All Topics / Help Needed! / Investor wanting extended settlement on our Property

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  • Profile photo of flippingkazzaflippingkazza
    Member
    @flippingkazza
    Join Date: 2011
    Post Count: 3

    We are currently selling our house on Sydneys North Shore NSW. We have been on the market most of the year with a break in the middle of 2 months. We received 2 offers earlier this year higher than our now asking price. The house is only 100 sq/m and on sloping land.

    We have received 3 offers from an investor and are trying to make sense of them. Our property is for sale by private treaty with a for sale price. For privacy reasons I wont disclose the price, so I will refer to the price difference. We have told the agent to communicate to buyers that we would be happy to rent it back for a while until we buy again.

    The offers we have received are:

    ·  $25k below asking price: settlement period – 6 month delay + standard 6 weeks settlement

    ·  $35k below asking price: settlement period – 3 month delay + standard 6 weeks settlement

    ·  $45k below asking price: settlement period – standard 6 weeks settlement

     Then he also made the cooment "We can arrange interim tenant at the market rate if the $25k below sale proce option is selected with 6 month delay + 6 week settlement "

    The question I have is why is the buyer wanting such a "delay"? Why not ask for a 8 month settlement? They have said they will exchange immediently and have deposit of 5% ready. Also, does the above comment mean that they expect us to pay them rent before settlement?

    I think if we accept a very extended delay then we will sell in a poor market and dont know what kind of market we will buy back into.

    Is this a usual tactic of buyers? What advantage do these offers give the buyer? Is it so they can hold onto the bulk of the money for as long as possible to invest elsewhere?

    I'm quite confused so any advise would be greatly appreciated!!

    Thanks

    Profile photo of Mick CMick C
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    @shape
    Join Date: 2010
    Post Count: 1,099

    The only time i have seen a buyer wanting to delay settlement in this manner is because his finance is not yet up to date/approved- Ie meaning he doesn’t have enough deposit to “settle” the funds– so need time to save up.

    Regards
    Michael

    Mick C | Shape Home Loans
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    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    They are probably wanting to control the property without having to pay the interest on a loan. It may be worth 10% more in 6 months or even more and they could want to try and resell it before they settle.

    Unless they specified otherwise you would be getting any rent.

    But, becareful. accepting 5% deposit and then what if the other party doesn’t settle? you keep the deposit and have to resell it again. If it is a company purchaser make sure you get personal guarantees, and even then they may have no assets.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of flippingkazzaflippingkazza
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    @flippingkazza
    Join Date: 2011
    Post Count: 3
    Shape wrote:
    The only time i have seen a buyer wanting to delay settlement in this manner is because his finance is not yet up to date/approved- Ie meaning he doesn't have enough deposit to "settle" the funds– so need time to save up. Regards Michael

    Thanks. I dont think finance is an issue as they are also planning to but a house up the street.

    Profile photo of flippingkazzaflippingkazza
    Member
    @flippingkazza
    Join Date: 2011
    Post Count: 3
    Terryw wrote:
    They are probably wanting to control the property without having to pay the interest on a loan. It may be worth 10% more in 6 months or even more and they could want to try and resell it before they settle. Unless they specified otherwise you would be getting any rent. But, becareful. accepting 5% deposit and then what if the other party doesn't settle? you keep the deposit and have to resell it again. If it is a company purchaser make sure you get personal guarantees, and even then they may have no assets.

    Thats interesting about the "control" as this investor does want to call all the shots and they are all in his interest with no regard for us. I thought he implied that we would have to pay him rent to stay in the property until it settled. I've heard of an investor wanting an extended 8 month settlement on the condition he could live there rent free for the 8 months!!

    I doubt the house will go up 10% any time soon. They will save interest on the loan, but wouldnt that be a tax deduction anyway?

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    Interest would still be a cost even if deductible.

    Remember it is legally your property until you settle so you would normally receive any rent.

    Maybe they are also trying to buy up neighbouring properties too? development?

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

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of crustycrusty
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    @crusty
    Join Date: 2010
    Post Count: 127

     I know I am not the sharpest knife but why would you agree  to  pay rent to live in your own house to some-one who doesnt own it yet.  Its your house till settlement..

    Profile photo of miikemiike
    Participant
    @miike
    Join Date: 2008
    Post Count: 111

    You may need to think outside the box on this one.

    If the purchaser is a property dealer or developer, they’re intention is purely investment and return in a short period of time.

    So the following are possible scenarios:
    – The purchaser may be seeking DA prior to settlement and on-sell.
    – The purchaser may be seeking DA prior to settlement with building contracts in place to start on settlement.
    – The purchaser may be speculating the increase of value, thus locking in the purchase price to gain the capital growth and on sell before settlement.

    Think about what an investor can do with your property, and that will give you an insight.

    Miike

    Profile photo of maree_bradrossmaree_bradross
    Member
    @maree_bradross
    Join Date: 2007
    Post Count: 401

    Yes sounds like they are planning a structural reno and using the time to hit the ground running on settlement

    mattnz
    Participant
    @mattnz
    Join Date: 2007
    Post Count: 574

    What does a 100 sqm house sell for in your street and what does a 200 sqm house sell for in your street? If the answers reveal a large difference between the two figures, then the others are likely to be correct about a structural reno.

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