Hi All,
I am currently looking at doing a reno in a suburb in perth WA, it is really run down and a majority of it is neglect.
I am concerned at the option of having a longish settlement (90-120 days) with early access to perform renovations, what would happen if the vendor bails on the settlement or renegs the contract after i have performed the renovations. I.e the vendor turns greedy and wants a higher sale price. The real estate agent told me she wouldn't even proprose the offer if i wrote one for her vendor – advising that not in vendors best interest. (yes i know legally she can't refuse to present any written offers)Has anyone been down this road and can offer any suggestions. I am currently working through the figures but not having done a reno during a settlement i'm concerned that i might get burned but as everyone says you have to start somewhere and being a tradie it appears to be a good way to get some more equity behind me to purchase more IP's.
Thanks for your responses
You could purchase an 'option' with the same clause, which can also act as a deposit (if specified) but you have more control ie, a long option period, set price, etc.
Options give you and only you the right to purchase the property at an agreed price within the specified option period. If you choose not to continue with purchase, the option expires and the owner is free to sell to anyone (they will keep the option fee though).
Seek some professional advice on this, if it seems the right way to go.
AS, once the contract is exchanged it is the purchaser who has the 5 days cooling off only, the vendor cannot recind the contract after exchange. The worst that can happen is that the vendor fails to settle on the appointed date then your solictor needs to serve a notice to complete (and then follow due process in order to get specific performance).
It may also pay to get the solicitor to put a caveat on the property (if you are concerned).
Speak to your solicitor as to how to frame your offer & the risks.
freelance wrote:You could purchase an 'option' with the same clause, which can also act as a deposit (if specified) but you have more control ie, a long option period, set price, etc.Options give you and only you the right to purchase the property at an agreed price within the specified option period. If you choose not to continue with purchase, the option expires and the owner is free to sell to anyone (they will keep the option fee though).
When you have an option on a property, can you apply to subdivide during the option time without the owner's knowledge? ie get all the nuts and bolts done before purchase? or does this need to be done once purchased.
Hi RubberduckyAU,
An option is an agreement between you and the seller. I'm positive you can negotiate subdivisions within the option clause, but I doubt you are able to do so without the owners consent (without him knowing). It will remain the owners property until you 'exercise' the option.
I'll just write up a quick example:
You find a property with development potential, the vendor is looking to sell at $150,000. You however, decide to offer the vendor a 24 month option to purchase the property at $200,000 (Let's assume that the market is trending upwards at the time and you want to make the deal sound fair for both parties as you may take up to 2 years to purchase it).
You state in the option clause that you will be granted entry during the 24 month option period to do all the appropriate work – the subdivision. So in this case you have plenty of time to complete the job and save money since you're not paying for any holding costs. Once the job is completed you can exercise the option at any time you like during the specified 2 year period.
If, however, the deal turns sour and your subdivision will not produce your expected profit (which will need to cover the sale price of $200,000) you can simply walk away from the deal by letting your option 'expire'. In this case you lose the option fee which may be a few thousand dollars and the cost for the subdivision. The vendor keeps everything and you walk away a little broke but a lot smarter.
If you're interested in options I highly recommend you get some thorough educational material and seek competent advice on the topic as there are many avenues with options.
Hi Guys,
Been a little busy with work and have realised that i didn't thank any one for their responses so "Thanks guys and girls'
appreciate the info. The property ended up getting a cash offer so lost out on this one……. next!Cheers
AirstrikeToo bad you missed out Airstrike,
I too missed out on a good deal mid last year (I even had the contract signed, but pulled out due to "fear" STUPID me!) if you ever need an option contract, I have a template that can be used and I can legally place caveats too (Im in Perth).Does the money you put down for the option become part of the agreed purchase price or is extra? Is there a formula to work out the percentage of $ for an option?
Option fee is what you negotiate. Generally approx 1-5k or higher if you need to sweeten the deal. If you negotiate the option fee to be part of the purchase price then that is a bonus as option fee is generally extra and is non refundable if you do not go ahead with a Contract of Sale (as apposed to a deposit on a Contract of Sale).
No formula, option fee is just what you negotiate, though some people will insist 10 – 20% but that is not true!
Hi Azalia,
as they say another bus is just around the corner.
I would like a copy of that option template and its good to hear from another Perthite. I'll pm you my email address.
Cheers
Azalia wrote:Too bad you missed out Airstrike,
I too missed out on a good deal mid last year (I even had the contract signed, but pulled out due to "fear" STUPID me!) if you ever need an option contract, I have a template that can be used and I can legally place caveats too (Im in Perth).Hi, Azalia;
I am interested in your option idea, would you be able to send me a copy of this option contract? My email is [email protected]
Many thanks for your advise!
Hi Azalia,
Could you also send the template to me too? my email is [email protected]
Will also send you a PM about it. Thanks a lot for your help!Viv
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