Hi all,
I a newbie property investor and had just a puzzling experience last week. My first time to make an offer.
After negotiation, I finally offered $265,000 to a 3BR house in the West Brisbane/Ipswich area. It was advertised as $279,000.
The real estate agent asked me to proceed to their office, and she prepared the standard REIQ contract. Even if other details (e.g. lot/plan, title encumbrances, present use, etc.) are not filled in, she asked me to sign it. She often said "this is only an offer". But I realised that if I signed it, and the seller signed it, the contract will be binding, and I could not add any special conditions /clauses.
I consulted my solicitor and he suggested that I added special conditions on:
Special condition 1. – "This Contract is subject to and conditional upon the Buyer obtaining a satisfactory building compliance search from Ipswich City Council within 21 days from the date of the Contract…."
Special Condition 2 . "This Contract is subject to and conditional upon the Buyer obtaining a satisfactory Mining search from the Department of Natural Resources and Mines within 21 days from the date of the Contract…."
The agent is not happy and said that these are not necessary. Nevertheless, she asked me come back after 2 days, and she said that she will prepare the document for me to sign, with those special conditions.
Thus on Friday, I signed the offer, despite that the cubby house was excluded. Then, on supposedly the contract date (Monday), the agent told me that the seller did not accept my offer. The agent is saying that because I have "too many conditions."
I am not sure what happened here. Are those conditions really too much? (I just followed what the solicitor advised!).
I will appreciate any advise or comments.
Thanks,
apanaHi Apana,
While you may think that your clauses are fair (and to a degree, they are), If the Seller were to sign your contract they would be effectively taking their property off the market for the next 21 days while they wait for you to accept or decline due to what ever your searches find. If you were to decline, this puts a a degree of doubt into the minds of future purchasers. What was wrong with it? Why did the contract fall over? Perhaps a seven day clause would have been better received by the Seller and your Lawyer could get of his arse and do some work (Time is of the essence in contract law – an issue most Lawyers have no concept of)As real estate agents we dislike it when Lawyers get involved in drawing up contracts – we often call them deal breakers. Lets analyse your conditions:-
Special condition 1. – "This Contract is subject to and conditional upon the Buyer obtaining a satisfactory building compliance search from Ipswich City Council within 21 days from the date of the Contract…."
The standard contract has provision for a Building and Pest inspection and any qualified Inspector would be able to tell if the home were built to council specifications. As to compliance, I would suggest that not many home will comply with council plans. This part of the condition is an easy out for any Solicitor. If the property that you were buying is relatively new or in a newish estate, I would not advise my Seller to accept this condition.
Special Condition 2 . "This Contract is subject to and conditional upon the Buyer obtaining a satisfactory Mining search from the Department of Natural Resources and Mines within 21 days from the date of the Contract…."
Being in or around Ipswich, I understand that this is quite common due to the many underground mines in the area, however again I am sure that this search could be done quicker than 21 days if your Lawyer sent someone into City Hall to do the search and not try to do it from his or her desk. A little service goes a long way.In summing up, a $279,000 property in Ipswich is going to have a lot of interest so any Seller is going to take the cleanest contract that they can. As you are a first time Buyer I can emperthise with your caution, perhaps a better way to approach the situation may be to do the searches yourself.
Jon
Hi there
the only comment I would make is about the time to have the conditions complied with – most contracts in QLD are 30 day contracts – I don't think a vendor would appreciate waiting 21 days to have a matter go ahead. The searches requested can be done in a far shorter period and perhaps 14 days would be more viable.If there are any unapproved structures they will be picked up by the first condition – the second would only be required if there was mining in the area – if neither apply to the property – that may be another reason for the Vendor rejecting the offer.
thanks
Must admit i see about a dozen purchase contracts a week and very few of them are 30 day contracts.
In most cases these days the Banks and lenders are so busy finance approval and issue of mortgage documents would not take place in 14 days and 21 days in now the accepted norm.
Normal settlements are moving out to 42 days.
Richard Taylor | Australia's leading private lender
Hi all,
Richard states,
Normal settlements are moving out to 42 days.32 contracts waiting settlement, all 30 day and most unconditional. Find another Broker or Bank that wants your business, if you start to give them 21 days they will take 21 days next step will be 30 days or better still Pre approved applicants will have first bite of the cherry when negotiating to purchase.
Jon
Thank you all for your insightful and helpful comments.
Apana
Hate to discuss agree Jon
61 Qld Finance deals on the go 57 of them went for 21 days finance. PMI / Gemworth taking on average 2/4 days for approval and most lenders out to 4 days for mortgage documents. (The Big 4 now are 4 days on average from approval – documentation with NAB and Anz out to 6 days)
The real estate agency I own has 37 deals currently going through and over 60% are 42 day contracts. 7 of the others are Commercial deals and DD is over a month.
Sometimes i think you have to live in the real world to understand the market.
Richard Taylor | Australia's leading private lender
Richard we don't have to agree on everything, we mearly have to see each others point of view.
