Failure to settle on property costs buyer over $200k

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Handsomedan

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#312383 12-Apr-2024 13:46

Woman loses over $200k after failing to settle on property deal

Paraphrasing:

Woman entered unconditional agreement to purchase unbuilt property and paid $83k deposit

Upon completion, she apparently ghosted and not only lost her deposit, but incurred costs for the developer paying to resell the property at a lower price, paying commission to a Real Estate agent and interest costs amongst others

An object lesson in making sure you can follow through if you enter into a deal to buy off the plans, I guess.

Tough lesson to learn for the purchaser (although we do not know the circumstances of her failure to buy or lack of contact).

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#3217391 12-Apr-2024 14:01

Er, according to the article, she wasn't represented in court, and Stuff couldn't contact her either. Seems a bit premature for Stuff to say she "learned a costly lesson" when it's unclear if the woman is even still breathing, let alone in any condition to learn anything.

SATTV

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#3217395 12-Apr-2024 14:13

Kyanar:

Seems a bit premature for Stuff to say she "learned a costly lesson" when it's unclear if the woman is even still breathing, let alone in any condition to learn anything.

I think you are splitting some very fine hairs there.

If she had passed away I am sure they would have found that out very quickly and easily.

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heavenlywild

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#3217413 12-Apr-2024 15:09

What's so newsworthy about this? It's how it works.

The person who didn't settle and buy my property lost his 130k deposit.

He's lucky I didn't go after my other losses because he had nothing to go after.

PS - luckily for the 130k otherwise on balance I would've lost much more. I ended selling for much less due to the changing market many years back.

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Scott3

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#3217429 12-Apr-2024 16:01

I know of a situation where the vendor died between unconditional date and settlement. Bank (understandably) pulled it's funding, so the estate was unable to settle (none of the beneficiaries were in a position to prop up the estate to allow for the property to settle). Vendor (as is within their rights) declined the request to return the deposit. Actually worked out pretty well for the vendor as they pocketed the deposit (which was plenty to cover costs of remarketing the property), put the property back on the market, and sold it to somebody else at a higher price. Thankfully this ment the estate was not sued for money beyond the deposit).

heavenlywild:

What's so newsworthy about this? It's how it works.

The person who didn't settle and buy my property lost his 130k deposit.

He's lucky I didn't go after my other losses because he had nothing to go after.

PS - luckily for the 130k otherwise on balance I would've lost much more. I ended selling for much less due to the changing market many years back.

Many people are under the impression that the deposit value is the limit of their liability, despite them being liable for all the counter parties losses, which could (as in the case of the article) far exceed the deposit. This along with the big $$ figure makes it newsworthy.

Should also note that the property market had such a such an aggressive uptrend through the tail of the pandemic, that as a general rule for longer settlement period transactions, up until very recently, the buyer was "in the money", and strongly incentivized to settle. And vendors would take any opportunity to cancel, as they could resell for more money. Know of a few situations where vendors chanced their minds wanting to cancel on condition of return of deposit, and the vendors aggreged to the cancelation.

Given we are now hitting ~ 2 years after market peak, we will be starting to have longer settlement periods expiring "out of the money", which is a new thing in recent history.

https://www.interest.co.nz/charts/real-estate/median-price-reinz

Handsomedan

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#3217445 12-Apr-2024 16:37

heavenlywild:

What's so newsworthy about this? It's how it works.

I think it's newsworthy as an object lesson to those who might buy now off plans and then decide to bail on the deal after the prices drop and they feel like they'll end up settling for more than the property is worth.

It's quite a big lesson for many to learn - especially with a falling market and ever-increasing costs of credit.

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heavenlywild

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#3217447 12-Apr-2024 16:43

Handsomedan:

I think it's newsworthy as an object lesson to those who might buy now off plans and then decide to bail on the deal after the prices drop and they feel like they'll end up settling for more than the property is worth.

It's quite a big lesson for many to learn - especially with a falling market and ever-increasing costs of credit.

Yes I agree with the lessons part but it isn't news news.

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#3217448 12-Apr-2024 16:46

I've heard of situations where the buyer can't settle, typically due to either falling property prices or unable to get finance.

The property developer agree to cancel the contract, but allowing the buyer to transfer some, or all, of the deposit to a new property to be built in the future.

The property developer gets a new presale which they can take to their bank to get funding for the new project (usually bank funding is dependent on getting a certain number of presales - which are pretty hard to get at the moment).

