A Cape Town estate agent, Bobby Ewing (name has been changed), wrote HouseCheck a letter this week which I think really exposes the deep seated and essentially unjust nature of the South African real estate industry. Bobby is an estate agent who is obviously both sincere and serious about his profession and I don’t for one moment think that he wants to associate himself with any practice which is not absolutely fair and ethical.
However, bad practices, like the voetstoots clause, can creep into an industry and become entrenched and the norm – so that people just accept things and no longer question whether this practice is right.
I believe that the opinions Bobby expresses in the letter below are common among many estate agents, who have not properly thought through voetstoots – from the buyer’s standpoint. The reported advice from two leading firms of conveyancing attorneys – whom Bobby quotes in his letter is clearly in the seller’s interest (not in the buyer’s). Both of these particular firms of attorneys do a lot of good in the property industry in terms of training and development of estate agents. I am sure that they also make a lot of money in conveyancing fees from the appointments they get from their estate agency friends and their sellers.
Bobby, who had received from HouseCheck “The HouseCheck Home Buyer’s Guide” (which is obtainable free from our website), wrote:
“Thanks for the report, I can see that a lot of time, effort and expertise went into it. “Unfortunately there are a few points that I cannot agree with.
• The first is to demand the removal of the voetstoots clause. We’ve recently had training sessions with attorneys Dykes van Heerden Slabbert and Miltons, both have indicated that this clause is to remain and is still valid.
• A further point is where the report recommends that the buyer appoints the transferring attorney.
Please also view the disclosure by seller report we present to a prospective buyer. I would love to hear your comments on this report.” Warm regards, Bobby
HouseCheck’s view: Until the law is changed there is only one way for buyers of second hand homes to protect themselves. That is for the buyer to only agree to accept a voetstoots clause if the seller agrees to making the sale subject to a satisfactory home inspection within a specified period (say 5 days). The buyer, who usually pays for the inspection, should be the sole judge as to what is “satisfactory”. This gives the buyer the option to withdraw or re-negotiate if the inspection report reveals defects which unnerve the buyer.
Of course, the seller could commission such an inspection report before putting the house up for sale. Either way the buyer knows the true condition of the house he is buying and buyer, seller, estate agent and conveyancers are then all party to a fair deal – and can sleep at night with a clear conscience.
I am posting the following explanation for my standpoint above in the hope of generating a wider debate among property professionals for the good of the industry.
First: The so-called voetstoots clause (which means that the house is sold “as is”) is of great advantage to the seller (who normally appoints both the estate agent and the conveyancing attorney). But this same clause places the buyer at unfair risk.
In other words when attorneys and estate agents (who normally act in the first instance for the seller who is paying them) advise that the seller should include a voetstoots clause in the sales contract, then these property professionals are giving good advice – to the seller.
However, what is good advice for the seller can be terrible advice for the buyer. And therein lies the tension and the unfairness in the South African second hand home market.
In this market, the estate agent and the attorney usually owe their first loyalty to the seller and not to the buyer. They will protest, of course, that they are ethical professionals and will give best advice to both seller and buyer. This is usually impossible in practice. An attorney or an estate agent seldom lack the wisdom of God, or even Solomon and therefore cannot impartially represent two parties involved in all of the tensions of negotiating a massive financial deal – which is what the sale of a house is.
Both the attorney and the agent usually get paid by the seller from the sales proceeds, so guess which side their advice is likely to favour.
The end result is that the South African home buyer of second hand homes is usually on his own with no-one to “watch his back”. The buyer who agrees to, or is bullied into signing an agreement containing a voetstoots clause, is at the mercy of an agreement which unfairly tilts the playing fields in favour of the seller.
If the buyer buys the house “as is” and then discovers that there are serious problems with the house that he did not know about, then the buyer has a big problem.
