HOMEBUYER SUES AGENT
Puffery falls flat - again.
When Rosemary paid $480,000 for a home described as a "quality built residence", that's what she expected. But her dream home became a nightmare.
Shortly after moving in, Rosemary discovered that every wall in the home needed repair or demolition. The home is worth far less than she paid for it. She is now suing the agent.
In a claim lodged in the District Court in South Australia, Rosemary says the agent misrepresented the condition of the home and, therefore, breached the Trade Practices Act. The real estate agency has denied responsibility. Of course. According to the agent, the claims made about the home were "believed to be true" – or were "puffery".
Yes, that means agents are allowed to use a certain amount of, well, exaggeration. Commenting on this case, the real estate institute – as institutes do – says buyers have a "duty of care" when making such a major financial decision. "If you're going to spend $500,000 on a property, it would be prudent to spend $300 or $400 getting a building inspection report," said the president.
Is this an admission that homebuyers cannot trust agents who belong to the real estate institute and who are also members of well-known networks? The institute is quick to remind the buyer of the phrase 'caveat emptor' (buyer beware). This reminder, however, comes after the buyer has bought. It is rather different from the slogans buyers first see when they approach an agent. Slogans which promise security and care. Unless something goes wrong. And then buyers are on their own.
Yes, of course, homebuyers should always get a building report before they buy. But how many agents recommend such prudence to buyers? How many agents tell buyers not to sign anything until they get independent legal advice? Very few.
What most agents are most concerned with is what's known as "putting the deal together". Sign here – it'll be right. Get the sale and get the commission. That's their goal.
And what happens when there is more than one buyer interested in a home? Must they all be so prudent as to each get a building inspection report? Yes. There are cases where as many as five buyers pay up to $500 each for a building report on the same home. That's $2,000 in wasted expenses on the one home. Multiply that by tens of thousands of sales and perhaps you'll understand why buyers are so annoyed with the treatment they get from most agents.
This farce can be solved with one word. Disclosure.
All homes should have 'home-worthy' certificates. Everything that buyers need to know should be disclosed. Up front and open. Homebuyers could then rely on legally guaranteed disclosures. It would be a lot safer than relying on real estate salesmanship and "puffery".
Cars have road-worthy certificates. Homes have "puffery" certificates. And caveat emptor.
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