Howdy,
forum virgin so please be gentle
Currently we are negotiating on price for our first IP. we initially put in an offer well below the asking price, which was refused but the agent said the vendor realizes the asking price is too high and is keen to sell and wishes to continue the conversation (what ever that means). at the moment we have slightly increased the offer and are waiting to hear back.
I would like to hear some thoughts as to what terms i could negotiate along with the price, as i assume we will get a counter offer back from the vendor. Some of the terms i have been thinking of are:
- Early access. The kitchen is a bit dated and we are considering replacing it, however i have been told that any property changes are illegal until settlement. is this true? otherwise we may want early access to allow our property manager to show prospective tenants through prior to settlement
- dependent on bank valuation, we would like to keep the right to withdraw if a bank valuation came in lower than the agreed price
- vendor finance. The vendor is selling to retire to the coast and although i haven't asked may be in a position to consider this. is it possible to receive better terms through vendor finance than we could get with the bank? (getting finance from the bank shouldn't be a problem for us)
are there others terms that others can suggest or comment on the above?
cheers,
Ben
PS the property is in NSW
Hi there Ben,
Negotiations on a deal is about realising what is in the deal .. and creating a win-win situation for BOTH parties. In other words .. your effort would be placed on making the deal as easy for the vendor to take and work with .. so you can make your money and do your efforts on the property.
People tend to confuse adjusted terms with actual negotiation. And thats not really a negotiation. Negotiation remains to actually LISTEN to what the vendors needs are and try to reflect that best in your stated offer.
In this case your basket of knowledge extends to the idea that the vendor is retiring to the coast. In that case the most likely scenario unless he's super rich is that he's gonna need the money he gets from the sale to fund his next proposition. Which sort of puts a dampener on your idea of vendor terms. Vendor terms may ask for a bit more on top of the interest component, but sale actually takes place when the FULL amount is paid. So your retiree may be waiting a LONG time until you refinance and he gets paid. That just doesnt work.
Subject to finance clauses are very standard in the industry. If you have ANY doubts about getting finance .. whether its due to income levels or valuations … include the clause in your offer that the offer is subject to finance. With competing offers .. it reduces the surety of settling the deal versus an unconditional (finance ok) offer, so it may come across as less attractive. Keep this in mind if you are competing for a deal.
I dont know enough about the status of Early Access in NSW or its legality to make a proper comment on the subject. But having done it several times before. I know i should …..
Good luck with your Negotiations.
There is nothing illegal about working on the property before settlement, but this carries a bit of risk as if the property doesn't settle then you may have wasted your time and money.
Subject to finance clauses are pretty rare in NSW. Usually people just extend the cooling off period to 10 days so they can get finance organsed. You could do it subject to valuation but you would need to be specific.
Vendor finance wouldn't work if the vendor has finance on the property as they would have to discharge the mortgage. They could probably give you early possession with you paying in installments with title in the vendor's name. Or you could borrow a deposit off them – say pay 80% now an the remainder in x years. But a bank is unlikely to want to lend to you if this is in place.
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
Thanks for your replies,Just wondering what options could be available. I will definitely bring up the early access when I meet with my solicitor.
After talking with family members involved in real estate, they have told me that vendors will only accept verbally (offer acceptance) if the purchasee is waiting on finance, while still continuing market the property untill contracts exchange. Finance shouldn't be a problem though (touch wood)
You won't have a contract until the point of exchange. Before that time you could have an oral agreement but it wouldn't be binding. This means they could sell to someone else, even if you have put down a 'holding deposit'.
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
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