Hi All,
Still licking our wounds from this one, but thought that sharing our experience might be of benefit to some of you (though more experienced investors will probably just shake their heads and think 'gee, they fell for that ol' trick….)
Here's what happened. We found the place of our dreams, did all due diligence, were ready to sign.
The agent came into my work this afternoon and I signed the contract. He told me that the vendors would be co-signing the contract that evening, and that it would be faxed to all relevant parties the following day.
The agent then phoned us around 8pm tonight to say that the guy who had made the first offer (way back in mid Oct – he kept extending the settlement date cos he couldn't get finance, so the vendors cancelled the contract) was back on the scene (did he ever leave???) and had this very afternoon, strangely not long after I had signed the contract, come into the agent's office (while he was away with me) wanting to resubmit his offer.
The agent told us that when he got back to the office he was told that this guy was waiting for him at a nearby cafe.
Apparently this guy no longer has a problem with finance because he has sold another property. Nonetheless, his contract is once again subject to finance, which he has to have secured by Jan 11. His offer is slightly higher than ours – not that we were offered the opportunity to counter-offer. We both had the same settlement date, mainly because the vendors have a contract on another place pending the sale of this place, and that contract has a deadline late Jan.
We asked the agent – 'what about the fact that you have a contract that we have signed? If the latest offer from this guy also falls through, can the vendors just co-sign our contract at any time, leaving us with an even shorter time to organise finance?" . The agent assured us that this could not happen. Does anyone know if he's correct?
I find it strange that the new contract from this guy is subject to finance, given that he claims to have sold another property and therefore freed up finance.Anyway, we have learnt an important lesson – never sign a contract without the vendor present and willing to co-sign on the spot. Otherwise your signed contract can just be used as leverage to get another buyer to go up. Despite the agent's insistance that he didn't do this, we believe he did.
Off to get a consoling G and T.
cheers,
CarlinThat sucks, Carlin. Whilst the agent may well have acted within the law, I believe that what he and the vendors have done was unethical. You should, at the very least, have been given the opportunity to match his offer.
I can't believe the vendors didn't give you that chance, given that this buyer has already caused them a lot of heartache. If I were selling, I would much prefer to have sold to you!Best wishes moving forward,
Tracey, Brisbane
Hi Carlin
Yes it is very unfortunate. You should, at the very least, have been given the opportunity to counter-offer. You could always find out the name of the vendor through the Land Title's Office, or even knock on their door, and tell them that you weren't given the chance to counter offer. If you do it quickly enough, if the new purchaser has a problem with finance, the vendors can rescind the contract IMMEDIATELY after the finance clause has not been satisfied.
In some states gazumping is illegal. You should call the relevant Real Estate Institute to find out whether that is the case in your state.
Good luck
K
If it a PPoR this is unfortunate. Emotions are high with those.
Make offers with a time-frame attached if you are worried; such as "until close of business today's date" etc.
If it is an IP, I simply move on to the next one. No emotion. It's a business and we only play my way.
Oh yes I forgot, make sure that you rescind the contract IN WRITING. Even though the RE Agent assures that the vendors cannot enforce the contract you have signed, if the deal falls through with this other guy, the vendors can then sign your contract including the shortened timeframes and can charge you default interest if you fail to settle on time. I have seen this happen. If it were to go to court a judge would certainly find that default interest would not be payable given the vendor's conduct, could you really be bothered going to all that time and effort?
Rescind as a matter of urgency.
Cheers
K
Hi Carlin….
Please be wary, whether or not it is legal, i had an agent exchange a contract i had signed almost a week after i was told i was out bid.
Yes the agent was dodgy but this is what happened… the agent REFUSED to submit any offers to the vendor unless it came in the form of a signed contract accompanied by a 10% deposit. Yes, this is definately illegal practice. After many arguments with him i made my decision that the property was worth it at that price so i did as i was asked after being told by the agent that my offer would definately be accepted. Next day (after much stuffing around to get everything in order including the 10% bank cheque) i was told sorry, you've been outbid. I was furious and refused to raise my bid. I thought that was the end of it until the weekend passed and on the following Tuesday i received a call from said agent saying, "Congratulations, you just bought the unit!" Not only had i talked myself out of the purchase but i was totally unprepared as it was now 5 days later. I had to continue with the purchase which thankfully, turned out to be my 1st successfull reno project. However, i was still unhappy with the way i had been treated. I complained directly with the agent's proprieter and got laughed at (me 27 year old single girl, him 50's male) and then he proceeded to invite me to the snow WITH him… !!!! His employee now works elsewhere but is still a real estate agent. I don't want to be unfair but for anyone who would prefer to steer clear of these people, this experience was had at Remax Prestige in Randwick NSW and the other agent now works at Ray White Randwick.
