What to do if you buy a house and there is something wrong with it

Thursday, 10 January 2019

Action you can take now includes writing down what happened when you bought the property and to gather all the relevant documentation, such as the building report, the LIM and the sale and purchase agreement. (File photo)

A couple of months ago me and my partner bought a new home. This isn't our first time at the rodeo – we've bought and sold a couple of houses before – but this is the first time that we've both had serious buyers' remorse. We were in a bit of a hurry when we bought this place, because we needed to move out of a rental, and we cut a few corners when it came to due diligence. The seller had a builder's report, so we just used that instead of getting our own one done, and now it turns out there are a couple of things that are seriously wrong with the house, including asbestos roof tiles that are deteriorating and breaking up. These are going to be expensive to sort out and we're absolutely gutted. My question is, is there any way we can get compensation from the seller or the real estate agent? I feel like they should have told us and because they didn't, we're going to be paying a very big price.

Buyer's remorse is a common affliction in January, but for most people it relates to spending too much on Christmas festivities and presents. Regretting buying something as big as a house is a much bigger deal that can have a serious impact on your family and financial wellbeing.

This is why at the Real Estate Authority (REA) we urge buyers to do as much homework as they can before buying a property. As I'm sure you are reminding yourselves now, it's much better to spend a few hundred dollars on an independent report by an accredited building inspector than face having to spend thousands of dollars on fixing any issues after the fact.

It can be tempting to settle for the easy option of using a pre-prepared report, but if you haven't paid for it yourself you have no way of ensuring that it's legitimate or being able to take action against the inspector for an inadequate assessment.

* How much do we have to tell potential buyers?

Getting legal advice early is important to fully understand your options. (File photo)

* Trust-owned property presents potential problems**

So, if we could travel back in time, I'd be advising you to find out as much as you can about the property, including getting someone to help you understand the outcome of any report on the building or land.

In some cases, issues are noted on property reports but buyers are in such a hurry that they miss them. I'd also recommend asking for legal advice if you wanted to negotiate with the seller on price as a result of an issue from the inspection report. Hopefully this information will stand you in good stead for next time.

As for action you can take now, the first step is to write down what happened when you bought the property and to gather all the relevant documentation, such as the building report, the LIM and the sale and purchase agreement. If the property was sold by a licensed real estate agent, make notes of any conversations you had with them.

If the property was sold privately, make notes of any dealings with the seller. Add any new information you have about the property, such as a building report or assessment that notes the faulty asbestos tiles.

Think too about what your best-case scenario outcome is: do you want an apology, compensation, or remediation (or all three)?

Getting legal advice early is important to fully understand your options. They can advise you on whether you have a case against the seller and what your next move should be, based on the information you've gathered. If appropriate, they can help you negotiate with the seller or act against them. Be aware that you may not be in a very strong position unless you can prove that the seller or the real estate agent knowingly covered up the issue.

If it appears that the real estate agent is responsible in some way, you are best dealing with them directly. If you can't resolve things this way, the REA handles complaints against licensed real estate agents and we can also help you understand expectations on real estate agents regarding disclosure of property defects. Check out rea.govt.nz for more information on making complaints.

It's painful to realise you've made a big mistake, especially one that can have a big financial impact. I hope you reach an outcome that brings you comfort beyond the knowledge that you'll be extra careful with the next property you buy.

Kevin Lampen-Smith is the chief executive of the Real Estate Authority (REA), the independent government agency that regulates the New Zealand real estate industry. If you have a question about buying or selling property, send it to susan.edmunds@fairfaxmedia.co.nz. For independent guidance and information on buying or selling, check out settled.govt.nz.