1. Lapsing or Manipulating Bond Grants
When buyers want to get out of deals, they sometimes go to their banks to encourage them to withdraw their loans. This happens mainly when their transfers are being delayed for any reason. Usually, they are aware that they are committing a serious breach of contract if they deliberately do this, so they use more clandestine ways of hiding their intentions. They subtly indicate to their banks that they no longer qualify for their bonds due to changes in circumstances, motivating the banks to immediately review their loan grants. Invariably they have caused these changes, such as resigning their employments and creating their own new businesses.
There’s no easy solution to the first example (lapsing a bond) as the seller will have to prove that his buyer colluded with his lender in bringing about the desired result which is very hard to prove.
Other buyers refuse to accept loan grants because they feel the interest rate offered to them is too high. If it is over the standard variable rate, they may be justified in their rejection of a quotation, but all too often they complain that the discounted rate offered is insufficient.
It is important for estate agencies to ensure that their bond clauses oblige their buyers to accept any rate equal to or lower than the current standard rate (which is the so-called “prime rate”, fixed at 3.5% above the repo rate.).
The Golden Homes standard contract states that “The Purchaser hereby appoints GOLDEN HOMES to make an application for a MORTGAGE BOND, to be registered over the property on their behalf and subject to the conditions currently being imposed by the Financial Institution.”
This covers the agency in the event that the interest rate offered is higher than the current prime rate.
2. Getting their own Electricians to issue Quotes.
It’s becoming increasingly common for buyers, both before and after getting electrical compliance certificates, to engage electricians of their own choice to do an inspection.
These electricians, sniffing a profitable opportunity, often issue exaggerated quotes which the buyers then angrily force on their sellers.
Legally only qualified inspectors from the respective province’s Electrical Inspector’s Authority can condemn faulty ECCs (electrical certificate of compliance) and oblige the original electrician to remedy the situation.
The simplest solution here is to ensure that the buyer only takes occupation on transfer.
3. Quotes for Defect Repairs
Purchasers constantly complain about undisclosed latent defects. A common practice here is for the Purchaser to go out and get quotes for electrical and other repairs without reference to the Seller. The Seller is under no obligation to accept these and can get his own quotes.
When a Purchaser raises the issue of defects and the Seller is willing to accommodate him, it is essential for the Seller to stipulate that he will get quotes for the repairs. When buyers are encouraged to get them, repair companies often hype up the costs of the repairs or add every item they can think of to get a profitable reward out of their work.
Ensure that you (the agent) never encourage Purchasers to get their own quotes. Contact the Seller right away and encourage him to get his own quotes as quickly as possible. Watch out for the repair sharks who see opportunities to make a few bucks out of property repairs.
Also, NEVER, NEVER, NEVER, offer to get the quotes on any party’s behalf and DO NOT refer them to a prospective contractor. Should you do so, and an issue arises with the repairs, the party to whom you referred the contact can take you to court and claim the damages from you!
This will become especially important once the new Property Practitioners Amendment Bill comes into law. If your Seller does not have someone that can do the required inspection, offer them three or more contacts and leave the choice up to them. DO NOT get caught in any kickback schemes.