Property Undervalued by Estate Agent
Friday 10 January 2020
A French estate agent and buyer conspire to defraud sellers of the proper proceeds from the sale of their property.
Two sisters who lived in Calvados inherited from their great aunt a property comprising two houses located in the village of Maffliers, in the Val d’Oise department of the Ile de France region.
As they did not wish to retain ownership of the property, in April 2015 they engaged a local estate agent to sell it, at an asking price of €180,000, with agent fees of €13,500 payable.
Within a few weeks of the property being on the market they accepted an offer of €117,000 and in July 2015 signed the sale and purchase contract, with completion due several months later.
Prior to completion neighbours of the property wrote to the estate agents expressing their surprise at the selling price, which they considered much lower than the market price, stating that they had themselves made oral offers of over €193,000 on several occasions.
On learning of this news the sellers decided to obtain a second professional valuation on the property, which the expert valued between €260,000 and €285,000, substantially above the valuation made by their agent, and over twice the amount agreed in the sale.
As a result, they advised the buyer and the estate agent that the selling price of the property was unacceptable, and they no longer wished to proceed with the sale.
Legal actions on both sides were launched, with the case finally ending up in the appeal court, who ruled that the buyer and estate agent had engaged in fraudulent conduct intended to mislead the sellers as to the value of the property and to cause them to sell it below its market price.
The proceedings revealed that the buyer had concealed her real status by presenting herself as a secretary although in reality she managed several property companies and she was buying the property as part of a property development project in which she proposed to demolish the existing buildings to create 4 building plots.
The court ruled that this deception had been facilitated by the conduct of the estate agents who, far from playing their role as an adviser and agent tasked with selling the property at the best price, acted in their own interests by encouraging them to accept a proposal at a price well below the value of the property.
The agents had never informed their client of the interest shown in the property by the neighbour.
It also materialised in court that the estate agents had falsely advised their client that a significant price reduction was necessary because of a change in planning rules and a peril order issued on the property. That lead them to accept a reduction in the sale price from €180,000 to €117,000. In fact, the order had not been issued until after the sale contract, and the danger was essentially due to the collapse of an external wall.
The court appointed expert considered that the development potential of the property was between €430,000 and €595,000.
The case is a slightly unusual one in that the buyers did not live in the area, and the property was one they inherited and may never have visited.
However, it is worth noting that each party had their own notaire, despite which it does not appear from the proceedings that either notaire flagged up the undervaluation of the property. It is possible they too were not based locally, so they might not have been aware of market prices, but it merely serves to show, as we have pointed out in previous articles, the need for both buyers and sellers to do their own research in any property transaction.
The case also demonstrates the need to obtain more than one professional valuation of the property before agreeing a sale/purchase price.