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Dozens of people buying and selling homes in Christchurch face delays as buyers fail to finalise sales, forcing sellers to default on their own contracts.
About 150 people who confirmed property purchases before the September 4 earthquake are in limbo - unable to get the insurance and finance they need
to close deals on homes.
This means anyone selling a home who is also in negotiations to purchase a new one is at risk of defaulting on their own contract.
Real Estate Institute of New Zealand Christchurch spokesman David Rankin said the situation was a "huge concern" in the short term.
"This impacts on everyone," he said. "If the buyer hasn't got insurance, they will have problems getting finance ... they will be unable to settle in that position."
He said if a house was deemed to be uninhabitable by a structural engineer, standard conditions in the sale and purchase agreement for the property offered the buyer an out.
"It gives the buyer an opportunity to cancel the agreement. In most cases, the seller is the buyer of another property, and if the seller can't get the money then they are in a position where they have to default on their next purchase.
"There is a possible chain reaction that can take place. Sometimes, you get chains that are quite long."
Mr Rankin said settlement issues would cause a lot of extra stress for people already suffering the effects of the quake.
However, he believed the situation would "sort itself out" if settlements were delayed until issues with insurance and lending were resolved.
He said only 2 per cent of damaged houses had been condemned, and did not foresee many cases of cancelled sales.
It was more likely people would be unhappy about taking over properties with minor damage such as driveway cracks and broken fences and chimneys.
But Mr Rankin said anyone in that situation had options.
They could ask the seller to reduce the sale price by the amount of the repairs, or the seller could transfer the amount paid out by the insurance company to the new owner.
"These are unusual circumstances that nobody has ever come across before. It's just unbelievable. But it will soon be business as usual."
Harcourts consultant Philip Watkins said new sale contacts would come with a clause allowing the buyer to cancel the deal if quake damage was identified.
Quake damage would also become a specific condition of sale.
Mr Watkins said the market would take a hit as a result of the quake, but he didn't expect it to stay down long.
"The volume of sales will diminish, but it will pick up again.
"The areas people don't want to buy in are areas that have been heavily affected," he said. "People will be naturally nervous to buy in those areas and the market will certainly be affected. But I think it will be overcome when structural engineers can give them some sense of certainty that the houses are safe."
Agents at open homes across the city yesterday were optimistic about the property market bouncing back quickly.
"At a meeting last week we were told that out of 13 settlements, 12 went through after the quake," said one agent.
"We had more people through [a house the agent was selling] this weekend than we did last weekend when it was raining."
Another said people who had bought houses before the quake were quick to arrange further viewings to check damage.
"They just want another viewing as quickly as possible, just to make sure everything's going ok."
He said sellers were being proactive when it came to getting engineers' reports.
