Deceitful REA - First home Experience Ruined.

My partner and I have recently signed a contract of sale for a property in Aug 08. We purchased it in good will thinking we'd be able to move in as our first home in Dec 08. The REA told us that the tenants in the property are on a month by month basis and no contract was actually in place. Long story cut short, turns out that the REA deceived us into purchasing the property despite knowing that there will be problems getting them out before settlement and that they actually do have a contract in place.
Now, we will have to rent out the property till May 09 before we can move in.

Below is a letter that I've sent to the tenants as a last resort explaining our situation in detail, hoping that they will symphatize us.

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(All names are fictional. If you require more details, please kindly pm me. I'd be more than happy to share.)

First of all, we apologize for having to write to you personally. We do not have any intentions to intrude, disturb or cause you any grief you in anyway possible.

As you have or may not have already know, we have signed a contract to purchase XXX property some time at the end of August. We bought it in good faith thinking that it was going to be vacant and that your tenancy agreement was on a month by month basis. At least, this was what the selling agent, Des told us. We even tried to negotiate a much longer settlement which is the XXX of December thinking that this would provide you with more time to find a new place to live.

Initially, we wanted to put in *subject to vacant possession in the contract but Des told us not to. Prior to signing the purchase contract, we saw the contract of lease between you and the vendor. It was till May 09. we questioned this. However, Des told us that the contract were on a month by month basis and that the Landlord didn’t even actually sign the contract. Des also told us that according to the property manager, Brad that you have already found another place to stay. He gave us confidence that they will be no problems at all. Given that this is the first time we're buying a property as this is our first home, we trusted everything he said.

Des also mentioned that we shouldn’t put in the clause above given that we have many other clauses already such as subject to satisfactory inspection by my partner, subject to finance, subject to valuation not coming below purchase price etc. He told us that it will be difficult for him to try convince the vendor to accept my offer if we were to put in another clause.

Anyway, prior to this letter, we have been talking to Brad to try to get in touch with you in order to come to a resolution. We both do sincerely feel that it is unfair for requesting you both to find a new place to stay but since Brad had troubles getting in touch with you, we thought we might just go to this last resort which is to write you a letter just so understand the real situation as we are running out of time now. We do hope that you can be honest with us, as we are to you about what you both decide to do or how we can all come to a resolution. At this point in time, we have almost lost all hope in contacting Des because to him, his job is done. We are now both left stranded, neither here nor there. We don’t know what else to do.

To be completely honest with you, we both just started working recently. We were both students who studied here, got our degrees and decided to stay here in Australia after getting our PR. Now, because of this situation that we're gotten ourselves in, all because of our carelessness and naivetivity in trusting other people, we've gotten ourselves into a very complicated situation. We thought that buying our first home wouldn’t be this difficult and that it would be a happy thing.

In terms of the financial predicaments resulting from this, we had a good look at the situation at hand and what it means if you intend to remain there till May 09 and we continue renting at our current place in Carlton or another place.

We currently are paying 400 p/w living in Richmond. We gave notice to my landlord few weeks back that we will be moving out. (Back then we still didn’t know that this will be a problem as Des assured everything was under control when we checked with him.) Hence, he proceeded to find new tenants. We don’t know if he has found anyone yet, but if he didn’t, and worse case scenario, we extend the contract till May, he will definitely have our current rent increased due to the current property market. Say, if you continue to stay. We will have to pay my mortgage of nearly $2,900 per month not including body corporate and rates which will come up to about $400 per month all in.

On top of this, we will still have to pay my rent which is say $400-$430p/w. Income we will receive from you from my new property is $400 p/w and after tax, its only about $310 p/w not including management fees. Plus we will have to move out with all my furniture for a few months, then move again in 6months time if we cant afford to pay the rent increase. This is just too much trouble in every sense.

