Is this Unethical?

[tk79]

Recently found a house which was to be my first IP (current house PPOR) in a high demand suburb. I put an offer down on the house which was the asking price. Got a call back from the agent who said several other people have put down offers that are the asking price and if i could fax a final offer.

Then something dodgy happened. He said since all offers are about the same anyone who will sign an "unconditional contract" will probably have the best chance. WTF? i told him i dont understand. He reiterates that he will email me the contract and whoever signs it and faxes it by COB the following day will be in the best position to buy the house. He made sure he actually didnt tell me to sign the contract but just mentioned that whoever sends an unconditionally signed contract first will be in the best position to have their offer accepted.

Now im new to this game but im thinking how can i sign something when it takes a few at least to get final approval from the bank. Also he wanted me to sign before COB that day even though my offer hadnt been accepted. This means no time for building/pest reports, $700 to solicitor to look over contract and make sure its ok to sign but no guarantee for me that my offer will win. That $700 could potentially be wasted if someone else's offer is better than mine.

I hurried to my broker and he said that this wasnt right as its really forcing me to sign before my finance is a 100% approved (obviously i had pre-approval). My broker speaks to the real estate agent saying i will definetly be approved but it will take 5 days. REA says first in best dressed. In the end i refused to "unconditionally sign", i stuck with the asking price and mentioned best i could do was exchange within 5 businness days. Well someone else who was willing to sign unconditionally ended up having their offer accepted later that day.

Was really p1ssed off. I have never heard of anything like this (i am a newbie however). Surely its unethical as it encourages signing bfore finances finalised and also means all losing bidders waste time and money (valuation, solicitor charges). If it is unethical im very tempted to name and shame the REA but that might have -ve legal repurcussions for me.

 

[HeXa]

simply put, money talks. As far as I know, the vendor (seller) can choose which offer to accept.. so of course the most trouble tree offer (ie. unconditional) would most likely win out.

If you are uncomfortable... WALK AWAY.

Head over to the ACT fair trading website and get yourself the PDF version of "Reality Check".... explains a lot of the process and how Canberra is different.

Building and pest inspections are done BEFORE the property even goes on the market... that is a requirement along with EER statement and a few other things. These should be available before signing contract (some posted on allhomes, sometimes from the REA, or at the latest, with the contract bundle sent to your solicitor). Whoever buys the property is also responsible for paying for the pest/building reports.

You also have five clear working days as a cooling off period after contracts have exchanged (penalty of 0.25% of sale price).

 

[HeXa]

Was really p1ssed off. I have never heard of anything like this (i am a newbie however). Surely its unethical as it encourages signing bfore finances finalised and also means all losing bidders waste time and money (valuation, solicitor charges). If it is unethical im very tempted to name and shame the REA but that might have -ve legal repurcussions for me.

oh.. and why is it unethical? no one is holding a gun to your head and telling you to sign. There are buyers in the ACT market that don't need to have finance to buy, so they use that to their advantage to gazump an earlier offer that may of been subject to finance. Gazumping sucks only when you are on the receiving end.

iirc, states actually get you to make your offers on the contract itself. Here there is no need to even get your solicitor involved until you are confident of going through with the sale (you can review contract and many other documents before submitting an offer).

 

[alexlee]

Actually, I think the agent is being very clever, and doing his job. He gets paid by the seller, yes? If he can push the buyer into dropping conditions or raise the price or whatever makes it better for the seller, he is just doing his job.

The agent works for the seller. He doesn't have any obligation (ethical or otherwise) to the buyer, in my opinion.
Alex

 

[Harris]

Not an iota of anything unethical about the agent. He is doing his job which is to:

1- Sell the property for the highest possible price

2- with the least (or no) conditions attached to the contract

3- in the shortest possible timeframe

4- with the shortest possible settlement

If he achieves that, he has represented the vendor's interest and done his job well. Like others have explained, do your due dilligence before and dont blame the agent for not securing the property on your terms.

Harris

Was really p1ssed off. I have never heard of anything like this (i am a newbie however). Surely its unethical as it encourages signing bfore finances finalised and also means all losing bidders waste time and money (valuation, solicitor charges). If it is unethical im very tempted to name and shame the REA but that might have -ve legal repurcussions for me.

 

[Rolf Latham]

Seems pretty standard to me.......

I dont like it either, but like most I get to follow the rules, but would luv to make them.

ta
rolf

 

[Jacque]

What you've experienced is not dodgy, just a REA doing his job on behalf of his client (seller), as others have already stated . Being fully prepared before you enter into a contract of sale is the best course of action, especially in a rising market or an area of high demand.
This requires you to have finance pre-approved, deposit funds readily available, searches done or able to be carried out within 48hrs and the contract reviewed by a solicitor/conveyancer so that you're then in the optimum position for negotiating an offer. Yes, this costs money but they are necessary costs to ensure you carry out your due diligence on any property purchase. Don't look upon them as a waste of funds- if anything I consider them "insurance" costs, as NOT spending this money can result in you losing money/gains down the track, due to unforseen repairs/issues that would have been known beforehand. It continually amazes me that people are willing to take out a loan of half a million dollars but balk at shelling out what usually amounts to less than $1K for pre-purchase costs

I understand your frustration, especially as a first time investor, but if you're going to be entering into such investments involving such large amounts of money and debt, you really need to be more prepared and aware of the processes involved. Difficult, I know, as most investors complete less than five transactions over their history- after all, it's not something you do on a regular basis!

If it becomes all too much and you'd rather hand over the job to someone who does it for a living, do consider using the services of an independent BA in your area- can't recommend anyone in ACT but I'm sure there's someone who can assist. Best of luck!!