Second: Because private “once-off” sellers of property are specifically excluded from the protection which the Consumer Protection Act (CPA) offers most consumers, a buyer who finds out later that he has been ripped off by the seller has only one choice, and that’s to go to court. For that, the buyer needs deep pockets, a strong determination and lots of time. Even if he gets his day in court, the buyer still has to prove that the problems with the house were deliberately concealed from him by the seller. A very difficult task if the seller has a clever advocate.
The beauty of the CPA is that this law provides a no-cost (or low-cost) way for South African consumers to fight to right the wrongs inflicted on them by suppliers – without having to go to court and face huge upfront legal bills.
The fact that the CPA has specifically excluded private once-off home sellers from accountability under this law is also a great injustice to the South African consumer. Private sellers of second hand homes are by far the largest suppliers of the housing “product” (in value terms) to South African consumers. And yet South Africa’s legislators have turned their back on these consumers when drafting consumer laws.
The fact that these sellers and their agents and attorneys should try and sell houses to buyers (often inexperienced, first time home buyers) using the voetstoots clause to protect themselves from comebacks, is really inexcusable and immoral. I believe that many honourable agents and attorneys have just not properly thought through the consequences of a voetstoots clause – for the buyer of a second hand home.
Even though it is legal and accepted practice for attorneys and agents to advise sellers to insist on the inclusion of the voetstoets clause in the sales agreement, it is also plain wrong from a moral and ethical standpoint. Unless steps are taken pre-sale to provide the buyer with objective and comprehensive information as to what the condition of the house actually is. If this is done, then voetstoots is an acceptable mechanism to protect the seller.
Third: There are various versions of “Seller’s Property Condition Disclosure” statements in use by estate agents – referred to by Sigri in his letter above. One such disclosure form was prepared by the Estate Agency Affairs Board (EAAB) and another by Miltons, the attorneys. Neither does much to make the average property transaction any fairer. These disclosure statements often don’t really help the buyer with hard information on the true condition of the property and simply shift responsibility away from the estate agent and onto the seller.
Estate agents use these forms to get the seller to disclose, to the best of his belief and knowledge, problems in the house for sale. Really! What the seller “believes” and what is actually true are sometimes very different. The average seller (or agent) is not qualified to evaluate the true physical condition of the house and in all probability has likely never climbed into or onto the roof.
Well over 60 per cent of houses inspected by HouseCheck have faulty and often unsafe hot water geyser installations. Often the roof covering or roof structure is deteriorating. Sometimes the foundations are subsiding because of poor ground water management, trees or unstable soils. The cracks which the seller has filled and painted over often open up again after the buyer moves in. There are numerous causes for damp as there are for wall and slab cracks. A trained, objective eye is needed to evaluate all of these problems, which are mostly not understood by the seller, who sometimes is not even aware of the problem or potential problem.
These seller’s disclosures sometimes seem like little more than cynical attempts to help estate agents escape the potential wrath of the Consumer Commissioner (estate agents are liable under the CPA for the information they supply buyers). And all the while the seller continues to take refuge behind the voetstoots clause.
So this is the shameful situation that exists in the second hand South African house market:
The agent is protected by the seller’s disclosure and the private seller is protected by the voetstoots clause. So seller, agent, and conveyancing attorney can take the buyer’s money and often get away with deals which are murky and not transparent – unless the buyer is rich and determined and sues the lot of them. We need more people like Wendy Appelbaum who took down Auction Alliance for equally shoddy practices. Unfortunately most buyers are not billionaires – just ordinary people trying to put a roof over their family’s heads.
In the United States and Canada 77 per cent of houses are now professionally inspected pre-sale. In South Africa the figure is less than 1 per cent. The South African home buyer is a lonely and unprotected consumer – mostly even unaware of his predicament.
Home inspections pre-sale are really the only solution. Industry professionals, mortgage lenders (banks) and lawmakers need to right this wrong. It is for all of the above reasons that HouseCheck fights for the rights of the home buying consumer. Please give me have your thoughts.
John Graham, Chairman HouseCheck
083 34109 766; email firstname.lastname@example.org www.housecheck.co.za