All Topics / The Treasure Chest / Vendor too greedy

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  • Profile photo of IshitaIshita
    Join Date: 2003
    Post Count: 20

    Hi guys,

    I would like your advice on how to approach the following situation.

    I’m purchasing a pos cash flow property in rural qld. Bank has valued it a 13.5% below negotiated price. Vendor will not negotiate even with an independant valuation paid for by me. Vendor is going through a divorce and says that if he can’t get negotiated price then he will pay out his wife and keep the properties.

    So even if I can get a valuation that is higher than the banks, I will have to fund from cash any difference between new valuation and negotiated price.

    Here’s the data:

    Negotiated price $208K
    Banks valuation $180K
    Last sold : Jan 2002 for $158500
    Capital growth in 2002 – 5.8%
    Assume 10% capital growth in 2003

    Using this info, it seems that banks valuation of $180K is about right.

    I was prepared to buy it at 208K based on the financials (it is a set of 3 villas), but that was based on the banks financing it.

    What would you suggest[?]

    Also, if anyone knows of valuers that will cover rural areas in qld (near NSW border), please advise contact details.

    Thanks for your help…I thought this was all but in the bag…my first one too…[:(]


    Profile photo of bcbc
    Join Date: 2003
    Post Count: 85

    Ish, do you think it might be possible that he (or she) has read the same report that you have, that has encouraged you to buy property so far away from where you APPEAR to be based?

    If this is the case, well, ‘no’ he is not being greedy, the question is, are you being ‘tight’ remember us country folk ‘know’ that city people are cashed up and desperate and will pay

    Sorry I cant help with valuers up there[:(]


    Profile photo of DavidUDavidU
    Join Date: 2001
    Post Count: 101

    Hi Ish

    I don’t think the vendor is being too greedy. You both have agreed to the purchase price, so there’s no real need for the vendor to reduce the price REGARDLESS of the valuation.

    Unfortunately, I believe the vendor understands your pysche, ie i) You are a newbie ii) You are an out of towner. Put i) and ii) together and you get a highly motivated BUYER… YOU!!

    In this current market, the vendor probably won’t reduce their price.. after all there are plenty of cashed up ‘investors’ around.

    At the end of the day, it’s your choice if the numbers STILL make sense even after forking out the difference, then go for it BUT be aware of what your exit strategy is, ie if you need to sell in a hurry, you will more than likely sell at a LOSS…

    If this is not satisfactory, walk..they’ll be another property next week… next month…

    Ensuring the numbers make sense is essential.. so is patience

    All the best

    David U

    Profile photo of Kirby319Kirby319
    Join Date: 2003
    Post Count: 120

    The vendor may not be greedy but he may be unwise not to negotiate.

    If you dont go ahead with the purchase (as you dont have finance), then the vendor will face the problem of the next purchaser also getting knocked back after the bank valuation. He will only sell if the investor puts in money out of their own pocket.

    In any event, I would strongly recommend that you do NOT poceed as $28,000 is alot out of your pocket (1 or 2 deposits) and it may take years for CG to catch up.

    Remember, investing should be devoid of emotion as much as possible. Dont worry about not securing your first IP because you will eventually find a better one. You will also learn alot from this experience.

    Cheers Brett

    Profile photo of HaroldHarold
    Join Date: 2003
    Post Count: 80

    It is a time for vendor greed, in this market. I myself have some sucker paying wildly too much for my under contract property.

    Be smart, put hands in your pockets and walk away (or at least be prepared to). If you are having difficulty with bank borrowability, that will effect future equity transactions with bank and also affect resale for borrower

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