The buyer has nothing to lose and gets to kick the can down the road. Best case, when the new property is built, property prices have gone up, they may be able to onsell, or may meet the criteria for a loan. Worse case, they're no worse off than they are now.

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Kyanar

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#3217454 12-Apr-2024 16:57

logo:

The buyer has nothing to lose and gets to kick the can down the road. Best case, when the new property is built, property prices have gone up, they may be able to onsell, or may meet the criteria for a loan. Worse case, they're no worse off than they are now.

If property prices go up it's not unusual for developers to kick the can down the road until they can exercise the sunset clause and cancel presales on the basis they haven't settled prior to the designated date.

eracode

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#3217472 12-Apr-2024 17:44

@Scott3 Quote: “I know of a situation where the vendor died between unconditional date and settlement. Bank (understandably) pulled it's funding, so the estate was unable to settle (none of the beneficiaries were in a position to prop up the estate to allow for the property to settle). Vendor (as is within their rights) declined the request to return the deposit. Actually worked out pretty well for the vendor as they pocketed the deposit (which was plenty to cover costs of remarketing the property), put the property back on the market, and sold it to somebody else at a higher price. Thankfully this ment the estate was not sued for money beyond the deposit).”

Assume you mean ‘purchaser’?

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Scott3

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#3217473 12-Apr-2024 17:48

eracode:

@Scott3 Quote: “I know of a situation where the vendor died between unconditional date and settlement. Bank (understandably) pulled it's funding, so the estate was unable to settle (none of the beneficiaries were in a position to prop up the estate to allow for the property to settle). Vendor (as is within their rights) declined the request to return the deposit. Actually worked out pretty well for the vendor as they pocketed the deposit (which was plenty to cover costs of remarketing the property), put the property back on the market, and sold it to somebody else at a higher price. Thankfully this ment the estate was not sued for money beyond the deposit).”

Assume you mean ‘purchaser’?

Correct.

I can no longer edit that post sorry.

mattwnz

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#3217484 12-Apr-2024 18:30

Kyanar:

logo:

The buyer has nothing to lose and gets to kick the can down the road. Best case, when the new property is built, property prices have gone up, they may be able to onsell, or may meet the criteria for a loan. Worse case, they're no worse off than they are now.

If property prices go up it's not unusual for developers to kick the can down the road until they can exercise the sunset clause and cancel presales on the basis they haven't settled prior to the designated date.

I would hope a good lawyer for the purchaser would put in a clause to prevent that happening, if allowed by the developer. But I have read stories in the NZ media of that happening which IMO shouldn't be permitted in NZ.

mattwnz

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#3217485 12-Apr-2024 18:33

heavenlywild:

What's so newsworthy about this? It's how it works.

The person who didn't settle and buy my property lost his 130k deposit.

He's lucky I didn't go after my other losses because he had nothing to go after.

PS - luckily for the 130k otherwise on balance I would've lost much more. I ended selling for much less due to the changing market many years back.

I am surprised that some people pay such high deposits. When I did it I only paid enough to cover the sellers agents fees. Although it was a very long settlement due to the seller wanting to stay in the house for several months afterwards.

Geektastic

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#3217583 12-Apr-2024 21:43

It’s unusually easy to end up in a real estate contract here. The simplicity of the system has advantages but as the OP shows there are pitfalls.

mentalinc

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#3217589 12-Apr-2024 22:24

Better recent example, with over twice the cost to the purchaser: https://www.nzherald.co.nz/business/failure-to-settle-116m-manurewa-house-deal-cops-429000-court-penalty/FA2DEIYH2JG2PAPJNMODW3B27I/

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Handle9

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#3217614 13-Apr-2024 07:07

mattwnz:
heavenlywild:

What's so newsworthy about this? It's how it works.

The person who didn't settle and buy my property lost his 130k deposit.

He's lucky I didn't go after my other losses because he had nothing to go after.

PS - luckily for the 130k otherwise on balance I would've lost much more. I ended selling for much less due to the changing market many years back.

I am surprised that some people pay such high deposits. When I did it I only paid enough to cover the sellers agents fees. Although it was a very long settlement due to the seller wanting to stay in the house for several months afterwards.

You can offer a minimal deposit but it makes your offer unattractive. If a purchaser offered me less than 10% deposit I’d be inclined to reject the offer. 5% and I’d invite them to investigate sex and travel.

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