the title, the bank will then say 'we are not going to advance the mortgage funds until you've fixed it'. In the meantime the settlement date is coming up and the purchaser has to settle because they are in an unconditional situation, but they cannot raise the money from the bank. Therefore it is catch-22.' Herring said a standard sale and purchase agreement said the person holding the deposit, whether that was a salesperson or a lawyer, needed to hold it for 10 working days, which aligned with the title requisition period. Once that was over and the buyer's conditions were satisfied, it could be released. 'If the deposit is released earlier than that and the vendor spends the deposit – maybe they use it for paying down debt, to put a deposit on a house they are buying or they might go overseas, if the requisition period is activated and the purchaser has to cancel the contract – if that deposit is gone, it makes it much more difficult to get back.' Herring said if someone was using KiwiSaver to pay a deposit, their lawyer had to give a legal undertaking to the provider that if anything went wrong and settlement did not go ahead, the money would be returned. But if something happened and the money had disappeared, that would be much harder. 'It heightens the risk for KiwiSaver first-home buyers.' He said people who discovered a change had been made to an agreement they had signed should seek legal advice. Real Estate Authority (REA) chief executive Belinda Moffat said her organisation had provided general advice to the sector on the issue. 'Section 123 of the act requires agents to hold money received in respect of a transaction for 10 working days – unless both parties agree to an earlier release. Ultimately, this 10-day rule exists to protect consumers. If a vendor fails to settle, or an issue arises before settlement, if the deposit has already been released it could leave the purchaser with no security that their deposit can be recovered. 'An early release of a deposit is only permitted by court order, or if each party to the transactions signs an authority agreeing to the early release. REA is concerned that some licensees and parties have sought to include an early release clause as an additional clause in the Sale and Purchase Agreement. 'REA does not consider that an early release clause in the Sale and Purchase Agreement meets the purposes of the act. Such clauses may undermine the consumer protection intent of section 123. Licensees should instead ensure parties give informed authority to early release.' Moffat said she was not able to comment on the current status of any complaints. 'We note further that whether there is a finding of breach of the conduct rules will depend on the facts of each case.' -RNZ
RNZ News
29-06-2025
- Business
- RNZ News
Property investor takes on salespeople: Is it 'cashflow positive' or just a 'cash cow'?
For Sale Sign Photo: RNZ / Angus Dreaver A high-profile property investor and investment coach is taking aim at real estate salespeople advertising properties as "cash flow positive". "Cash flow positive" is generally understood by investors to mean that the rent from the property will fully cover the cost of owning it, such as loan repayments, rates and insurance, and leave a surplus each week. But property investor Steve Goodey said he had found instances where claims were made that did not stack up. In one case, an Auckland unit was being advertised as a "solid home or cash flow positive investment" but he calculated that even at the top of the rent range for the unit, it would need to be bought for $405,000 to make it cashflow positive. He said the salesperson told him the vendor wanted $500,000. The salesperson told RNZ that the numbers stacked up if an investor had a 20 percent deposit. "But the title should be changed to cash cow investment as it has caused confusion for some investors." In another case, a property was being advertised as cashflow neutral with a purchase price of $699,000 but Goodey estimated it would be negative by $16,000 a year. Another property going to auction promised to be cashflow positive but Goodey said that was a bold claim to make when the sale price was not known. The Real Estate Authority said it could not comment publicly on specific situations. But chief executive Belinda Moffat said real estate professionals must not mislead a customer or client nor provide false information. "This applies to representation made in advertising. Where a property is marketed as a 'cashflow positive investment' this would need to be able to be verified and substantiated. We would recommend potential buyers ask the licensee or vendor to substantiate this, and take expert advice if required." Goodey said investors needed to be careful with the information they were supplied when looking for a rental property. He said it was disappointing that no one seemed willing to tackle this sort of marketing. "I've had agents come to me and say that a property is cashflow positive if you put a 30 or 35 percent deposit down in cash. That makes anything cashflow positive - are we just making stuff up as we go along now?" Sign up for Ngā Pitopito Kōrero , a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