 

[tk79]

Ok thnx guys, i've never come across this before. All part of the learning process, ill learn to accept it as part and parcel of real estate.

 

[Pushka]

Yes, not unethical. When we bought our current house, we loved it on the spot. We had already sold our first house and we were renting, so we had cash in hand, no loans needed. At the first preopen inspection, there were two parties who attended, and both of us wanted to buy the house. The other party actually offered more money, but they had a subject to sale clause in the contract; we offered I think $2000 less, but no clauses whatsoever so we got the house. And we wanted 30 day settlement; the other party wanted 60 days. It was a no brainer, wasnt it!

It turned out to be a great buy - an old tudor that had been run down by tenants, presented badly (but with original fixtures like leadlight, chandeliers, pressed metal ceilings etc etc) and the owner just wanted it sold and off his hands. We have ploughed about $100k into it; the CG in 5 years (actually, settlement was exactly five years ago!) is around 100%. And as it is our PPOR, no tax when we sell!

 

[HeXa]

Ok thnx guys, i've never come across this before. All part of the learning process, ill learn to accept it as part and parcel of real estate.

Got the link the the Reality Check publication -> http://www.fairtrading.act.gov.au/Real Estate/REALiTY Check.pdf

get a hard copy from -> http://www.fairtrading.act.gov.au/Real Estate/Reality Check request.html

 

[Twitch]

Ok thnx guys, i've never come across this before. All part of the learning process, ill learn to accept it as part and parcel of real estate.

The lesson to learn is don't offer until your ducks are in a row.

 

[JTY]

I hurried to my broker and he said that this wasnt right as its really forcing me to sign before my finance is a 100% approved (obviously i had pre-approval). My broker speaks to the real estate agent saying i will definetly be approved but it will take 5 days

You weren't being forced to sign. You were being warned of your competition.
Your broker also cannot say you will "definitely" be approved.
Unfortunately, this is the game that goes on. It suxs but it's legal
Best thing to do is walk away from it and learn from the experience

 

[hobo-jo]

You can be just as sneaky/tricky to get sellers interested. Tell them you have multiple offers out there on homes and that you will be accepting the first one that comes back in as a yes. All part of the game really.

 

[CairnsAgent]

Good job by the agent, in fact he was being more than fair by telling you he had other offers(law in some states). This gave you the chance to put in your very best offer, in turn giving you more chance to buy his clients home.
I had the exact same situation this week, client was asking for $145k, I had 2 offers, both parties were aware of the other offer (not the exact details tho!) so one party dropped all conditions and offered $149k...result? they got the property, but at least both parties were given the chance to rethink the offers and resubmit them.

Cheers,

 

[Glucose]

You can be just as sneaky/tricky to get sellers interested. Tell them you have multiple offers out there on homes and that you will be accepting the first one that comes back in as a yes. All part of the game really.

If your 'multiple offers' are in the form of a signed (by you) contract, as seems to be the way a lot of agents need an offer put, what then do you do if more than one vendor countersigns & suddenly you have 2 or more legally binding contracts?

 

[hobo-jo]

If your 'multiple offers' are in the form of a signed (by you) contract, as seems to be the way a lot of agents need an offer put, what then do you do if more than one vendor countersigns & suddenly you have 2 or more legally binding contracts?

Cooling off period
Make sure you will only have the finance for one and subject it to finance
Or simply put a clause into each offer that states you have offers elsewhere and if one is accepted before this one, then this offer is void (if you put it in the contract you will be sure the the vendor sees it, incase the rl agent doesn't pass it on)

 

[Firsthomelooker]

I'm going to go against the flow here and say I think it is unethical, not illegal, but unethical. Sure the agent is trying to get the best outcome for the vendor, but it is still unethical to step all over and put unnecessary pressure on purchasers to do this. To my mind it is the same as saying the execs of big corporations can get away with ripping off their employees, anti competitive behavior etc because they are doing the best for their shareholders.

You could have signed and relied on the 5 day cooling off period. A solicitor could easily review your contract within that time, but it is pretty risky because your finance is unlikely to go unconditional within 5 days. If the bank is doing a valuation it is usually a '5 day turnaround' just for that one part of the process. And if you can't get your finances approved or the val comes in under purchase price after the cooling off expires? You can kiss goodbye 10%.

Also $700 is ridiculous to get a contract reviewed before signing or before an auction. Standard price should be less than $300, PM me if you want some names.

 

[jazzlobber]

they have them here in melbourne, its call AUCTION

or tantamount to auction anyway, you contract to purchase a property where you cannot have any clauses to your benefit.

 

[neko]

I know the bad taste this leaves in your mouth! Similar happened to us I also put it on the forum, it was called "learning the hard way". Ethical or not the best thing that I got from a similar situation is that you will learn from it. And even if everything is so right with the house that is now sold to someone else, it must not have been the one for you. There will be another bus with your name on it coming around the corner soon. With our situation we ended up buying another in the same street as the one we didn't get, so much better for what we wanted, which is an investment property, for 30k less. In hindsight we wanted the other house on an emotional level not a business venture. And the real estate agent we ended up purchasing this IP off is the most genuine person I've come across so far, so there is good ones out there. So chin up keep focused on what you want and next time you will play the real estate game with even more knowledge. Good luck

 

[lizzie]

If your 'multiple offers' are in the form of a signed (by you) contract, as seems to be the way a lot of agents need an offer put, what then do you do if more than one vendor countersigns & suddenly you have 2 or more legally binding contracts?

you wouldn't sign until after the purchaser does - and it's still not legally binding until the contracts are both signed and "exchanged". just because it's been signed by a purchaser does not make a contract binding.