If it was me, i would definately be retrieving the contract so that you can stay in complete control. These days i only allow my solicitor to exchange on my behalf too which stops this from happening. You never know, if the other buyer drops out again, you might be in a position to submit a lower offer? Good luck
First of all, do not beleive anything an agent says.
You have signed a contract and it is still an offer to the other party until they accept it. They accept it by signing the same contract or a copy and you have not secured the house until you have that in your possession. If the other party's offer falls through, the vendor could still accept your offer and you would have a binding contract. If you don't want to proceed you will need to withdraw your offer as Linar indicated. Do it in writing, maybe via fax as well as delivery so you will have the fax receipt as proof.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Carlin
Sorry to hear about this. I know how frustrating it can be as the same thing happened to me – just about to exchange and surprise surprise the agent pulls another buyer out of his #$%&.
Anyway, what irritates me a little about the whole real estate purchase thing is the cost incurred before you even know whether you have secured the property, especially if attending auctions – building inspections, legals, etc. All adds up especially if you miss out on a couple of properties.
Good luck in the future.
Cheers
TheBIshDon't buy at auctions. Simple.
Hi Everyone,
I appreciate your responses. Yes, we will fax a letter to rescind the contract.
The two things that really irk us are – 1 – we were never given the chance to counter offer and – 2 – since emailing I have spoken directly with the vendors who told me they were put off our contract by one of our conditions. This fact was never relayed to us. Had we known, we would have withdrawn that condition.
The agent says we were just pipped at the post. We say we were never given a fighting chance.
Thanks again for your support and advice. I am still hurting from this because it would have mean a lifestyle change for us that we've been dreaming of for some time. And, no Marc, this not an auction.
regards,
CarlinHeh Carolyn
You are supposed to be on holiday enjouying the NT weather.
Off the computer and go get yourself a tan – lol.
Richard Taylor | Australia's leading private lender
Question: ….. Could the "sunset clause" option get around this problem, whereby an expiry date included in the contract signed by the prospective purchaser/s makes the contract null and void unless the contract is signed by the vendor before this date/time?
I have put an expiry date/time on written offers, but not on a contract.
Martin
This type of practice if not uncommon, I've had it pulled/tried on me a couple of times. Fortunately, due to experience I thrive on these situations, and now I use it to my advantage. One important point, there is millions of bargains out there in this big world.One time we were in the RE agents office and signed the contract, the agent went away for less than a minute, came back and told us a story along the lines of ' just had a phone call from the vendors and there has been some development with another offer … bla bla bla…. I stood up, ripped up the signed contact right in front of the agents eyes and walked out of the office. The agent nearly had a heart attack, the whole agent where stunned. To cut the story short I had the agent ringing me every day for the next week apologising and begging, and in the end I ended up signing the contract again for $1k less.In this case I was fortunate that I was not emotionally attached to the investment and able to just walk. I feel for those who are in a PPOR situation.GeoffBHi Mystery
You could have a sunset clause but it is not really necessary. A clause in the contract only takes effect once there is a valid contract in place, that is, once both parties have signed the contract. Obviously if the vendor has not signed the contract the sunset clause is useless.
You should just be able to give a timeframe to accept the offer (which is all that a contract signed by the purchaser is) verbally. Unless you buy in the name of a company there is always a cooling off period and technically, you would be exercising your right to cool off if the offer has not been accepted by your designated timeframe but is signed by the vendor after that time.
Love that cooling off clause.
Cheers
K
Geoff – love your work …
Firstly, Carlin, my sympathy for the treatment you received during this transaction. Disappointment is always a hard pill to swallow.
It is interesting from my point of view as an agent to read all of the different suggestions that people have offered, so I tend this reply in order to cover some of them.
The reality of your situation is that you found yourself believing that you were submitting an offer with no competition while in fact there was competition. To this end I believe that the Agent acted unethically at best, If not illegally, by not advising that there was another offer. When this happens in Queensland (and I'm not sure which State you live in) a good agent will cover themself by advising the Buyers that they are in competition and that this offer is their best and final offer. We have a form that the Buyer must sign to acknowledge that they have agreed to this.
If this step is not taken the Buyer may well feel that they are being submitted to a 'Dutch Auction' and this always leaves a sour taste in the mouth of the underbidder. In situations like this most purchasers would preferr to be in an open Auction and see exactly where the competition is coming from.
Linar is correct in advising you to recind the offer (by fax to the agent is sufficient – keep a copy of the transmission). I am not sure in which state gazumping is illegal though and would love to hear if anyone knows. You could pull out using the statutory cooling off clause, however this would cost you .25% of the purchase price.
