Man ordered to pay $1.1M after pulling out of house purchase

This is a controversial yet legal real estate practice, I don’t understand why is this allowed, it’s legal in New Zealand, Canada, Australia, would be other countries too, it is a very risky business, I would go as far as calling it dodgy.

I’m going to explain on 2 cases in New Zealand, one of them is a very recent one, there is a court verdict, everyone’s lost, the whole business was an absolute shambles from the get-go.

In normal real estate transaction, you find a house, you purchase it, it means deposit, settlement, title goes in your name. In shadow flipping you are legally entitled to on-sell the property before the settlement date of the original purchase. What it means is, you enter the sale and purchase agreement, you pay 10% deposit, the settlement would be in a month or 2 and you on-sell before you settle. The 2nd settlement would be around the same time as the 1st one or on the same day, and you won’t even take ownership of the property, you take the difference for what you had bought it and on-sold it for.

Here’s the case that came across my table, it was published in Stuff by Marty Sharpe on January 21, 2026. Robert and Margot Smallridge sold their family home at the peak of the market in November 2021 to Paljeet Singh for $1,925,000 the house is in Auckland Avondale. Paljeet Singh paid deposit of $96,250 which is 5%. You normally pay 10%, in this case it was only 5%. I veer off the topic now when I say that the only person or persons who benefited from this mess where the real estate agents who sold Smallridges house to Singh. They received their commission from the deposit, this would be a blog for another day, the real estate agents are being paid from the deposit, the settlement could be in a month or 2, or in a year as it was in this instance, they are being paid first regardless if the property settles or not.

Back to the case, the settlement was due to take place in a year time which was to be November 2022, by which time the market plummeted. It is quite a time for a settlement, they must have had their reasons as to why they wanted to settle that late from the sale, they wouldn’t have known that the market was about to dive. 

Six weeks before the settlement date, Singh told Smallridges he was cancelling the Sales and Purchase agreement because they had breached an essential term of the agreement, to allow Singh a reasonable access to the property to enable him to market it and on-sell. I reviewed a standard Sale and Purchase Agreement and there is nothing that obliges a vendor to do that until the property settles, that means they had to agree that beforehand and put that in the S&P Agreement. Following numerous discussions between the Smallridges and Singh, their respective lawyers, the Smallridges decided they had no option but to resell the property, the house sold for $1,130,000 in April 2023.

Following the sale, the Smallridges launched a claim for damages for wrongful cancelation against Singh, he responded with a counterclaim for return of his deposit. You remember when I said that the real estate agent is being paid from the deposit? That money has gone, 2/3 of the deposit was paid as commission to the real estate agent who sold the property to Singh. It would be funny to ask them ‘can you return that money back?, the settlement did not eventuate’. The Smallridges have been seeking full redress for any losses suffered. In November 2022, Singh was served a settlement notice requiring him to settle within 12 working days, he didn’t settle, before launching legal action against him, the Smallridges offered to settle at a considerably lower sum, Singh did not respond to that offer.

The matter was heard by Justice Tracey Walker last year.

I’ll try to make it simple because the case would’ve been very much a case of ‘he said – she said’. Singh claimed the Smallridges did not allow him access the property when he had potential buyers, he said he’d had a buyer for $2.1M but they walked away because they couldn’t view the property. The Smallridges claimed there had never been a discussion about the access. They said there had been meetings between them and their respective lawyers but they were because he wanted to settle at a lower price, he claimed he was under financial stress and wanted to back out of the agreement, he said he couldn’t obtain lending.

Kapil Rana of Barefoot&Thompson was engaged by Singh to on-sell the property, he told the court he had visited Smallridges in March 2022 to ask if a potential buyer could visit, Rana told the court that Margot Smallridge told him no-one would visit the property until settlement had been reached. Margot Smallridge told the court such meeting did not take place, she did not recognize Kapil Rana, she said had they asked for access, it would’ve been granted.

I can carry on with this, there were differing views of meetings between the Smallridges and Singh, Singh said they didn’t allow the access, Smallridges said it had never been about the access.

Justice Tracey Walker took the side of Smallridges, she said she had no difficulty to conclude the Smallridges had not denied access to the property, she said they were straightforward witnesses, immaterial differences in their accounts. On the other hand, she did not find Singh and Rana credible. The price range sought by Singh, $2.3M – $2.4M had little interest, she didn’t find the situation described by Singh and Rana about a prospective buyer walking away due to the access issues credible, she said Singh’s inability to on-sell the property was a product of a falling market, his own unreasonable price expectations  and that the ‘access’ issue was no more than an attempt to find some reason to back out of the agreement to avoid settling.

She ordered to pay damages of $753,803.25, that is the difference between the 1st and 2nd sales price , plus the costs of marketing the property again, minus Singh’s deposit, he was also ordered to pay interest at 14% for the period between the original sale agreement and the date the property actually sold, this came to $99,604.48

Also, he was ordered to pay contractual interest on the net loss on resale at $268.01 per day from April 15, 2023 and this comes to $270,958 as per today.

I am not going into the details of the verdict, I have my very own opinion as to what happened, the Smallridges are not without fault, they didn’t like the fact he was trying to on-sell and make money on top of their sold price, I can see how they would’ve been brassed off, did they have the clause about the access to the property before the settlement in the Sale and Purchase Agreement? I don’t know about that.