On top of this, the major problem would also be the fact that we're renting out the new place. We will be liable for capital gains tax in future if we decide to sell as the ATO will regard this property as an investment property rather than my primary place of residence. After putting all this in figures, we realize that we're really going to be in dire stress as we are adamant that there is no chance we can service the loan plus the extra out of pocket.
Once again, we would like to emphasize that we do understand that this scenario is also very unfair to you as tenants. If we were told that there will be no problems with you moving out and that the tenancy agreement was on a month by month basis, we would definitely not have signed the contract in the first place. The first thing we asked Des during the inspection was if the tenants were happy to move out. As you can tell, we are now in a very vulnerable position now as we cant have anything against Des. We've even tried talking to consumers affairs and Reiv and all they said is that its our words against his words. They have no doubts that we were telling the truth. However, in court, the judge will only look at the cold hard facts. All Des has to say is that everything is in black and white stated in the contract of sale. We made a big and costly mistake when we trusted every word he said.

Having said all this, all we can both hope for is for you to be willing to talk to us. You can be honest with us and tell us your situation, what it means if you really move out and what compensations that you may require. We are in deep distress at the moment and are very worried with this whole situation. We sincerely hope that you will consider coming in contact with us via a phone call. If you feel more comfortable, you can contact Brad too.

It would be very much appreciate if we all keep this letter just within both our parties as we really do not intend to have any shortcomings with anybody. All we are trying to do is hopefully come to a mutual resolution that you will be happy and satisfied with. We kindly hope that you will provide us with a prompt reply in regards to this matter as we're just five weeks away from settlement. All in all, we thank you for your time in reading our letter and hope to speak to you soon. We sincerely apologize if we have caused you any inconvenience that we never had the intention for. Thank you once again Mr & Mrs Tenants.

PS: We hope that you can provide us with a prompt reply as to whether you decide to come to a solution or even continue staying because our landlord has recently contacted us and said that he needs an answer by this Friday 21st of Nov 08. He wants to know if we are going to continue staying in our current place. We are honestly desperate and in dire stress now. Thank you Mr & Mrs Tenants for your understanding and time.

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Note that Brad and Des are from different real estate companies. I hope that many will learn from my experience in regards to the above. I know its unfair to classify all REAs in the same basket. However, there are indeed some out there who are cunning, deceitful and dishonest. They would say anything just to get the deal across. I've tried contacting "Des" and he said that everything is out of his hands now. Its up to the vendor's solicitor or "Brad" to get the tenants out. He has washed his hands clean and wants nothing to do with this. He has no idea how much grieve and distress he has caused my partner and I who has made so many plans to move in by Christmas. He's totally ruined it for us.
Its okay, I just hope you guys will learn from this and make sure you have everything in black and white before you purchase a property. Trust no one but yourself. As for this "Des" guy, I'll just leave it to the man upstairs to deal with him. Take care guys. Sorry for being so long winded.
 
Prior to signing the purchase contract, we saw the contract of lease between you and the vendor. It was till May 09. we questioned this. However, Des told us that the contract were on a month by month basis and that the Landlord didn’t even actually sign the contract.

First of all, this behaviour is the type that gives all agents a bad name. It seems you have tried REIV and they are no help to you.

Having seen the lease contract, didn't that ring alarm bells, that it ended in May '09? Did you not check to see if it was signed? If it wasn't signed, then the agent should have shown you the earlier contract that had rolled into a month by month basis.

The time you said in the letter to give notice as to whether you stay in your old place has passed. What did you tell them?

I don't know the rules exactly, but it can still be your PPOR as long as you move in within a certain time frame. Somebody will know that time frame, but you may not have to pay CGT when you sell. It will also affect whether you pay PPOR stamp duty or the higher IP stamp duty.

What a mess.

Have you heard back from the tenants?
 
Hi Wylie.

"Des" told me that all we got to do was to give the tenants 60 days notice prior to moving in. Thats it. And with the settlement date in Dec, we would have given them plenty of time to find a new place to move in to. To put it simply, he said everything that we needed to hear, he assured us and made promises.

The tenants have recently just responded. They complained about "Des" being unethical and deceitful as well. They stated that he told them that my partner and I were investors and that we were keen buyers before they allowed us through for inspection. And that we would have no problems to allow them to see through their contract, but also beyond May 09. I have this in black & white in their email correspondence that the tenants have sent to me. It was clear he way playing both sides..bluffing his way through.

All in all, the tenants refused to move out. In all fairness to them, they have the right to and I feel sorry for all the trouble they have been through too. At least now, I know what to do.. and yes, you're dead right. Its a big mess..
This couple of months have been a nightmare.
 