Terryw says:- First of all, do not beleive anything an agent says. Should we add Finance Brokers to this list Terry? What a stupid statement.
Keira says:- the agent REFUSED to submit any offers to the vendor unless it came in the form of a signed contract accompanied by a 10% deposit. Yes, this is definately illegal practice. If the Vendor has instructed that all offers must be in writing and be accompanied with a 10% deposit then NO this is not illegal practice. It is after all the Vendors property and they can accept or refuse any offer they like.
TheBish says:- Anyway, what irritates me a little about the whole real estate purchase thing is the cost incurred before you even know whether you have secured the property, especially if attending auctions – building inspections, legals, etc. All adds up especially if you miss out on a couple of properties. I agree that this can be very frustrating, however have you ever considered that the reason for this really lies in the 'Games that People Play' when it comes to purchasing or selling property. The fact is that no one wants to feel that they have been ripped off (The Seller always feels that they gave it away while the Buyer feels that they paid too much) This is the physology of the beast. As an interesting aside, The question most often asked after an auction by people who refuse to go to auctions is. How much did it sell for? to which, once they have been told the selling price, they usually reply. Is that all, I would have paid more. We all know that this is an outright lie and if it isn't, then they just missed out on an excellent deal due to their decisions.
If only we could learn to trust each other, life would be less of a hassle. We all know that this will not happen so I guess we are stuck with what we have and we must learn to deal with it.
Jon
Jon Chown wrote:The question most often asked after an auction by people who refuse to go to auctions is. How much did it sell for? to which, once they have been told the selling price, they usually reply. Is that all, I would have paid more. We all know that this is an outright lie and if it isn't, then they just missed out on an excellent deal due to their decisions.Jon, I do not and will not buy or sell via auction, and if I said this to you, I would be telling you the truth. I don't believe that auctions achieve the best price for the vendor – because the pool of potential purchasers is necessarily limited – and they limit the flexibility necessary for me to be interested as a purchaser.
The only reasons that I'd ever participate in an auction would be:
1) as a buyer – if I had so much free cash and equity that I can buy with cash and can afford to make some mistakes, in the hope of picking up some bargains, or
2) as a seller – if I have something wrong with my property that I don't wish prospective purchasers to discover before being locked in.
Therefore I won't participate as a buyer because I don't have so much money that I can afford to be committed to buying a property that I can't finance (because the valuation comes in low), and I'd also be worried what the problem is that the vendor's trying to hide. I won't participate as a seller because I can't imagine ever getting more via auction than I would via a sale (except if I have a big nasty to hide).
The comfort of being able to do building and pest, and check that the bank's comfortable with the valuation on the property, are worth a significant amount to me as a purchaser, and therefore I'd always pay more for the same property in a sale situation than at an auction.
Trakka, there are many people on this site who I respect for their thoughts and sense of fair play and you are one of them. I don't wish to create an arguement here and respect your position on Auctions, however I would like to clarify my thoughts as to this method of sale.
There are times when it is a Sellers market and times when it is a Buyers market, There are properties that will be in demand and properties that won't and there are properties that it is relatively easy to place a value on and properties that you can't, and as an agent we must decide which of these types of situations are best suited to the Auction method of sale. As an example of these comments, I personally dislike Auctioning the cheaper end as I am of the opinion that many younger people are unable to purchase under these conditions so you limit the potential bidders, on the other hand it is often difficult to place an exact value on properties over 2 million dollars for instance, and this type of property is best Auctioned so that the person who wants it the most will pay the most for it.
Your comments :-
The only reasons that I'd ever participate in an auction would be:
1) as a buyer – if I had so much free cash and equity that I can buy with cash and can afford to make some mistakes, in the hope of picking up some bargains,
My answer to this is that the only bargins most people see are the ones that they missed out on buying. No offence meant here but as I am working for, and being paid by the Seller, I have a legal obligation to make sure that I obtain the best possible price for them – so no bargins here. On the other hand, when a Buyer decides to pay my commission, then I am working for them and I will do everything that I can to find them the best possible deal that I can.
and
2) as a seller – if I have something wrong with my property that I don't wish prospective purchasers to discover before being locked in.
That's what building inspections are for. I have personally sold many properties by private treaty with a Building Inspection clause only to have them fall over due to some defect. So the cost is still there no matter if you buy by Auction or not. In the Auction case you have the benefit of knowing what the property is like and can bid accordingly on the private treaty situation you bid and then attempt to go for the cut after the Inspection.It is my considered opinion that this practice should be legislated against and the Seller should be directed to pay for the Inspection and show it to prospective purchasers prior to their offer in order that they can take into consideration any issues arising from the inspection.
