Revealed: the risks of a DIY home sale
The Dangers of selling your house privately have been exposed, after a woman who tried to back out of such a sale was ordered by the courts to honour the deal.
Auckland woman Catherine Burton, aged in her 80s, sold her house privately for less than two-thirds of its market value and later, regretting the move, refused to settle.
The new owner took Burton to court and won, and now Burton must also pay high court costs of the dispute, which could total tens of thousands of dollars.
Experts say the case shows those trying to save money by selling their house without a solicitor or an agent take a big risk.
The buyer, Edward Sayers, a lawn-mowing contractor in his late 60s, offered to buy the unit in Ellerslie, Auckland, from Burton in 2006 after she inherited it from her brother.
He became interested in the unit – one of three – while mowing the lawn of one of the neighbouring properties, and thought he would be able to buy it at a good price because of its dilapidated condition. Burton's brother had been a hoarder, and the poor state of the property had prompted Auckland City Council to give notice that it could be a health and safety hazard.
Sayers sent Burton a letter offering $125,000 for the property, which both parties thought was probably worth around $155,000, based on the previous year's council rating valuation. In a reply letter Burton also said she doubted the property would be worth more than $125,000 due to its condition, but indicated that there was other interest in the property. Neither party ordered an independent valuation.
Six weeks later Burton accepted Sayers' offer of $125,000 and five days later they signed a sale and purchase agreement. Burton, the court found, did not consult a lawyer on the agreement, because she wanted to save money. Sayers had suggested she get legal advice.
When the other interested buyer came back to Burton more than a month later, he was upset to learn it had been sold. The man phoned Sayers accusing him of taking advantage of Burton, and told her to seek legal advice.
Based on this, Burton then refused to settle the agreement, claiming it was an unfair bargain. Sayers – and a nephew who had helped him with the deposit – took court action.
Justice Geoffrey Venning ruled that although the actual value of the property was closer to $190,000, and the purchase was "a bargain", Burton had not been deliberately taken advantage of.
Sayers himself did not know the true value of the property and had advised Burton that she should take legal advice, Venning said.
"This is not a case of experienced or successful business people taking advantage of an elderly lady," he said.
When contacted by the Sunday Star-Times, Burton said she was unhappy with the outcome but did not wish to comment further.