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Case Study 6

NSW couple loses $35,000 under auction day pressure

New South Wales couple Dean and Janis claim to have lost a substantial amount of money at their March 2001 auction because of the actions of the agent 'L’ retained by them and the agency which employed him.

L inspected the vendors’ property and signed the listing authority at $875,000. Other sales staff from the agency also agreed that the house was worth that amount.

Their agent urged auction as the best method for the owners to get "top exposure and top dollar". He also recommended an advertising campaign costing the owners $5,000.

L advertised the house at "$750,000" despite the vendors’ concern. L insisted this was the best way to "pull the buyers in" and a higher price guide would "scare potential purchasers away".

Four weeks into the marketing campaign for their home, L showed them another house being marketed by the agency. Dean and Janis decided they wanted to buy it but sought reassurance from the agent that they would get at least $850,000 for their own home.

The agent said that there were four "strong buyers" and six contracts had been handed out during the auction campaign.

The vendors committed themselves to the purchase of the second house for $1.1 million. Agent L acted for the vendor of the second property in signing up Dean and Janis as purchasers.

On auction day Dean and Janis set their reserve at $840,000 and informed the auctioneer / agent.

The agent used a dummy bidder on behalf of the vendors. Bidding stopped at $803,000.

The vendors reduced their reserve under considerable pressure from the agent and auctioneer and the house went "on the market" at $803,000. The house sold shortly afterwards for $805,000.

Dean and Janis were incorrectly advised by the agents that they were obliged to sign the contract at that price. The agent also dealt directly with the vendors’ solicitor whom he had earlier recommended the vendors retain for the conveyancing transaction. The agent did not tell the solicitor that his clients did not want to sell their house at $805,000, $35,000 under their initial reserve.

The agent then incorrectly advised the vendors to change the existing contract conditions to enable the purchasers to pay the deposit by cash five days after the auction was over.

The auction shortfall resulted in the vendors being unable to complete the purchase of the second house. They forfeited their $20,000 deposit to the vendor of the second property. The vendor was liable to the same agency for commission on the "sale".

The HHPF is presently engaged in obtaining detailed witness statements and other proofs of evidence from the vendors and other parties prior to considering whether or not to institute legal proceedings against L, the agency which employed him and any other relevant party.

The preliminary advice of counsel briefed by the solicitors retained by the HHPF to represent Dean and Janis is that there are "several grounds" available to proceed upon against those parties. The agents were allegedly negligent and breached their duty of care to their clients and committed breaches of the relevant sections of the Trade Practices Act 1974.

Depending on the outcome of its investigations, the HHPF expects to commence legal action shortly.

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