I was browsing around the OTHER property investing forum and came about something interesting.
There was this guy who made an offer with 3 “subject to†conditions: solicitor approval, BPI and finance.The general response from a few “experienced†investors was that having 3 conditions makes for a weak offer and that a single “solicitor approval†clause is sufficient.
Do you agree and is that what most people here practise as well ?
Bennido,
It only weakens your offer because the vendor may think “nope too hard” and will accept the offer of another bidder who has no “subject to” clauses or at most one, maybe two.
Obviously the more “subject to” clauses, the more the vendor will be fearful of the sale falling through, and as such may reject it to avoid the headache.
Furthermore, may I add one very interesting point, that if (in Victoria) you take your Section 32 to a solicitor to peruse (in place of a conveyancer) you forefeit the right of claiming the “cooling off period”.
Cheers,
Jo
Monopoly,
So do you only use the “subject to solicitor approval” too ?
No Bennido I don’t.
I tend to like to take both the Contract of Sale and the Section 32 to whoever I approach at the same time.
Subject to solicitor approval (in Victoria) is useless, but most people (thankfully for the vendors peace of mind) are unaware of this.
For most straight-out purchases, I tend to favour a conveyancer, but if there are say for instance easements or other suspect complications I will go to my solicitor and don’t take the Section 32, or if I do then it is with the knowledge that I am forefeiting my right to withdraw (not that I ever would anyway).
Jo
bennido,
I don’t use any of those clauses anymore. I just don’t sign anything until i have all the checks done. By the time I sign, it’s a fait accompli. It is usually me suggesting the waiving of the cooling-off period, as I can’t be bothered with the wait.
Oops. forgot to mention.. the way it works with me is, offer and acceptance, and a verbal agreement by the REA not to gazump, and their knowledge that I am serious about the purchase is the way I do these transactions. Just trust on both sides- that I will purchase, and that they won’t gazump.
But i just won’t sign a contract until I’m ready to- and vendors have been ok with that.
kay henry
Originally posted by kay henry:a verbal agreement by the REA not to gazump, and their knowledge that I am serious about the purchase is the way I do these transactions. Just trust on both sides- that I will purchase, and that they won’t gazump.
Spoken like a true investor!!! Must try that trust thing, see how it stacks up against money….I believe it talks louder!!! As for the gazumping, bet if the REA was instructed by the vendor to take the higher offer, all the trust in the world ain’t going to work. Maybe no one else was interested at the time in the same property, or yours was just the highest bid; I’d tend to think it was the latter though!!! After all, people who bid market value or above tend not to get gazumped; yep that’s my problem; thanks for helping me see the light!!! Hopefully, next time I sell I’ll encounter generous buyers like you!!!
Really comes down to the conditions – i’ve had clients recently purchase at a lesser price as their contract was subject to finance and building / pest – the competing contracts where subject to same plus sale of existing property.
my clients offer was obviously ‘cleaner’ and therefore more acceptable despite being a lesser price.
kay, interesting concept – imho, you have nothing until you sign something – and i have to say, your faith in the integrity of sellers and their real estate agents is without a doubt fantastic – no doubt this has worked for you as you wouldn’t say so otherwise.
call me crazy, (mmm crazy brahms…) but if its not in writing it aint worth the paper its not written on….
Exactly right Brahms,
An offer is useless and of absolutely no value whatsoever, and as a seller I would pay little (if any) heed of such a claim in my REA came to me with such a notion.
As for the gazumping, as an outsider looking in, it obviously did not occur because either one of two factors (a) it was the only offer, and or (b) it was the highest offer. Call me cynical, but all that “air fairy” stuff in the business of real estate, and where money is involved; it won’t work.
I challenge anyone to show me a REA who will work in the best interest of the buyer to such an extent that they will forgoe a higher commission, simply because of (not even an official) but a promise to make an offer. Pleazzzzz !!!!
Jo
As we know, realtors ‘should’ take all offers to their vendors, its their legal responsibility – no matter how much they like/dislike the purchasing parties. Kay, what happens if someone makes a better/cleaner offer?
Gazumping is such a NSW thing – Qld and Vic contracts are pretty effective at minimising this, as we happily sign contracts ‘subject to’. Really don’t find it an issue here in balmy Qld (24 in the shade today)
The difference in commission on $420k vs $430k is ZIP – the difference on $420k and $0 is significant….agents will position a cleaner contract over a not so clean contract every day of the week ending in a ‘y’.
As such Jo, I accept the challenge, a ‘sure deal’ at $10k less is better for the realtor (and most possibly the vendor!!!) – its a commercial decision when compared to extended settlements/conditions whereby other interested parties drift off and find other places to the detriment of securing secondary offers and dwindling impact of marketing exposure.
Agents look at contracts not personalities – not always true, but hey, its a commercial transaction.
