A man in Xiamen, who entrusted an agent to handle the entire process of purchasing a court-auctioned property due to his unfamiliarity with the procedure, found himself overcharged by hundreds of thousands of yuan. The case, involving a contract dispute, was recently heard by the Xiamen Intermediate People's Court, which ultimately ruled against the agent's deceptive practices.

On December 16, 2023, a man surnamed Li signed a "Power of Attorney" with an individual surnamed Wang, who claimed to be a real estate agent. The agreement authorized Wang to bid on a specific court-auctioned property on Li's behalf, and the document was subsequently notarized. On the same day, Wang, acting under the guise of being the agent for the property's owner, a person surnamed Chen, entered into a separate "Real Estate Sales Agreement" with Li. This agreement stipulated that Chen would sell the disputed property to Li for a total of 2.48 million yuan. However, Wang did not actually know Chen and had no authorization from him whatsoever.

On January 12, 2024, Wang, using Li's name, successfully bid for the court-auctioned property at the highest price of 1.98 million yuan. Following Wang's instructions, Li gradually paid the full 2.48 million yuan to obtain the property's ownership. It was only a few months later that Li accidentally discovered the actual winning bid for the property was significantly lower. Realizing he had been deceived out of a substantial sum, Li filed a lawsuit demanding Wang return the 500,000 yuan price difference plus interest.

The court determined that Wang, based on the notarized power of attorney, acted in Li's name to secure the property at auction; therefore, it was Li who legally acquired the property through the court's sale process. The title transfer was not an outcome of the "Real Estate Sales Agreement" as Wang claimed. Instead, the transfer of ownership was facilitated by the court's legal documents, which directed the relevant authorities to handle the registration. Consequently, the court found that the terms of the "Real Estate Sales Agreement" could not be fulfilled in terms of seller identity, ownership transfer, or property delivery, as the entire transaction was governed by the court's authority. The judge ruled that the actual relationship between Li and Wang was one of a commissioned purchase, not a direct sale.

The court's decision highlighted that Wang, as a fiduciary, had violated his duties by exploiting information asymmetries. By having Li sign a purchase agreement while also acting as his commission agent, Wang had intentionally concealed the true transaction price, causing the client significant financial harm. The court stated that such actions warrant legal liability. It further emphasized that an agent attempting to position themselves as the seller in a separate agreement to pocket the price difference would not find support in the judicial system.

Where to begin

For those looking to secure a bargain court-auctioned property, it is crucial to do thorough due diligence. Before bidding, one can research the property's nature, any existing rights attached to it, and the auction process through the executing court or online platforms. If you decide to hire a professional to bid for you, ensure you have a clear commission contract that spells out the agent's duties, payment, and terms for breach of contract. It is also vital to scrutinize any other documents an agent may ask you to sign before putting pen to paper. Ultimately, agents must act in their client's best interests, and any attempt to exploit the relationship for huge gains is legally untenable.