The whole case is shambles, there are no winners, yes there is a court ruling, is Paljeet Singh going to pay that? He’s either bankrupt or insolvent to pay any debt or even worse, he’s not even in the country anymore. The Smallridges would have ended up with a substantial legal bill, how much was that?, the article did not say.

This case is a cautionary story about what happens when you do business with hustlers.

I’ve got another example of Shadow flipping which occurred back in May 2020 in Wellington area, in this case the buyer happened to be the colleague of the real estate agents who marketed the property, made a fortune.

Two elderly siblings were ‘devastated’ to find a section they had sold was put back on the market and sold within 36 days for a whopping $790,000 profit. From what I understand, the section was a farm in Wairarapa and it was onsold before the settlement of the original sale and it was sold to the colleague of the 2 real estate agents who marketed the property.

Two brothers, one of whom has since died, complained to the Real Estate Authority that the 3 realtors involved in 2 transactions had abused their trust, in other words ‘they took them for a ride’.

According to the facts laid out in the committee’s decision, the complainants were two brothers who owned a large section inherited from their parents. They were trying to sell it without luck and in May 2020 were approached by 2 realtors whose names were redacted from the decision (these are not Epstein files, this was an investigation conducted by Real Estate Authority), and asked if they would consider selling it off-market. 

A potential buyer was identified by the realtors, it was their very own colleague Elyas Salimi Sarkhab (I’m wondering  why was he outed?). Sarkhab was employed by the same real estate agency as the realtors at the time, however, he was about to leave to begin work for another agency (as if this was going to make any difference in the decision). 

The 2 brothers, who were also not named, listed the property with the 2 realtors and sold it for $2,290,000 in December 2020. At the time the Capital Value aka CV was $3,225,000 The 2 brothers sold it $1Million below the capital value. 

36 days later the new owner sold it for $3,080,000

The brothers alleged the two realtors had worked with Sarkhab to on-sell the property and generate a profit of $790,000. They claimed the three had abused their trust by stripping them of that additional money.  They told the committee the transaction had a severe and negative impact on their health. They argued the Comparative Market Analysis completed by the two realtors had undervalued the section by almost $1M

Following the investigation, the committee found there was no evidence of collusion between Sarkhab and the 2 realtors to on-sell the property at a profit. It ruled the two realtors had not broken any rules and were not guilty of any unsatisfactory conduct. These people know how to look after their own people. The committee found the property appraisal they completed did reflect the market conditions at the time and the on-selling weeks later was due to a change of circumstances rather than to make a profit. They would’ve completely disregarded the fact the property on-sold before the settlement of the original one with a whopping $790,000 profit. 

However, the committee found Sarkhab guilty of unsatisfactory conduct concerning a breach of his fiduciary duties to the brothers by failing to tell them he had agreed to on-sell the property.

‘Given Mr. Salimi Sarkhab’s fiduciary relationship with the complainant, the committee considers that he should have advised the complainant that he entered into an agency agreement to on-sell the property. This did not occur’, the decision stated.

I want to pause at this moment, Sarkhab was the buyer, he is the colleague of the 2 realtors who marketed the property, he doesn’t need to tell anyone anything what he intends to do with the section. He does not have fiduciary relationship with the vendors. He wants to sell it or keep it, raise chooks and rabbits, plant cabbage and carrots make coleslaw, he can do whatever he wants to do with his property.

But it was not found that the section had been undersold and Sarkhab colluded to on-sell it at a profit.

I have no words, all I can say is they know how to look after their own people. The bloke made $790,000 in a couple of weeks and they say that was absolutely normal and there is nothing to see here.

Sarkhab was fined $1,000 and ordered to reduce his commission relating to the property by $4,500 This is a big dent compared to the $790,000 profit he’d made (that money would’ve been cut in several ways though, that wasn’t all his) and I’m not sure what commission they talking here since he owned it, he probably charged commission on the sale of his own property.

Following the release of the decision, Sarkhab told NZME (New Zealand largest multi-media company) he didn’t know he was supposed to tell the previous owners he intended to sell. Once again, he didn’t need to, it’s his own property, he can do whatever he wants to.

Salimi Sarkhab said he was put in the corner where it could’ve been very ugly for him if he couldn’t have on-sold, then he would’ve been in a huge financial struggle. Tell it to Paljeet Sing Salimi, he would surely tell you what sort of struggles you would end up with. ‘Up shit creek’ is an understatement. 

Sarkhab added ‘I think one of the reasons the brothers felt ripped off was because they felt it had all been planned out’. No it wasn’t, that was an impromptu on-sell and a change of circumstances in the market as the real estate commission concluded Salimi.

Real Estate Authority chief executive Belinda Moffat told NZME the importance of the fiduciary obligation real estate agents owe to their clients. ‘In general terms, if a buyer has signed a sale and purchase agreement to buy a property, they are legally entitled to on-sell that property before the settlement date of the original purchase’, she said, ‘while it is understandable that a vendor may be unhappy to see their property on-sold for a profit, a range of factors may influence the price achieved for an on-sold property, this includes the fluctuating market’.

In this case the market fluctuated +$790,000 in 36 days.