Hi,
I have found a unit and have made an offer well below the asking price.
For the vendor to consider my offer seriously, I am wanting to put the offer in writing and attach a 10% deposit bank cheque – this is recommended under the guidelines of “Securing a Property You Wish to Purchase.” It will make the vendor (hopefully) take notice of my offer and if accepted, secure the property before anhy other higher offers from other parties are made.
I am aware that I need a strata inspection as well as Building/Pest inspection (which I still prefer to do depsite being a unit). I have already contacted the appropriate people who are ready to go ahead with the inspections if the offer is accepted.
My question is how and what order is the above to be completed? Are the inspections all to be carried out within the 5 day cooling- off period, being after the written offer is accepted with the bank cheque? What if it takes longer than 5 days, including the bank’s valuation?
I need to understand (with my conveyancor) what conditions I am to write the contract of offer? “Subject to Finance” is what I thought…so does this allow me to “pull out” if any serious issues are found wth the strata reports, inspections and/or if the bank values the property much less than the agreed purchase price?
Any immediate advice would really help as I need to get the ball rolling tomorrow and I want to be very clear in the procedure I need to follow.
Thank you.
You can put in the contract whatever you want, as long as the vendor agrees to it! You should be able to get inspections done within a couple of days, no problem, or just put in the offer "within 7 business days" or similar. But the longer time you ask for and the more conditions you put in the contract, the less attractive your offer will be. Just putting "subject to finance" won't help much, as it's not specific enough. You need to make it subject to finance that is acceptable to you. Here are a couple of conditions I've used in contracts before. But they are only in my own words – I'm not exactly sure how they would really hold up legally. Your conveyancer should be able to help.
This contract is subject to and conditional upon the purchaser/s obtaining approval for a suitable loan with which to purchase the property, within 21 business days of the vendor accepting the purchaser/s offer to purchase the property. It will be solely for the purchaser/s to determine whether or not the loan is suitable and acceptable to the purchaser/s. All money paid by the purchaser/s by way of deposits for the purchase of the property must be immediately refunded to the purchaser/s if the contract is ended.This contract is subject to and conditional upon a building inspection being undertaken at the property, within 7 business days of the vendor accepting the purchaser/s offer to purchase the property. The inspection will be undertaken by an inspector of the purchaser/s choice and the results of the inspection are to be satisfactory and acceptable to the purchaser. It will be solely for the purchaser/s to determine whether or not the results of the inspection are satisfactory to the purchaser/s. All money paid by the purchaser/s by way of deposits for the purchase of the property must be immediately refunded to the purchaser/s if the contract is ended.
There's no way you'll get the bank valuation done in 5 days – that's all part of the subject to finance clause, giving you 21 days to sort all that out. But the banks seem to be moving very slowly at the moment, so I'd be asking for at least 28 days unless you are absolutely sure your finance application will be approved quickly.
Good luck,
PhilPhil,
Thank you so much for taking the time to respond and with such valuable feedback! I will most certainly take up on your advice.
If the bank valuation was to end up way under, are you saying I am stilll able to cancel the sale and obtain a refund if it is after the cooling off period (minus 0.25% after the cooling off period) and it is within the 21 days (or 28 preferrable as you have stated)?
Many many thanks again.
Sounds risky to me. Why not get some legal advice before doing all this? Will be cheaper than losing 0.25%.
One thing you could do is to extend the cooling off period.
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
BTW, what state is the property in?
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
I'd suggest to get the help of a lawyer, especially one that specialises in real estate contracts
QM- it will depend on which state you are in. IN NSW as I understand it- you need to get pest inspection and finance before you put in your offer. I worked as a real estate agent in Victoria- you can get your deposit back less your 0.25% if you have not already sought legal advice. The purpose of cooling off is to get legal advice. If you were to put in clauses- subject to finance- and you don’t get finance- you can cancel the contract effectively- you get all of your deposit back.
So- that means that if you have “legal advice” already – then you don’t get cooling off. I am not sure that you can get out of a contract “subject to finance that does not come through during this period- you MUST get your finance approved or go unconditional at this stage- YES banks are taking longer- And the agent will most likely press you to put shorter time for finance clause. Yes, you can at the end of the period – try to get an extension- YES it is at the risk of the vendor saying no- either go unconditional or end the contract- you need to weigh this up.
I did have a case where the finance clause was extended 3 times in the midst of the GFC and banks were reeeeaally slow….Building and Pest inspection should not take all that long- and you need to be specific about what it is that you want to pull out on. I did have a case where there were structural imperfections – the vendor fixed the problem and all was well. Sometimes you can use a building and pest inspection to lower the price- but usually the vendor will tell you to take a hike.
The 'cooling off' period really allows a potential purchaser to rescind the contract simply because of a 'change of mind' – the key thing is to understand the length of colling off period in each state.
Qld – 5 days
NSW – 1 day
VIc – 3 days
SA – 2 days
WA – no colling off
NT – 4 daysEach state has a outline of how the 'cooling off' period works in their state and these can be found using google.
Conditions such as finance, inspections, etc all fall outside the cooling off period and need to be written in such a manner that they are unabiguous and very clear as to who is repsonsible, what happens if and so on.
Th eexamples provided by Phil are very clear, detailed and there seems fo be little/no room for different interpretations coming into play. I recommend you get your solicitor to write the conditions – these are your safety net should something go awry in the purchase.
Well Derek, I am not sure which state you are in BUT you cant simply “change your mind” in Victoria- the law states if you have already sought advice from a legal person then you cant “cool off”. That is – the “cooling off” is the time to seek legal advice if you have not already. Perhaps you should have a closer look at the laws in Victoria.
Thank you so much WomeninPropMelb – you are obviously a wealth of valued and up-to-date information and a great asset for our community
Well this post was a long time ago… QM- what did happen in the end?
Did you get to the bottom of what you needed to know about property inspections and finance clause?More importantly – DID YOU BUY??!!
And how are you going?Hi WiP,
Thank you for your follow up.
I did not end up buying the unit. I went ahead with a building and pest inspection then after viewing the reports I submitted a written offer with a bank cheque attached acting as a generous deposit. The vendor did not accept the offer. I lost approx $600 for the inspections but felt it was the best chance I had considering that I was making an offer substantially lower than the vendor's asking price.I am still actively seeking to purchase but feel property prices will drop even lower.
Yes, $600 is well spent. You have the right attitude- make low offers and be prepared to walk away. There is always another property just around the corner.
I know that media is saying property is bad but I cant see where you can still get a bargain. I was about to put my property on the market but decided against it as I think there is upside soon.
Good luck with your investing- you will do well.Thank you WiP! Any feedback from you is always appreciated
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