House auction – my first and last one I’ll attend

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#2531064 29-Jul-2020 21:23

Fundamentally, I consider the idea of having to fork out your own money to do the necessary due diligence so that you can have a chance to make an informed/unconditional offer, to be stupid beyond words. I'd rather take my time to negotiate, get a price that I can live with, make a conditional offer, and then do my DD. I've known of people who have lost thousands on inspection reports, valuation reports, and the like just from bidding and losing at auctions. Not my cup of tea.

Now of course there are definitely bargains to be had at auctions, so don't necessarily dismiss them out of hand. But it's not my thing.

richms

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#2531066 29-Jul-2020 21:25

Investing in property is a risk, if people dont want to take that risk noone is forcing them to and they can keep on renting.

Richard rich.ms

mudguard

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#2531128 29-Jul-2020 21:58

dejadeadnz:
Fundamentally, I consider the idea of having to fork out your own money to do the necessary due diligence so that you can have a chance to make an informed/unconditional offer, to be stupid beyond words. I'd rather take my time to negotiate, get a price that I can live with, make a conditional offer, and then do my DD. I've known of people who have lost thousands on inspection reports, valuation reports, and the like just from bidding and losing at auctions. Not my cup of tea.

Now of course there are definitely bargains to be had at auctions, so don't necessarily dismiss them out of hand. But it's not my thing.

I agree, I'd rather see the seller have to provide certain information, LIM, builder's report etc as a legal requirement. I was doing mortgages at Westpac when I realised I had two customers who were looking at the same place who got all those things done. So who knows how many times a house will have a valuation or builder's report done if there are several interested parties. It all adds up.
Obviously if it was law then you'd want to ensure the information was reputable.

BlinkyBill

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#2531173 30-Jul-2020 07:56

Fundamentally, I consider the idea of relying on someone else’s due-diligence to be stupid beyond words.

mudguard

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#2531177 30-Jul-2020 08:11

BlinkyBill:

Fundamentally, I consider the idea of relying on someone else’s due-diligence to be stupid beyond words.

The due diligence is only a paid service. We pay a lawyer to look at the documents, we pay a builder to do a report, we pay an agent to do an RV. This all gets repeated for each different customer.

So technically I'm not really doing any due diligence. I'd simply like to get to a point where it was a condition of selling a home, XYZ has to be provided. In my time in the bank I saw enough variation in builders' reports and RVs for the same property that it ought to be close enough.

A friend of mine went to over fifty auctions looking for a house in Auckland a few years ago. There were five that they were serious about. That's probably at least $1500 per house for the reports. It adds up pretty quick.

antonknee

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#2531226 30-Jul-2020 09:27

Absolutely hate the concept of the auction - whoever thought buying the largest asset most will ever buy at such a breakneck speed, in a stressful process was a good idea.... 9/10 this is only going to advantage the vendor (which I appreciate is exactly why they do it).

As @mudguard and @dejadeadnz touched on - paying all that money for LIMs and reports etc, often many times over, is just silly. Multiple buyers per house, possibly multiple houses per buyer. Such a waste and so inefficient. Who even wants to spend $1500 on a lost cause? The negotiation process is far better for that. Agree they should be sought by the vendor and provided to every buyer, if you want more or don't trust it that's up to you.

roderickh

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#2531260 30-Jul-2020 10:16

antonknee:

Absolutely hate the concept of the auction - whoever thought buying the largest asset most will ever buy at such a breakneck speed, in a stressful process was a good idea.... 9/10 this is only going to advantage the vendor (which I appreciate is exactly why they do it).

As @mudguard and @dejadeadnz touched on - paying all that money for LIMs and reports etc, often many times over, is just silly. Multiple buyers per house, possibly multiple houses per buyer. Such a waste and so inefficient. Who even wants to spend $1500 on a lost cause? The negotiation process is far better for that. Agree they should be sought by the vendor and provided to every buyer, if you want more or don't trust it that's up to you.

I was in the space very recently.

LIM for most cases are provided by the vendor. Building report varies around the $500 mark, solicitor pre auction check was around the $250 mark and property file is ~$100.

