All Topics / Help Needed! / Contractual Offer

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  • Profile photo of IntrigueIntrigue
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    @intrigue
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    Hello, I am seeking some assistance regarding the submission of a formal offer in writing (contract).

    I have been looking at a home that is a deceased estate and thus the agent has advised all offers to be by way of contract. No problem however I am a careful planner and am mindful that once I submit the signed contractual offer the seller may then sign and we are part of a binding contract….

    Therefore I must make sure that I not only advise the agent on my price offer but also my conditions of offer! I am a little nervous as I am pretty sure most people and most agents here just do standard contract with only standard conditions ie building and pest and finance. Thus my conditions are likely to be a little more complicated. I am thinking about going to a solicitor but dont want to pay lots of money for clauses on a contract that I dont know if is likely to be accepted.. What do you do?

    I also need to advise that the home is old and thus I want to have appropriate time after agreeing on a price to arrange for various trade professionals to go in and provide advice and estimates on repair costs.. If there is a more serious issue than I can see then I would like to be able to terminate the contract with my deposit refunded.

    Below is what I am preparing to send to the agent…. thought and advise pleeeease

    I would like to submit a contractual offer for the sum of x for property located x
     The contract must include the chattels currently within the home (fridge, washing machine, air conditioning units, water tank, …………….) The contract must be subject to a 30day due diligence period in order to ensure the buyers complete satisfaction of the results from the following;  Building and pest inspection  Structural integrity inspection  Roof integrity inspection  Council approval checks  Title search The buyer will advise the seller of complete satisfaction prior to 5pm on the 30th day from contract date. If complete satisfaction is not obtained the buyer reserves the right to terminate this contract with a full refund of deposit payable. The contract is subject to finance 30 days. (to co-inside with the due diligence period) Settlement to be 30 days post the expiry of due diligence period I.e. 60days from contract date. Offer expires at  …. 

    Profile photo of xdrewxdrew
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    @xdrew
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    Intrigue wrote:

    Below is what I am preparing to send to the agent…. thought and advise pleeeease

    I would like to submit a contractual offer for the sum of x for property located x
     The contract must include the chattels currently within the home (fridge, washing machine, air conditioning units, water tank, …………….) The contract must be subject to a 30day due diligence period in order to ensure the buyers complete satisfaction of the results from the following;  Building and pest inspection  Structural integrity inspection  Roof integrity inspection  Council approval checks  Title search The buyer will advise the seller of complete satisfaction prior to 5pm on the 30th day from contract date. If complete satisfaction is not obtained the buyer reserves the right to terminate this contract with a full refund of deposit payable. The contract is subject to finance 30 days. (to co-inside with the due diligence period) Settlement to be 30 days post the expiry of due diligence period I.e. 60days from contract date. Offer expires at  …. 

    Grab a formal Sale of Land contract paper or a photocopy from either an agent or your local state authority. Nothing wrong with writing it up on a blank piece of paper or a notepad aside from the legalese at the end of most compiled sale of property documents that protects you from litigation. There is a reason that most agents use them. They save their own backsides. You should too.

    Profile photo of Scott No MatesScott No Mates
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    Intrigue,

    this is a deceased estate, it is likely that there are several interested parties who stand to inherit the funds from the sale of the property ie KISS.
    It is likely that the furnishings will be sold separately from the property or the family may wish these chattels, hence it may be unlikely to get your hands on these items.
    A/C, & watertanks are part of the building ie they cannot be removed without causing damage, so it is unlikely that they will not go with the sale.
    If the property is in a desireable area, it is unlikely that the property won't go to auction hence an unconditional sale or you may need to put your best foot forward with a S66W waiving any cooling off period.
    Why do you need 30 days for your due diligence, all of these can be done in the normal timeframe of 5 days?

    Xdrew, it is generally the vendor's solicitor who prepares the contract of sale not the agent.

    Profile photo of xdrewxdrew
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    Scott No Mates wrote:

    Xdrew, it is generally the vendor's solicitor who prepares the contract of sale not the agent.

    The  Contract of Sale document is a document provided by the state real estate licensing authority for the usage by solicitors and agents respectively. It is the agents responsibility for making sure the offer is represented appropriately and all elements of the offer are represented on contract.

    How the offer is submitted is really up to the purchaser.

    Profile photo of Dan42Dan42
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    @dan42
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    Like Scott said, I'm not sure why you need so long to do your inspections. Here in SA we only get 2 days cooling off!

    If I was the vendor, there is no way I would grant a 30 day due diligence period. The vendor would be essentially turning away other prospective buyers while you did your due diligence. If, at the end of your 30 days you decide not to proceed, the vendor is back to square one and has wasted a month.

    Council checks and title searches have to be handed over before cooling off is entered into here in South Australia. I'm not sure of the procedures in other states. So if you don't like what yoiu see in the searches, you can always cool off under normal terms.

    Profile photo of IntrigueIntrigue
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    @intrigue
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    Thanks to both of you.