Whilst I empathise....

you would have seen the lease details included in the section 32. Yes?

I realise what "Des" said, but sales guys don't necessarily the ins and outs of tenancy laws. Obviously you relied upon that, and you could well mount a legitimate argument that you should be able to rely on "Des's" word. In anycase, a leson learnt in validating all information told to you.
 
you would have seen the lease details included in the section 32. Yes?

I realise what "Des" said, but sales guys don't necessarily the ins and outs of tenancy laws. Obviously you relied upon that, and you could well mount a legitimate argument that you should be able to rely on "Des's" word. In anycase, a leson learnt in validating all information told to you.

Trust me Buzz, he knew exactly what he was trying to do.
 
Swap houses with the tenants

Sue the agent

Do anything you can to get out of the contract

Sounds a rather farcical situation to be in.
 
Wow... I don't have time to read all of that.
And I doubt the tenants will either.

What if they can't understand the terminology?
Or take one brief look at how long the letter is and throw it out?
 
You didn't read the next post fokas, they read it and replied :p

And they were played from the other side. It would be amusing if it wasn't real.
 
Trust me Buzz, he knew exactly what he was trying to do.

He may well have. But you saw the lease. Didn't the fact that you had two pieces of conflicting information prompt you to say this doesn't marry up? Did you speak to the relevant property manager to confirm?

Sorry xQuIz8, its up to you to protect your own interests. You cannot hand them to the selling agent and assume what he tells you is correct, especially when you are sighting the actual lease in the section 32 that says there is a lease agreement. That is the legal document which has precedence over either a well-meaning or shifty agent.

If you are wanting empathy from a 'kick an agent' sentiment on this site, then you will get it in spades. I personally think without wanting to sound too harsh, IMHO the agent didn't con you to sign the contract, it was solely in your control to make an informed decision.
 
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Initially, we wanted to put in *subject to vacant possession in the contract but Des told us not to...

Ah the crux of the problem. Surely your solicitor/conveyancer advised you to tick this box and not the "subject to existing tenancies" one instead? Relying on the word of an agent who's representing the seller simply because he "told us not to" is dangerous indeed. As others here have already said, validation is vital, especially when it's likely to affect settlement and moving dates.

I'm sorry for your situation and hope it all works out for you. I guess, if nothing else, you've learnt some valuable lessons from all of this. Best of luck with it all- before you know it, you'll be in the house and everything will be fine :)
 
It's disappointing, but not the end of the world. As Jacque said, you'll be in the place before you know it. Make sure you give the tenants plenty of advance notice of when they need to vacate. They may even start looking earlier knowing they have to be out in May. An offer (with a time limit) to contribute to their moving costs, or an offer to pay the first week's rent in their next property might make them move out sooner.
Scott
 
Do permanent residents have access to the First Home Owners Grant? This situation prevent you claiming it if you can apply.
 
Do permanent residents have access to the First Home Owners Grant? This situation prevent you claiming it if you can apply.

I dont think this is correct as the owners need to move in within 12 months of the settlement.

This is from the Victorian State Revenue Office website:

You (or at least one applicant) must occupy the home as your/their principal place of residence for a continuous period of at least 6 months, commencing within 12 months of either settlement or completion of construction.
 
1) Has this property settled yet? If not, how much deposit have you paid? If it hasn't settled and your deposit is "smallish", ie < $5K, then I'd be threatening to not settle until this situation is rectified. Make the vendor put pressure on Des to fix this. But I suspect from the way that you talk, that you have settled. :(

2) Costs until April. You're figures aren't quite right; you'll be financially better off. You can claim your costs (mortgage interest, rates, etc) against the rent of $400. Say you earn $400 per week, but it costs you $800 per week to own it (which is not far off), you can claim a loss of $400 per week against your other income, and save yourselves $120 per week (if in the 30% tax bracket).

3) CGT. You will only pay CGT on any gain between settlement and April, which is likely to be minimal. Pay a registered valuer (note it must be a registered valuer; not a real estate agent's appraisal) to value the property in April, which will cost perhaps $3-400. It's highly likely, in the current market, that they'll value the property at exactly its purchase price. So if you buy for $400K, and get a registered valuation for $400K in April, then when you ultimately sell (provided you've occupied it as your PPR from April until sale), then there will be no CGT payable.

