The 8 risks to buying property privately

August 4, 2011

Buyers are cautioned to be very careful when buying a property privately, without a real estate agent. Recently, I have seen this happen a couple of times, and my general anecdotal findings are this.

1) Private sellers will often write ineffective, risky clauses that could open the buyer up to difficulties prior to settlement. Unless “subject to’s” are succinct, there are risks to both sides.

2) Deposits. Who will hold the deposit, how will it be treated in the event of non-performance of the contract?

3) Incomplete contracts- Agents do this for a living every day and know what to check. I have seen voidable incomplete contracts that could be a “can of worms” for the parties.

4) Advice- Agents can give appropriate advice.

  • Joint tenants or tenants in common?
  • Settlement agents?
  • What annexures/ inspections recommended?
  • How much to offer?
  • How to structure the settlement dates/ details?
  • 5) Agents will follow up better all of the clauses

6) Agents will have “protection” for all parties in the form of professional indemnity insurance, and be obliged to act within the Fair Trading Act, Trade Practices Act, REBA Code of conduct etc. Agents have professional reputations to consider.

7) Agents are objective, and will not be personally offended or affected by the negotiation. They will be able to stay impartial and protect your interests.

8) Agents are better negotiators as they do this day and night, for a living. A good agent may have literally negotiated thousands (or at least hundreds) of transactions.

* Not all agents are of the same standard; this document assumes a competent, ethical and skilled agent.