    To answer a couple of your questions Scott No Mates, the property has been on the market for over 6 months. It is in the hands of the public trustee. It has already had 4 price reductions and the agent tells me there is no intention to ever go to auction (not sure why but thats what was said). I am not feeling a great deal of urgency and thus do not see need for any waiving of cooling off etc.

    I was allowing 30 days because in north QLD here things can move a little slowly and I could not be sure that I could get all inspections done in 5 days. It can take weeks to get someone to do the inspections!

    Profile photo of xdrewxdrew
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    I've revised my thoughts on how you should submit it. Submit it as a page of conditions rather than within the contract. That way you can just refer to the submitted conditions attached. Make sure you cover all things you want included.

    However all the 30 days extra searching for Titles and Building Inspections is really extending safety for yourself to the terms of waffle. The standard time for a Building Inspection or Pest Inspection is a week. Thats it .. thats all you need.

    All due diligence on the property should be done before signing. Any people you want to bring through for any costs estimating should be done pre signing and not after.

    The vendor is seeking from you as the purchaser the security of a signed and deposit paid deal. He doesnt care at the end of it whether you want to bring reindeer through the property after exchange of contract. Once you got it its yours. But he does care for the idea of getting from the agent a full ten percent deposit (indicating that he is actually proceding with the contract) and a short series of terms that can be worked out quickly. The vendor wants the sale unconditional as soon as possible. Thats when he gets his cash.

    Profile photo of IntrigueIntrigue
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    @intrigue
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    Thanks Xdrew but I am a bit confused.

    One one had you say — "Submit it as a page of conditions rather than within the contract. That way you can just refer to the submitted conditions attached. Make sure you cover all things you want included"

    and then in the next line you suggest my conditions to be 'waffle'. So whats the items to include and whats waffle to be left out?  (Title search out cause I know that's normal, was just trying to get a list of what people believe should be in to protect a buyer).

    I am submitting lower than asking price offer, I have no idea if they are likely to accept. I do not want to be running around wasting the agents time with a variety of inspections getting quotes on replacing the floor coverings, fixing the roof, painting, plus the inspections of stumps, brick work etc if the seller has no intention of accepting my offer. What a waste of everyones time and money. Thus I thought if I offered based on the condition I believe the home to be in but have a due dilegence then I can do all the inspections etc and providing there are no scares then we are done deal. If there are scares I have protection to avoid buying a lemon…. Not a good idea?

    Profile photo of xdrewxdrew
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    I'll be a little more explicit.

    Submit an offer with the agent .. and a separate set of conditions for what u need. Your requirements for 30days for building inspections and additionals is excess. At 30 days the vendor is expecting his contract to already be unconditional, in fact .. the contract should become unconditional in less than two weeks. The vendor wants the sale to happen.

    Your conditions on what should or should not be included is ENTIRELY valid. All fixtures and fittings should be requested in the contract of sale. Anything additional .. any special features (fountain, garden pots, fridge) that you want to stay should be mentioned in the contract.

    Title search and validation of ownership is what the time between contract and exchange of contracts is all about. Its about making sure the names are valid, that the owner is .. who the owner says he is, any details of how to deal with cheques for distribution of payment. Leave it to the solicitiors/conveyancers to sort that out. (in QLD it will just be a solicitor)

    The whole set of inspections that you want to do for costings on various items should be done by yourself. They are not inclusive as part of the sale and shouldnt be factored in as such. As i stated before .. you can drive reindeer through the property once contracts have been exchanged. However there is no reason that you cant drag a tape measure through for area measurements during your final inspection (you are entitled to a final inspection a week before settlement) and get the costs from that. The costs for anything you want to do to the property shouldnt be factored into the final sale. The price you pay the vendor should be determined on what the property in its current state is worth to you.

    Australian property is dealt with on reasonable concessional terms. In most states they have some form of cooling off period so if you feel you got sold a lemon .. you can back out (forfeiting a portion the deposit). Its quite reasonable, and there are lots of times where it shapes up as not being what was wanted or needed. But in most other countries the terms are more like .. if you bought it .. you paid for it. So for future reference .. I'd make a suggestion that if you are going to purchase anything .. do your due dilligence on it first. You happen to be in a country where you have flexibility. But for purchasing .. you should be acting like you dont need to use it.

    Profile photo of Scott No MatesScott No Mates
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    xdrew wrote:
    The  Contract of Sale document is a document provided by the state real estate licensing authority for the usage by solicitors and agents respectively. It is the agents responsibility for making sure the offer is represented appropriately and all elements of the offer are represented on contract.

    How the offer is submitted is really up to the purchaser.

    AFAIK in NSW it has normally been the Vendor's Solicitor who prepares the contract of sale and ensures that all information required for the transfer of land has been included (ie Contract, schedules, sewer diagram, survey (if required), S149 Certificate etc). Yes, it is a Law Society of NSW/REI document however the solicitor is best placed to create any special conditions which may be relevant and binding upon the parties.