I believe that I live in the same real world as you do but see the situation through my Vendors eyes. They do not want to wait (and disrupt their marketing campaign) for 21 days for any bank to get around to giving a prospective Purchaser an answer as to availability of finance or not. (note: The bank still has 14 days to get their documentation together).
If banks were to insist on 21 day finance clauses, I would begin to advise my Vendors to only accept offers from Purchasers who can show a pre-approval letter from a bank or lending institution. This way it only has to go through valuation (7 days tops).
This may seem harsh from a Brokers perspective, but from my experience Purchasers really should be better prepared when they go out to buy a property.
Jon
Jon Chown wrote:Richard we don't have to agree on everything, we mearly have to see each others point of view.I believe that I live in the same real world as you do but see the situation through my Vendors eyes. They do not want to wait (and disrupt their marketing campaign) for 21 days for any bank to get around to giving a prospective Purchaser an answer as to availability of finance or not. (note: The bank still has 14 days to get their documentation together).
If banks were to insist on 21 day finance clauses, I would begin to advise my Vendors to only accept offers from Purchasers who can show a pre-approval letter from a bank or lending institution. This way it only has to go through valuation (7 days tops).
This may seem harsh from a Brokers perspective, but from my experience Purchasers really should be better prepared when they go out to buy a property.
Jon
Although I am always extremely prepared as a purchaser, I have had last minute hassles with lenders in the past.
I'm glad I'm not purchasing through you – the agents I've used in the past have worked for both vendor and purchaser. Who knows – I may be the one providing your next commission.Hi Redleaves,
I think that you missunderstand my stance on behalf ot the Vendor (who, after all, pays my commission).
You may well be prepared, unfortunately don't mould everyone in your vein as my experience tells me different. There may well be unforseen problems, a good agent will obtain an extension of time for those hassles to be sorted out, but I stand by my statement give the Bank 21 days and they will soon want 30 days. In all contracts, time is the essence.
Why does everthing have to go the way the Purchaser wants it? Ask your self, If you were selling, would you want me to let a maybe purchaser tie up your property for 21 days? If the answer is truly 'yes' then all I can say is that you are an exceptional person and there are not many like you left in this world.
Jon
Jon Chown wrote:Hi Redleaves,I think that you missunderstand my stance on behalf ot the Vendor (who, after all, pays my commission).
Jon
I've never understood the above statement from Real estate Agents, …. sure the vendor pays your commission, but who pays the vendor, …. yep … the buyer. I'm not sure sales agents ever think of this in dealing with purchasers. Without the buyer, … the vendor has no money to pay your commission.
Martin
Oh dear Martin, how many buyers do you think we have for each property which we can only sell once. Don't try to read words into my statements. The Department of Fair Trading would take a dim view if I were to adopt your sentiments. I am under contract to work for the Seller. Get used to it
Jon
Jon Chown wrote:Oh dear MartinYou appear to be a very condescending person Jon. Of course I realise you work for the vendor and the law dictates this, but it doesn't make it any less frustrating at times.That is the point I was making. I was not attacking you personally, I was expressing my views as I am entitled to do in an open forum such as this. As you say .. "get used to it"
Martin
When I know the banks are busy or the clients are interestate I ask for 21 days. It's possible sometimes in a week but that is rare. I work with all parties to make sure they're happy and a happy medium can be found. Yes, if ONLY my clients all got pre-approvals, but they don't, they come screaming in with a signed contract from 3 days ago – and finance extensions cost purchasers money through solicitors charging them, so it's no wonder banks are asking for 21 days. Anyway in this real world you just take it as it comes. Nearly all of my files with the banks have been 'escalated' through all of the departments, it would be a massive relief to everybody to have 42 day settlements and 21 day finance clauses but r/e agents seem to like to get paid quicker and vendors are usually obligated elsewhere so what can you do? Take as it comes honey's…
i have to admit i would like to see 42 day contracts the norm perhaps a clause to complete earlier if both parties are ready. Too many times I have bought houses and there have been holdups with banks and solicitors….dont expect much out of them on a Friday! Solicitors flippantly say 'we'll ask for an extension' and couldnt give a rats that i'm paying interest on those extra days.
and apana, i agree with above. if you are keen on this property, check it out before putting in the offer. And of course there is always more bargaining power if the contract is not subject to finance.
Jon Chown wrote:Oh dear Martin, how many buyers do you think we have for each property which we can only sell once. Don't try to read words into my statements. The Department of Fair Trading would take a dim view if I were to adopt your sentiments. I am under contract to work for the Seller. Get used to itJon
Very True Jon and something I always keep in mind when dealing with a REA, they represent the vendor and wnat to get the "best" deal/price they can
PS: with our Brisbane property I think it was 14 days for Building and Pest, Finance was approved (but that never means much, you still have hoops to jump through), we had other clauses and were purchasing through a HDT (which made the agent baulk, he'd never dealt with anything other than a purchasers name and thoiugh it was impossible), but realised we had a good buy so made the deal attractive in other ways (we had competition from a potential owner occupier and several other investors as well).
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