Buyers walk away from sales after signing contracts at St Albans auctions

Buyer’s remorse has resulted in two house sales falling through on the same day in Melbourne’s north-west, with the buyers “disappearing” overseas.

The St Albans buyers chose to give up the small deposit they paid on auction day last month rather than proceed with the sales. Both contracts have been rescinded.

The director of the agency, who did not want to be named to protect his sellers’ privacy, said it was unlucky for two buyers to pull out on the same day.

“Buyers remorse” is when buyers regret their purchase after the auction. Photo: Chris Hopkins

• What to look for in a section 32 vendor’s statement
• How to choose the right real estate agent
• The six things you should be doing at an open home

He said it was problematic that many prospective buyers no longer carried cheque books, and some people whinge about paying $15 for a bank cheque for a property they might not buy.

Therefore the agency, like some others across Melbourne, may accept a smaller deposit on the day, with the balance transferred over the weekend or on Monday to make up the 10 per cent.

Henderson & Ball Lawyers partner Justin Lawrence said there were cases of buyer’s remorse from time to time, but it appeared to be occurring more than in the past.

Vendors are advised to request a full 10 per cent on auction day. Photo: Greg Newington

The prices being paid at auctions were much higher than what some people expected, he said, and those buyers were looking for a way out.

“I think the market in a lot of areas is barrelling on so hard that people are really being swept along by the process, and just going ‘did I really agree to pay $2 million for that vacant block of land?” Mr Lawrence said.

“And they wake up Sunday morning, and they think ‘oh my goodness’ or — as we’ve seen a couple of times — they go home and they speak to their spouse, and their spouse says ‘what do you mean you paid that much?'”

Vendors who accept a small deposit on auction day run the risk of paying hefty legal fees. Photo: Glenn Hunt

Mr Lawrence said the onus was on the agent to ensure the buyer did not walk away after paying a $500 or 5 per cent deposit.

“The standard contract will say that in the event the purchaser defaults under the contract, then they forfeit 10 per cent deposit,” he said. “But if the agent doesn’t have 10 per cent, the vendors are forced to sue the purchaser for the 10 per cent.”

Sellers might be up for $10,000 or $15,000 just to get an order for the buyer to pay what they were due, he said.

In the case of the St Albans properties, the agent claimed one buyer returned to the house an hour after the auction and was told by its tenants some appliances did not work properly. The buyer called the agency on Monday to say they wanted all those items fixed before paying the full 10 per cent deposit, he said, but “legally, once you sign a contract at an auction, you get the property in its condition.”

The agency tried pursuing the buyer via solicitors until the buyer told them she was going back overseas. Coincidentally, the other buyer also told the agent he was going overseas, but it was not clear whether he did not have finance or changed his mind.

Mr Lawrence warned the vendor’s agreement with their selling agent would almost certainly say “if the purchaser pulls out of the contract, you still have to pay me commission”.

“In that case, the vendor can be up for not only the resale cost, but also two lots of commissions,” he said.

Fortunately for one of the two St Albans homeowners, their property recently sold for $1000 less than the auction price and they were charged one commission.