AN ESTATE AGENT’S DUTY TO LIST AND MARKET A PROPERTY AT MARKET VALUE
Keywords:property’s market value, estate agent, legal duty, Australian law
For most people the sale and purchase of a house is a stressful exercise. In fact, a quick internet search reveals that it is rated among the ten most stressful things in life, outranked only by divorce and death of a loved one. This is hardly surprising, since experts have found that moving house is “the most expensive and life-changing financial transaction most people ever undertake”. A wrong decision is not easily rectified, and may have significant financial implications. Fear and uncertainty, not knowing whether the right decision has been made, exacerbate the stress. An informed decision is therefore crucially important, meaning that all relevant information must be gathered and carefully weighed before a final commitment is made. Every seller of immovable property wants to sell at the right price. But what is the right price? The valuation of immovable property is not an exact science, and values change depending on market conditions. Nevertheless, as a point of departure it is safe to say that a property is sold at the correct price if the price offered and accepted matches the property’s market value at the time of sale, the market value being the price a willing buyer would pay to a willing seller on a specific date. It must be properly understood, however, that the market value of a property is not necessarily the price paid by the particular buyer who actually bought the property. The “willing seller” and the “willing buyer” are not the actual persons buying and selling, but a notional willing seller and a notional willing buyer negotiating with each other on an equal footing, assuming that neither party is overly anxious to buy or sell by reason of special or extraordinary reasons: Sher NNO v
Administrator, Transvaal (1990 4 SA 545 (A) 547H). A property can therefore be sold below its true market value, which happens frequently in the case of forced sales and sales between relatives. Many homeowners are not pressed to sell, but are prepared to do so at the right price. For them, discovering that their most valuable investment was sold below its market value may be the worst nightmare come true. Obviously, the best way to avoid this is to be informed about the property’s market value prior to putting it on the market. Here estate agents enter the picture. In practice they handle the vast majority of sales of residential properties, and both sellers and buyers rely heavily on them for advice and assistance. This Note discusses the question to what extent an estate agent is under a legal duty to provide the seller of a house with information about the market value of the property, prior to the marketing and/or sale thereof. More specifically, the focus falls on whether, in the absence of an express instruction or request from the seller, an estate agent is under a legal duty to (a) advise the seller at listing stage that the seller’s asking price for the property is less than its likely market value; (b) market and sell a property at market value; and/or (c) advise the seller, when submitting an offer, that the price offered is below market value. The common law of estate agency in Australia in many respects closely resembles South African law. For that reason the Note commences with a brief discussion of the legal position under Australian law.
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