All Topics / Overseas Deals / Cash Out Clause?

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  • Profile photo of Sparticus10Sparticus10
    Join Date: 2005
    Post Count: 10

    Can someone tell me about this Cash Out Clause thing? I think there was something on the NZ forum recently but can’t find it.

    From my understanding someone can come along and beat you to a property even though you have a contract if they agree to pay cash or something like that?? Please advise..

    Profile photo of oziozi
    Join Date: 2004
    Post Count: 262


    I can answer this as it happened to me recently. The house I was buying fell through on finance by the previous purchaser, so when I made an offer, the agent decided to put in a 2 day cash out clause. Basically all this means is, I still have the 10 days to do my due diligence, however if during that period someone comes along and puts in a cash offer on the property, I will have 2 days to go unconditional or I lose the deal. The cash out period will be whatever the vendor/agent/purchaser agree to. I would try get maybe 5 days. In these circumstances you need to act quick, get your builders, finance, etc organised as soon as possible and ensure that everything is treated as “high priority”.

    The reason this clause is used is purely to protect the vendors interests. As deals that fall through normally fail on finance, this gives the vendor a bit more security. This would be true in a heated market I guess.


    Profile photo of checkerchecker
    Join Date: 2003
    Post Count: 8

    I have a bad experience with the cash out clause in NZ. If any REA use it on me next time I will tell him/her where to go. I put in an offer subject to the usual finance, the REA said she would put in a cash out clause. Not sure what it is I removed the finance clause and the contract became unconditional. After due diligence and wanted to terminate the contract but was forced to settle – all because of the threat of a cash out clause. For me cash out clause = no offer, period

    Profile photo of MiniMogulMiniMogul
    Join Date: 2002
    Post Count: 1,414

    Hi Checker,

    that is very unfortunate. I would certainly recommend that you – anyone – see a lawyer before adding, writing, or inserting any clauses – let alone signing, especially if you ‘don’t know’ – no matter how experienced you are.

    Also if you mean to be able to get out of a contract on due diligence, why not add a due diligence clause? Checker now you have a bad impression of cash out clauses but really the problem was I think with you not the clause.

    I only ever write conditional offers, it is much safer.

    Cash out clauses – I don’t like them, but I will take them occasionally in a hot market to get my price and terms. In effect, it is unlikely that you will get a cash unconditional offer which invokes the clause – hasn’t happened to me yet.

    Try to get min. 3 days cash out clause. 5 is better.

    then, just start to get on with your DD straight away so that if they invoke it, you have time.
    Oh and get pre-approval, so you can make cash offers. Oh, and run everything past your lawyer before you sign it!


    Profile photo of westanwestan
    Join Date: 2002
    Post Count: 1,950

    Hi all

    i agree with Mini and Ozi

    You will usually get a cash clause if the offer is below what the seller really want and they think the market is hot enough to get a higher price.

    the best thing to do apart from what Mini has said is to get pre approval for finance – very simple it just takes a bit of preplanning and action.
    you should rearly put in unconditional offers.
    Chechers sorry to sound harsh (i’m agreeing with mini) but it was your fault that you signed an unconditional offer, you MUST know what you are doing, don’t sign things you don’t understand.

    regards westan

    USA information evenings in Melb, Syd and Brisbane in early April, email me for more info. We find cash positive deals showing 15-25% Returns in the USA email me at [email protected] to join our database

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