Multiple times I have had the building inspector calling me asking for approval for another potential buyer to have my report shared to them. Even if the answer was no, it was simply additional admin work for the building inspector to reuse a different image of the same defect on file so as to not duplicate the reports.

I think mandatory report on top of the usual LIM will definitely benefit many buyers in the market. Additional clauses to be added around lack of vendor responsibility around the building report supplied, and that additional independent inspections are at buyer's cost etc.

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dejadeadnz

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#2531288 30-Jul-2020 11:21

roderickh:

I think mandatory report on top of the usual LIM will definitely benefit many buyers in the market. Additional clauses to be added around lack of vendor responsibility around the building report supplied, and that additional independent inspections are at buyer's cost etc.

On the bolded bits especially, if you have those two together, you're actually having the worst of all worlds scenario IMO as an experienced lawyer/commercial guy (albeit that I am not a property lawyer). The average Kiwi is basically functionally illiterate and/or won't have the patience to read through all the words and note the disclaimers. It will instead incentivise an industry of rubbish/seller-friendly building inspectors who will get very rich without ever having to assume any responsibility to anyone for producing basically rubbish that also materially influence buying decisions. If buyer/consumer protection is the key, IMO there should be clear requirements to (i) for the seller to use a registered and qualified building inspector and (ii) be responsible for the contents of the inspector's report, at least insofar as any conclusions have been influenced by any material misleading information and/or omissions by the seller, if not more. (i) actually further requires a serious clamping down and professionalisation of the building inspection industry, which is at the moment a free-for-all and full of cowboys.

I don't agree with people who think that the risk of buying a house should become a free-for-all to be allocated according to the Darwinian nature of the market. At a minimum, genuine first property buyers should receive some extra protections. But introducing stratified protections for different kinds of buyers create its own problems. Another thing that people don't realise is that it's highly questionable whether the Council owes a duty of care to a buyer who didn't pay it money to obtain a building report. Traditionally, the common law is clear that, for example, a lawyer's advice to A cannot be relied on by B without the agreement of the lawyer. I think there's actually a 2016 High Court authority that says Councils don't owe a duty of care re: a LIM report's contents to a buyer who didn't order/pay for one themselves.

At the moment, whatever the ludicrousness of the situation re: auction for the buyers, at least it's clear: everything is stacked against you. If society wants to change this (and I tend to think we should), the changes have to be well thought-through.

JonnyCam

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#2531323 30-Jul-2020 12:23

tdgeek:

We sold two houses in the last 4 years by auction with Harcourts. Same experience. Bids stopped. We went into an office as the seller to discuss. The offers from us went back and forth and they sold.

Both well above the last bid

Sold a house in Wellington by Auction with Harcourts a couple of months ago, did the back & forth with the high bidder, came to a figure, and the auction was then restarted at that bid (which I didn't know happened, first auction buying or selling)

A couple of developers started bidding at that point but only at a $1,000 a time, so was glad when the young couple held on.

Was a bizzare sale anyway, campaign halted by lockdown, social distancing in the viewings & auction.

antonknee

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#2531335 30-Jul-2020 12:53

dejadeadnz:

roderickh:

I think mandatory report on top of the usual LIM will definitely benefit many buyers in the market. Additional clauses to be added around lack of vendor responsibility around the building report supplied, and that additional independent inspections are at buyer's cost etc.

On the bolded bits especially, if you have those two together, you're actually having the worst of all worlds scenario IMO ...

I don't agree with people who think that the risk of buying a house should become a free-for-all to be allocated according to the Darwinian nature of the market.

Why on Earth should a vendor not be responsible for information they're providing? There should be no transaction where the seller can say "yeah I said this, but actually I'm not responsible for what I do or say so good luck". Caveat emptor, indeed!

I don't believe in mollycoddling people who can't or won't read, but there is absolutely no reason a vendor should be able to present something and walk away from it disclaiming any and all liability of that thing. If you're trying to sell a dodgy house and/or with dodgy building inspection, you should own that.

Just my opinion.