If i ever sell a place, yep, keep the verbals to the tea room – put it in ink or its in the sink…
Originally posted by brahms:As such Jo, I accept the challenge, a ‘sure deal’ at $10k less is better for the realtor (and most possibly the vendor!!!) – its a commercial decision when compared to extended settlements/conditions whereby other interested parties drift off and find other places to the detriment of securing secondary offers and dwindling impact of marketing exposure.
Yes Brahms I agree, as sure deal at $10K less is definitely better for all concerned, especially if it is the ONLY offer being brought to the table!!! Maybe I should have clarified that challenge a bit better. “In the event of more than just one offer…..and/or ANY other offers presented have no “subject to’s”….”
As a vendor, of course, if I really need to sell, I will accept the best deal I can get, either the one with little or no “subject to’s” at a lesser price and/or it is the one and only offer received.
But at the end of the day, regardless of how good all this appears, if there is no signature on the page to legitimize the deal/offer, no consideration will be given; they are wasting my time and their own!!!
I concur.
cheers brahms
Are there any Real Estate Agents here that would like to share their views / experiences on “subject to” conditions and how it affects the sale process ?
Hi Bennido,
Im not an RE agent but what do you expect them to tell you differently???
Its pretty simple really….the less “subject to” clauses the more appealing your offer will be. Its not rocket science!!!
Pepper
I just came across a new Subject To condition in a post by Jetdollar.
It was for a owner occupied sale and he included a “Subject to Tenant @ $160pw”. I assume that means that the sale will only proceed if the agent can find a tenant at that rent.
This is something I have never heard of and quite creative in my opinion. Is it just me being ignorant ? Is such a condition common and agents are receptive to it ?
hi bennido,
in answer to your question, i haven’t ever had a ‘subject to tennant at $x per week’ clause in my dealings with contracts (brisbane, qld).
However i think it’s a great idea for investors (perhaps not neccissarily for us REA) as a way of protecting your interests in the property transaction. I have had offers though which stipulate that the existing tennant must be renting the property on the settlement date.
I asked some of my other colleagues if they had similar experince in the “subject to $x dollars per week’clause but none had. Whilst it’s not common i think it’s a great idea and it’ll test out whether the agent is committed to selling the property – get them working harder for you.
cheers,
e xHi everyone
As a REA i would consider it very un profesional to submit anything less than a written contract to my vendor, yes we all would like an unconditional contract but the reality is there is usually some legitimate reason for clauses,hower they should be specific and not general.
regards
garrytas [cigar][email protected] Always have cashflow positive Tasmanian commercial properties
availableOriginally posted by emcdonald:
However i think it’s a great idea for investors (perhaps not neccissarily for us REA) as a way of protecting your interests in the property transaction. I have had offers though which stipulate that the existing tennant must be renting the property on the settlement date.I asked some of my other colleagues if they had similar experince in the “subject to $x dollars per week’clause but none had. Whilst it’s not common i think it’s a great idea and it’ll test out whether the agent is committed to selling the property – get them working harder for you.
Yeah, I think its a great idea too. I’ll definitely try to put it in when I buy my next IP without an existing tenant. Its really good when dealing with “slick” agents who try to overquote the expected rental when asked by the buyer.
When I look at a property, I’ll do my research and have a pretty good idea for the expected rental beforehand. But I still like to ask the agent and see if he tries to pull a fast one on me … [cap]
Bennido,
Try and remember, there are SELLING agents and RENTAL property managers in RE; two different divisions.
In defence of Selling REAs….the one acting in the sale of the property is not necessarily going to be versed in the “rental potential” of the property, and hence will often give you an estimated figure, which of course may be way above/below the median range for rentals in the area (for similar type property).
If the property is currently tenanted, or even was recently so, ask the selling agent to check ALL rental history available to their agency, ie. how long rented at that price, what was it rented at before, and get him/her to speak to someone in their “rental department” to give a more accurate indication of what rental return that type of property could expect to achieve. Get the selling agent to arm him/herself with that info BEFORE you start grilling them and possibly risk falsely (or unfairly) accusing them of being “slick”.
Jo
Hi Jo,
You are absolutely right on your point about the Sales and Rental being 2 separate entities.
However, the more up front agents – when asked about the expected rent – will give me what he thinks is the expected rent, but will add that he/she will go and confirm the figure with the Rental department and get back to me.
Whereas, the other type of REA will just pluck an attractive rental figure out of thin air and never bother to go check with his Rental team.
All I am saying is that having such a clause added will ensure that the REA has done his due diligence when providing expected rental figures to the buyer.
Hi there
am reasonably new to this game and one thing I would like to become more confident in is the negotiation process. Is there a fixed proceedure or standard offer ie say offer 10000K less or does it depend on the individual property.
thanks penne
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