Having now experienced three property cycles in my adult lifetime, I know these sorts of issues (and others) commonly arise when an economy and a property market are transitioning into downturn, as is the current case in New Zealand. I think this is because people start feeling more desperate to make a deal and sometimes the correct protocol is not followed. This can be a trap if you are not aware of it. Read the case studies below. Don’t get caught.
Trust selling property massively under value
The client did not advise his GRA Professional Trustee that he was intending to list and sell his property. The real estate agent was selected by the client on the basis that the agent was willing to offer a discount on the commission he would charge. The agent did not communicate with the Professional Trustee, which should have happened because the property was owned by the client’s trust (and is a legal requirement on the part of the real estate agent).
The property was duly marketed and then proceeded to tender. A tender offer was presented to us at $1.6m. As Professional Trustee, we refused to accept the tender, knowing that the price was well under market value and it would not be in the best interest of the trust to accept it. The agent became volatile at our offices, but we still refused to accept the tender offer. As Professional Trustee, we arranged for the property to be relisted with a new real estate agency and taken to auction. The auction price reached $2.105m. Result? One very happy client and an additional $505,000 in our client’s coffers.
Moral of the story: Involve GRA’s Professional Trustee before you list your property for sale. They are aware of the property market and will need to sign the agency listing form in any event. In this manner, you are demonstrating all trustees are discussing and making decisions together and you will receive the benefit of the Professional Trustee’s knowledge and experience.
Trust buying property at well over market value
A draft agreement to purchase a land and build home was forwarded by our client to us as Professional Trustee for signing. We involved a solicitor, who required several amendments to keep the client safe. The client visited the vendor and was pressured into signing agreements. The agreements were forwarded to us as Professional Trustee, and on a hunch we requested a valuation of the property before consenting to sign and release the agreements. The valuation stated that the land and building would, on completion, be worth $200,000 less than the sale price stated in agreement. Consequently, we refused to proceed. The client was very happy he did not have a binding contract.
Moral of the Story: A conversation with GRA’s Professional Trustee can save your money. The GRA Professional Trustee is always the last party to sign any document and no contract exists until they have signed. This is a safeguard for all clients. Follow the process and you as a client gain the benefit.
Real estate agent dating agreement before all parties signed
Two agreements for sale of property were presented by the real estate agent to the GRA Professional Trustee. One agreement was a backup offer, and both agreements had been dated. Legally, a document must be dated the date the last party signs it. Dating agreements and other documents before all parties have signed can create a legal nightmare, as parties in a backup contractual situation argue when a contract comes into force. This can cost clients money.
When we spoke to the real estate agent and advised the above, she confirmed she had always done this. Pity the poor client who has to pay their lawyer to sort out an argument that arises.Moral of the story: The agreement you sign should be sent to your Professional Trustee for signing and only once they and all other parties have signed, can the contract be dated. Involve your Professional Trustee at the very beginning of the buying and/or selling process. Often agreements need to be signed in the evenings or over the weekends, and by giving your Professional Trustee notice they are able to help you.
Agreement containing dangerous clauses
An agreement for the purchase of a property was presented to the GRA Professional Trustee for signing. The vendor was a building company. A special condition had been inserted into the agreement noting settlement was to occur and if the purchaser advised the vendor of defects within 60 days of settlement, the vendor would then remedy. A very dangerous clause as there is little onus on the vendor to fix the problems once settlement has occurred and money has been passed over. Furthermore, what would be the position if the vendor was placed into receivership/liquidation?
We are traversing choppy waters at present. In those seas, there will be opportunities but also the propensity to commit to actions and make decisions which can be costly. Working with a team of people who specialise in their particular fields goes a long way to avoiding financial migraines. If you have a Professional Trustee, use them. They are there to help you make decisions, build your wealth and protect your assets. Remember … that’s why you put them on your team of experts in the first place.