    I do agree that the purchaser can submit the conditions they feel appropriate, it is up to the vendor & their advisers to agree or reject those conditions.

    Profile photo of IntrigueIntrigue
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    @intrigue
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    The thing that worries me here in QLD is that it is not the vendors solicitor that prepares the contract of sale it is the vendors realestate agent (an no disrespect but their legal knowledge is often limited and their desire for commission can outweigh ensuring all parties understand their options). The agent wants me to submit a signed contract offer (that he/she prepares) the vendor if happy with it signs it an we are in a binding agreement without any solicitor having set eyes on it…

    Profile photo of IntrigueIntrigue
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    @intrigue
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    Another thing playing on my mind….

    I know an investor, he is under 25yrs of age and owns in excess of 25 properties. He once made a comment to me that I thought very interesting.

    'the negotiations begin after the contract is signed'

    Do we have to do things the way they have always been done just because that's what the seller wants or what the agent is familiar with?

    Profile photo of Dan42Dan42
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    Intrigue wrote:
    Do we have to do things the way they have always been done just because that's what the seller wants or what the agent is familiar with?

    The issue here is the seller holds all the cards. You can ask for all sorts of conditions, but if the seller says no, then that's the end of it.

    It is in your favour that the property has been on the market fora long time, but it doesn't necessarily mean that the vendor is anxious or desperate to sell. I'm not sure how desperate they would have to be to allow a 30 day due diligence period, and effectively hand control to the purchaser. Pretty desperate, I would think…

    Profile photo of IntrigueIntrigue
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    @intrigue
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    I appreciate all of your comments, it has given me much to ponder over the day. Thank you for your time and interest.

    I have done some digging around and find that some use all sorts of unusual clauses that arent quantifiable effectively giving them the appropriate out if need be. (I believe in the old days people just used the finance clause but it seems solicitors have fixed that loop).

    The more I think though the more I believe in a due diligence period (agreed I could shorten it a little). I actually cant work out why this is not used in residential contracts more often, after all that is what people are doing so why disguise it in a finance or building and pest clause and risk the fact you will be called on it. (sure we all do due diligence before contract but I can bet your level of detail and concern changes once the contract is signed)

    The vendor is a public trustee so I am sure they know all too well about due dilegence and understand the challenges they face selling an old home. Surely a conditional contract is better than no contract, particularly if there is no one looking at the property. And is there really any difference between a due dilegence and a finance clause (both mean the seller does not know its a concrete deal until a certain date).

    And just the same as they may not be desperate to sell (although I am sure they are sick of it being on their books for over 6 months) I am not desperate to buy. I only want to buy if the property and the yield stack up, otherwise happy to walk away. (I actually believe I may be able to purchase the home in 6 months time for less – that our market at the moment) So why would I bend over to satisfy the needs of the seller. I believe I hold just as many cards as he.. takes both parties to do the deal! he is nothing without me… ha ha ha ha ha

    Is this not true?

    I dont mean to be obnoxious, I realise that my challenging comments can sometimes be perceived as arrogant (suck eggs type) but I wish to explain I need to challenge to learn (havent yet found a better way). I am grateful for those who challenge my thoughts and allow me to understand different perspectives.

    Profile photo of dtrumpdtrump
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    Intrigue wrote:
    …thus the agent has advised all offers to be by way of contract.

    I have had agents say this to me when i was going through the purchasing process (not for deceased estates). Are you sure this is an actual requirement when making the offer? It could just as equally be the agent trying to suss out to see if you are a 'serious' buyer or not…can you give some pushback and say you will write up the contract and sign once you have formed an agreement?

    Profile photo of beediebeedie
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    Intrigue wrote:
    Another thing playing on my mind….

    I know an investor, he is under 25yrs of age and owns in excess of 25 properties. He once made a comment to me that I thought very interesting.

    'the negotiations begin after the contract is signed'

    Do we have to do things the way they have always been done just because that's what the seller wants or what the agent is familiar with?

    Spot on. best post in this thread. ..  and you are on the right track Intrigue ….. I always approach each deal along these lines and negotiate after contract is signed………. think about it.…………  i see nothing wrong with what you propose…………go for it and good luck………..
     
    As Steve says………….success comes from doing things differently

    Profile photo of beediebeedie
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    Personally , would never accept a verbal offer  or some something scribbled on some piece of paper ….
    We make sure our agents understand that ..some still don't get it………… if you are a  serious buyer then put it on a contract …..

    Profile photo of IntrigueIntrigue
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    Thanks for the support Beedie, I was beginning to think I was a bit crazy

    Profile photo of TerrywTerryw
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    Before submitting any offer you should get your solicitor to review the contract and to draft addtional clauses – what are the special conditions the vendor wants?

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of IntrigueIntrigue
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    @intrigue
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    Yer, thats what's so hard when you are dealing with RE agents, who knows? They say nothing!

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