I know this is frustrating, but it is just an inconvenience, and the lessons you've learned are invaluable. In a few months, this will all be history, and I pray you'll be enjoying living in your new home. :) Chin up!
 
Thank you for all the replies kind ppl..
My post is not meant for people to start bagging REAs. Easy for some to say, you should and done this, you should have done that. But imagine a young person, trying to secure a first home. Trusting, a little too naive thinking that the REA will not lie and everything he says is true.. it is quite possible for this to happen. I just hope others will learn from this.

Also, I disagree with Buzz when you said that the REA didnt con me into signing the contract. He clearly knew that I was a first home buyer and that I intend to occupy the place as soon as I secure it, yet he told me all the lies about the tenants just to portray it to me that everything will be fine. That they will be moving out before settlement. Yes, the contract was there for me to check, but I didnt go through the whole section 32. (It was my first time seeing a contract that thick and he kept saying that he had to leave soon). Long story short, like I said, he misguided me and skewed the truth. He was a sneaky and cunning person.

ps: thanks for all the pm asking for the real identity. thanks for all the support too.
 
Has this property settled yet? If not, how much deposit have you paid? If it hasn't settled and your deposit is "smallish", ie < $5K, then I'd be threatening to not settle until this situation is rectified. Make the vendor put pressure on Des to fix this. But I suspect from the way that you talk, that you have settled. :(

Yes, I have paid 10% deposit. The property is valued at 550k and the bank valuation did come in at purchase price. The vendor's rep didnt even know that I needed the tenants out in the first place. "Des" didnt tell them that. He didnt bother about anything else except to put the sale through. When I approached the vendor's rep, they just said that I'm legally required to settle because I didnt put subject to vacancy in the contract. They didnt even want to contact the tenants and talk them to move out.

2) Costs until April. You're figures aren't quite right; you'll be financially better off. You can claim your costs (mortgage interest, rates, etc) against the rent of $400. Say you earn $400 per week, but it costs you $800 per week to own it (which is not far off), you can claim a loss of $400 per week against your other income, and save yourselves $120 per week (if in the 30% tax bracket).

I suppose if u were to include tax return, then perhaps I'm a little better off. But I just found out that the tenants are just paying $370 p/w.. and I'm paying $400p/w for my current lease. Minus tax return, I have a shortfall of $550 per month.

3) CGT. You will only pay CGT on any gain between settlement and April, which is likely to be minimal. Pay a registered valuer (note it must be a registered valuer; not a real estate agent's appraisal) to value the property in April, which will cost perhaps $3-400. It's highly likely, in the current market, that they'll value the property at exactly its purchase price. So if you buy for $400K, and get a registered valuation for $400K in April, then when you ultimately sell (provided you've occupied it as your PPR from April until sale), then there will be no CGT payable.

Thanks for this information. Its very useful. However, what happens if I dont get it valued in April ? How will the ATO calculate the CG from settlement till April?

I know this is frustrating, but it is just an inconvenience, and the lessons you've learned are invaluable. In a few months, this will all be history, and I pray you'll be enjoying living in your new home. :) Chin up!

Thanks for your kind note.. The lesson learnt will indeed be invaluable. It has been a hard time for my partner and I. I'm sure that we'll get through this. Looking forward to May.. Sighh.. Thanks again..
 
I really feel for you as a first home buyer putting up with this crap. Its disgusting (and common). The 'these agents make the industry look bad' line doesnt really wash anymore, its just too common.

I think its the ethical agents that are threatening to give the RE industry a good name. But that will never happen.

Another person on the long list that will distrust and dislike agents into the future. Isn't it funny how agents blame the public for their bad public image.

Have you had a chat with a solicitor yet. You had a verbal agreement with an agent and he mislead you and that caused you inconvenience, not the least financial.

I threatened to take an agent to court years ago and it i had a date set. The agent backed down and settled with me before the date.

It wouldn't hurt for you to have an initial chat with a lawyer.
 
Legal action would be a waste of time. In the only document that matters, the OP failed to tick the "vacant possession" box. End of story. REA talk is just wind; it doesn't matter and it never happened.
 
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