Buying an apartment privately? Here's what you need to know.
Summary:
Private sales don’t come under the fair Trade Act so the owner selling doesn’t need to disclose any knowledge of what may be wrong or need doing in the apartment or building.
Often private sales will come along where they are cheaper than market rate and this may be because owners rely on sales statistics and this may not be giving them an accurate worth of their apartment. In the apartment market you can’t predict this, only a specialist can. This is because some buildings move in the market more so than others and owners may not be aware of this.
When private sales come along they don’t come under the Fair Trading Act and the owner has autonomy on what they would like to do with their sale- this means that extra due diligence needs to be done. An owner doesn’t need to disclose what is happening or what may be wrong in the building and so on.
An agent’s biggest fear would be to lose their license, so they are not likely to misinterpret information or withhold information and will be up to speed on the market and what is happening in particular apartment buildings.
TRANSCRIPTION:
Good day, Andrew Murray here from Apartment Specialist and I'll be talking about buying an apartment privately. I’ve seen some great deals come up in the market, and this is because owners who are selling their apartments privately, don’t have a lot of sales statistics. We all know that sales statistics, especially in a moving market, are not very transparent. The open apartment market is probably one of the most untransparent markets around.
When it comes to residential property, and it’s because one building may have moved with the market where the other one hasn’t yet, often, private sellers will come on at a price that’s a lot cheaper. In other cases, they might be more expensive, but I’ve seen a lot of great deals achieved through buying privately. I would still look at these listings when they come up.
What happened was - as I like to jump so many new hoops, I have to go through resource consent. Everything had changed since then in regards to all the rules and regulations around bedrooms. It's about $20,000 later and probably about 100 hours of my time, and I end up getting it to a residential. So, at the end of the day, the deal wasn’t worth it. And I wish I’d never done it.
The key thing here is, when buying through a private listing or a private seller. You need to check if they are not actually covered by the Fair Trading Act. So, they sort of play dumb, in a way. The interesting part is I found out that my offer wasn’t the highest offer. It was the unconditional one, and so I’m assuming - I can’t, obviously, point fingers. I don’t have any solid proof, but their lawyer advised them to take the unconditional offer, even though mine was much less. And why? Because if you actually sifted through all of the documents and went really deep - this is where much lawyers don’t even go to, and you’d find this issue that I came across.
The big thing with private sellers is - they can kind of do what they want to a degree and you can’t rely on them. Where purchasing through a real estate agent, there’s no commission, and I don’t care how big it is. Is it worth losing your license over? You’ve got a governing body which you can complain to. So the thing is, yes, there are some deals out there that are private sellers, but make sure you do your due diligence even more thoroughly than you normally would.
Also, be aware that a private seller can be selling because they know of information which is not known or not in the minutes yet and can be quite dangerous. Where a real estate agent is far more likely to notice this. If they specialise in apartments, then they know the market and the buildings. They often hear about stuff coming out before it actually does come out.
I had to announce how to buy an apartment privately. Cheers. Bye!
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