Question 1
On the pre-marketing due diligence Horizon Realty should perform for the Auckland project, consider the following statements.
- (i) The professional indemnity insurer must be told that foreign property is being marketed.
- (ii) Due diligence should cover the vendor's financial standing and track record.
- (iii) Due diligence should test the vendor's claims, such as any guaranteed rental returns.
- (iv) Where the agency cannot verify a matter itself, it may engage a third party such as a foreign lawyer.
Show the answer and full explanation
Answer: B
The rule. Pre-marketing due diligence for foreign property covers the vendor's financial standing and track record, tests the vendor's claims (e.g. guaranteed returns), and may draw on a third party (such as a foreign lawyer) where the agency cannot verify a matter itself. The PI insurer must be notified that foreign property is being marketed.
Why B is correct. All four are correct: (i) that the PI insurer must be told; (ii) the vendor's standing and track record; (iii) testing the vendor's claims; and (iv) engaging a third party where the agency cannot verify a matter.
The other options.
- D drops (i), notifying the PI insurer.
- A drops (i) and (iii), notifying the insurer and testing the vendor's claims.
- C drops (i) and (ii), notifying the insurer and the vendor's standing.
Exam note. Vet the vendor, test its claims, use experts where needed — and notify the PI insurer.
The PI insurer must be notified that foreign property is being marketed →