We are considering the purchase of a property that will require us to spend about $60K on “rejuvenationâ€.
Our intention is to agree to the vendors asking price in return for an extended settlement period and access so that we can complete most of the work prior to settlement.How can we protect our investment in the property, assuming the worst case of delayed or failed settlement?
I have previously posted this elsewhere and the only response was “to go see a solicitorâ€.
I am certain that with all the active investors who subscribe to this forum someone has come across this situation before and has a solution. On the other hand, do you just trust the vendor to be an ethical and honourable person?
Any suggestions etc would be really appreciated.
The location of the property is important.
Robert Bou-Hamdan
Mortgage AdviserLocation is Regional Victoria
Sorry, not my area.
In NSW, once the exchange takes place and the cooling off period expires (if any), the law is on the purchaser’s side. Any work you do prior to settlement should not be lost if the vendor tries to pull out as the Court will enforce the sale.
If you cannot go through with the purchase, things become unclear. You would definately need a solicitor for this to determine whether you still acquire an interest in the land.
Sorry I could not help more. Where are the Mexicans???
Robert Bou-Hamdan
Mortgage AdviserThanks Robert
It seems like we should be in NSW – from what I have gleaned of the rules here it all seems to be in the vendors favour! Thanks again for your interest.
John
Yes talk to a solicitor. You cold put various clauses in the contract, but these may make it unattractive to the vendors.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Kenyaboy,
In the end the option of talking to a solicitor may not be as horrific as you seem to anticipate! Having said this, we have now completed two such rejuvination projects during early access without any complications.
Laws do differ between states, certainly I would be UNWILLING to carry out extra work before the Contract became unconditional.
The idea of contract clauses which would ask for a refund of monies spent if the contract fell over due to the vendor’s fault, seems to have merit, but you’d need to check the validity of any such clause with your Solicitor. In the end a few hundred $ to protect your funds not only in this instance, but also in any future similar transactions would seem to be well spent.
Best of luck….
RosePink
Hi Kenyaboy,
Why not sit down and calculate what your holding costs would be. If it is economic, discount your offer to the Vendor by this amount and offer them a really short and therefore attractive settlement period.
That way, you spend the same amount of money as you did previously but gain the surety of owning the place, and therefore remove the risk of which you ask about, altogether.
How much value do you place on this risk ?? Your offer may be structured accordingly – therefore eliminating the need to consultant a solicitor as you shall hold legal title over the property.
EG : Asking price $ 250 K
Offer 1 : $ 250 K with a 6 month sett period.
Offer 2 : $ 241 K with a 1 month sett period.Both are pretty much the same time / dollar value, but the second offer has removed the risk that you speak of. You don’t need permission from anyone after sett. and no-one can ‘steal your rejuvenation’.
Whaddayareckon ??
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Hi Guys
Having attended a number of seminars where the “experts†constantly talk about access to the property prior to settlement (a version of flipping I guess) I’m amazed that no one seems to have considered the prospect of a failed or delayed settlement and how to protect themselves.
RosePink, I am not worried about the cost of using a solicitor (ha!) I just did not want to pay to reinvent the wheel. I have a concern as to whether or not a vendor would agree to pay the rejuvenation costs if the deal fell over.
Dazzling, I had considered the option you suggest, however we are at the point with the deal where the vendor will not negotiate any further on the asking price – it is at the maximum that we consider the property to be worth. So I was trying to find a way to achieve the “win/win†for both sides. The vendor has rejected the offer of a short settlement at discount price.
If this continues much longer we will walk away – there is always another deal around the corner.
Thanks for the interest and suggestions, it is always good to get another opinion.
Even though I cannot contribute much to most of the topics on the various forums, I gain a lot from reading the posts of other contributors
Kenyaboy
Hi kenyaboy i too am not all taht experienced myself however when you asked before if you should trust the vendor to be an hounourable person, i offer these words of advice when it comes to finacial matters don’t trust no one unless its in writing and remember the more you leave to chance the higher the chance that something will go wrong . so mate if its not in writing get them to put it in writing if they refuse to don’t do bussines with em. hope this helps. happy easter all
Hi Kenyaboy,
Before you start to spent any money on the property, just register a caviate over the title. This would make sure thatit can not be sold to a third party!Anyone agree
Bob the chippy
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