Saturday, September 3, 2016

It's only quietly on the market

With the recent boom in house prices it is natural for investors to consider if this is the time to sell their property.

One of our long term clients rang us recently to let us know that they were going to get a real estate agent to go through to appraise their multi-unit property as the agent had recently sold a similar property nearby for a surprisingly large amount of money.  
"Is it going on the market?" I asked our client.  

"No, I'm not selling it.  Of course, I will if they can bring me an offer to match the other property.  They won't be marketing it or anything, they'll just be talking to the buyers who missed out to see if it will suit them, and if so, then hey, we'll sell."  The owner commented casually.  

I confirmed my understanding that "the agent is just doing an appraisal, nothing for us to do but arrange access for this?" The owner agreed, so we did.

A week later, I'm filling our client in on a prospective new tenant and I asked him if he was going to list it.  "No," he says, "They haven't brought me an offer yet, so no, I'm not selling it, let's carry on as if I am going to own this property for the rest of my life, which was the original plan".  

"OK, tell me if anything changes as we'll need to notify tenants if it goes on the market" I sign off.

So, we carried on as usual, organizing some maintenance work we agreed on, and proceeded arranging a sign-up with the new tenant for the available unit.

On the day we are due to sign up the new tenant, we get a call from the real estate agent.  "I want to bring a buyer through, can you please arrange it with the tenants?".  Hold the phone, we thought it wasn't being sold, so I called our client to ask what was happening.
"Oh yes, that's fine, they can go through" he said.  

"But is it on the market or not?" I asked, "we legally need to notify tenants if so*".

"I'm not getting the agent to advertise it, it's only quietly on the market, so no it's not on the market as such" declares our client.

"We can't deal in ambiguity, or more importantly, the law can't.  Have you, or have you not, signed a listing agreement with the real estate agent?" I asked as patiently as we could.
"Oh yes, I signed one several weeks ago for a ninety day period, but as I said, they are not doing any marketing" says my client, blissfully unconcerned.

"Then it's on the market" I say, holding my head in my hands for the breach of the Residential Tenancies Act that has been unknowingly committed. "The advertising isn't the defining factor; you've authorized someone to sell your property for you.  Therefore it's on the market.  I'm notifying your tenants straight away."

My client kindly assures me "Tell my tenants not to worry, I won't sell it unless I get the price I want".  I mutter darkly that this is hardly reassurance, few people sell without getting the price they wanted, but assure him we have a polite and calming letter for the very purpose, and as soon as I am off the phone I am sending it to his tenants, including one to present to the new tenant I am due to sign up in 20 minutes time.  Boy was he surprised, but took it rather well, and proceeded to sign the tenancy agreement.  I was less inclined to be unconcerned about it, given we do all we can to keep clients out of trouble, and this one just landed themselves in a particularly messy spot.

Two days later, the day I am due to do the initial property inspection with the new tenant, I receive another call from the property owner.

"Guess what?  I've just signed a sale and purchase agreement.  Settlement is in three weeks time, the purchasers will be doing their due diligence next week, help them out won't you?  I've told them they need to use you guys for managing it, you are the best!".

I can only hope they are better at keeping us informed of important things like this.

* See Residential Tenancies Act 1986 Section 47 for more details of the law that applies here.

Lesson:  Knowledgeable property managers to help save you from mistakes that may land you in hot water, but you need to tell them exactly what is going on for them to be able to do so.

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