JonnyCam

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#2531339 30-Jul-2020 13:01

antonknee:

Why on Earth should a vendor not be responsible for information they're providing? There should be no transaction where the seller can say "yeah I said this, but actually I'm not responsible for what I do or say so good luck". Caveat emptor, indeed!

I don't believe in mollycoddling people who can't or won't read, but there is absolutely no reason a vendor should be able to present something and walk away from it disclaiming any and all liability of that thing. If you're trying to sell a dodgy house and/or with dodgy building inspection, you should own that.

Just my opinion.

And a vendor with no building experience, how can they know if the building report they have is accurate or not?

Is that not why they have employed the services of the 'expert'

dejadeadnz

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#2531350 30-Jul-2020 13:20

antonknee:

Why on Earth should a vendor not be responsible for information they're providing? There should be no transaction where the seller can say "yeah I said this, but actually I'm not responsible for what I do or say so good luck". Caveat emptor, indeed!

I don't believe in mollycoddling people who can't or won't read, but there is absolutely no reason a vendor should be able to present something and walk away from it disclaiming any and all liability of that thing. If you're trying to sell a dodgy house and/or with dodgy building inspection, you should own that.

Just my opinion.

In certain situations in the commercial world, it makes sense that there's an element of caveat emptor. But given the lack of regulation/quality in the building inspection industry and the vulnerability of first home buyers especially, a total free-for-all strikes me as wrong. That being said, to just automatically sheet home all the risks to the vendor isn't necessarily equitable either. There are people who would have acted in good faith, genuinely tried to get a good building inspector, and would have then been let down. It's not always immediately obvious that some cheapo buyer who insists on saving $600 who then just takes everything the report writer wrote literally should be able to sheet home all their own negligence to the vendor.

Our building industry is an abject failure. It's inefficient, technologically behind the curve, and generally produces abhorrent quality of housing. Reform is badly needed.

Varkk

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#2531362 30-Jul-2020 13:40

dejadeadnz:

In certain situations in the commercial world, it makes sense that there's an element of caveat emptor. But given the lack of regulation/quality in the building inspection industry and the vulnerability of first home buyers especially, a total free-for-all strikes me as wrong. That being said, to just automatically sheet home all the risks to the vendor isn't necessarily equitable either. There are people who would have acted in good faith, genuinely tried to get a good building inspector, and would have then been let down. It's not always immediately obvious that some cheapo buyer who insists on saving $600 who then just takes everything the report writer wrote literally should be able to sheet home all their own negligence to the vendor.

Our building industry is an abject failure. It's inefficient, technologically behind the curve, and generally produces abhorrent quality of housing. Reform is badly needed.

I thought the inspector carried some of the liability. E.G if they produce a report saying a dwelling is structurally sound but then you find out there is significant remedial work needing to be done it can fall on them. I have heard of people having trouble getting building reports done as a lot of the guys doing it dropped out due to the cost of the insurance they had to carry.

dejadeadnz

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#2531391 30-Jul-2020 14:02

Varkk:

I thought the inspector carried some of the liability. E.G if they produce a report saying a dwelling is structurally sound but then you find out there is significant remedial work needing to be done it can fall on them. I have heard of people having trouble getting building reports done as a lot of the guys doing it dropped out due to the cost of the insurance they had to carry.

As I explained previously, if you didn't pay for the report, it's highly questionable whether you can establish that the inspector owes a duty of care to you. This is an essential element of establishing the tort of negligence. If you paid for the report, some of these inspectors will try to limit their liability to you to a ridiculous degree. But if you are a residential purchaser, they won't be able to contract out of the Consumer Guarantees Act.

frankv

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#2531395 30-Jul-2020 14:10

BlinkyBill:

Auctions favour buyers, but the agent works for the seller. I would never sell at auction.

The agent works for themselves, not the seller. The agent's aim is to get paid a commission today, not a probable 5% bigger commission perhaps tomorrow. The vendor's loss of 5% of their capital is collateral damage.

The hard sell on the bidders post-auction when it didn't reach reserve would be mirrored by hard sell on the vendors to drop their price to what the top bidder offered. "We've marketed your house really well. The auction was great, with spirited bidding. But, sadly, your house isn't worth what you think."

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