On the issue of Valuation – A purchaser at an Auction will have spoken to their bank prior to the Auction and been approved to a ceiling. As far as any bank is concerned the fact that the property sold under the hammer dictates that that is market value and the valuation will be accepted. (bid over your ceiling and don't expect the bank to necessarily honour your commitment.
In fairness I have to accept that you saying that you will pay more under private treaty than Auction is truthfull but to me it only proves my previous point as you contradict yourself when you say – I don't believe that auctions achieve the best price for the vendor therefore in fact they must be a bargain and yet you would rather – .always pay more for the same property in a sale situation than at an auction. Perhaps it's just me, but I fail to see the logic here.
In summary, I believe that not all properties should be Auctioned, but on the other hand there are still benefits for them. It is my belief that Buyers generally don't like Auctions because, to some degree, they feel that they loose control of the negotiation phase of the purchase, and yet for all of this, and, as this thread implies, Buyers don't like being pitted against each other in a Dutch Auction situation either. So where is the answer? First buyer to offer has the rights to negotiate unimpeded? hardley fair to the Seller is it – but then the Buyer doesn't care do they. If only we could learn to trust each other.
Jon
Thanks, Jon, for your thoughtful response. I do agree that auctions may be a useful tool at the higher end; the disadvantages of auctions are less likely to be significant for these properties.
I agree that people attempting to use building inspections to get the price down is dubious. I don't know why people think they have a right to buy a 50 year old house in perfect order.
I think it's ridiculous that people ask for vendors to repair minor things, eg a few loose tiles, a couple of rusty pockets in the gutter, a few dings in the wall. If it's not a new house, these things are part of the deal, as far as I'm concerned. I look at a B&P as a "make sure there's no big nasties" – if there are huge structural problems, I'd probably use it to walk away. But using it to try and get everything perfect – or get a price reduction – is not in the spirit in which I like to conduct myself. (I wouldn't go as far as saying unethical, as I know people that I respect who routinely do this; it's just not consistent with the golden rule – I'd hate others doing it to me, so I won't do it to them.) I like your idea of having a B&P done prior to negotiations and the negotiations being done on that basis. Then the purchaser would only have the right to renegotiate if their own B&P uncovers something new.If what you say about the valuers/lenders recognising an auction price as market value, then fair enough, I didn't know that. Is that a policy, or just the way it tends to work out? Have you not ever heard of people buying at auction and then the property being valued at a lower price?
But there is no logical contradiction in what I said, Jon: I think that auctions generally get a lower price. IF the property has no hidden nasties, then I believe most properties bought at auction are bought below what they'd fetch via a private treaty sale and therefore are a bargain. How often is a property passed in at auction for not reaching reserve, then immediately sold via private treaty for a higher price? If, as I would always fear, there are hidden nasties, then the bargain is not so much of a bargain, because it could cost a fortune to fix hidden defects. Because I'm afraid I'll get the one with hidden nasties, I won't buy at auction, even though there's a chance of a bargain.
Best wishes, Tracey
Tracey, Thank you for taking my words with the spirit that they were intended. As I said previously while I don't agree with your feelings in relation to Auctions, I do respect your right to have them.
It's funny that in life – we don't know what we don't know and sometimes we think that we know, but we don't. It's the nature of the beast I guess.
I have never heard of anyone being knocked back for finance based on valuation by a Bank post Auction.
I agree with you ethical stand on Building Inspections. In days gone by a Purchaser could only use the Building Inspection as an out clause for structural defects – now days they are being abused and some people will use any issue to renegotiate.
Thanks for the great discussion.
Jon
I can't believe the vendors didn't give you that chance, given that this buyer has already caused them a lot of heartache. If I were selling, I would much prefer to have sold to you!
I think it's ridiculous that people ask for vendors to repair minor things, eg a few loose tiles, a couple of rusty pockets in the gutter, a few dings in the wall. If it's not a new house, these things are part of the deal, as far as I'm concerned. I look at a B&P as a "make sure there's no big nasties" – if there are huge structural problems, I'd probably use it to walk away. But using it to try and get everything perfect – or get a price reduction – is not in the spirit in which I like to conduct myself. (I wouldn't go as far as saying unethical, as I know people that I respect who routinely do this; it's just not consistent with the golden rule – I'd hate others doing it to me, so I won't do it to them.) I like your idea of having a B&P done prior to negotiations and the negotiations being done on that basis. Then the purchaser would only have the right to renegotiate if their own B&P uncovers something new.You must be logged in to reply to this topic. If you don't have an account, you can register here.
