New consumer ruling may change the face of the SA real estate industry

To inspect or not to inspect?   That is the question that more and more estate agents are confronting as buyers are increasingly shying away from buying a house without  first seeing a comprehensive inspection report documenting the physical condition of the property.

In the US, consumer-driven pre-sale home inspections are the norm. About 76 per cent of homes are now inspected prior to transfer.   John Graham, CEO of inspection company HouseCheck believes that South African home buyers are rapidly moving down the same route and  pre-sale home inspections are likely to soon become the accepted way to buy a secondhand house in South Africa.

He says that while many estate agents are still resistant to the case for an objective home inspection at the time of sale,  HouseCheck already deals with a growing number of enlightened agents who  recommend home inspections to their clients.

This past week HouseCheck has been an expert witness in a Consumer Protection Commission conciliation hearing  – involving a small Gauteng estate agency and an elderly widow who had bought a retirement property.  Graham believes that as a result of this case more agents may soon, in their own self-interest, start recommending home inspections.

The result of the NCC hearing has been that the estate agency concerned has agreed to pay the buyer R17000 in compensation for latent defects. “Our understanding is that the CPC facilitator has determined that the estate agent should have taken greater care to investigate all defects on the property”, says Graham.

Graham adds that what was especially interesting about this case was that the facilitator said that the CPC position was that while the seller may be excluded from accountability under the Consumer Protection Act, the estate agent as a provider of services to the buyer/consumer was not.  The CPC facilitator went further to say that the voetstoots clause may apply between the buyer and seller, but certainly not to the agent.

Unfortunately conciliation proceedings are confidential. However it appears as if the agent will pay the compensation within the 15 days allowed for under the conciliation ruling. If the agent does not pay up then she will face the Consumer Protection Tribunal which has the powers to fine her up to ten per cent of her agency turnover, in addition to any compensation.

This obscure CPC hearing may prove to be extremely significant for the South African real estate industry where some 10 000 houses are changing hands monthly and where most of the sellers of these second hand  homes are private sellers, who are excluded from accountability under the CPA.  Up to now many estate agents and quite a number of attorneys have also questioned whether estate agents can be held accountable under the CPA.

Graham says although HouseCheck is happy that this elderly buyer will receive some compensation, it would benefit the industry if this matter proceeds to tribunal stage where the proceedings and findings are on public record.

In the meanwhile HouseCheck continues to recommend to buyers that they should only sign an offer to purchase containing a voetstoots clause if the offer is also conditional on a satisfactory home inspection report.   That way both buyer and seller are protected and the deal is as transparent as possible. In the light of the CPC conciliation ruling, responsible agents will be recommending this route to their buyers and sellers.

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