Advice Needed

[jon2378]

Hi Guys,

Sorry in advance for the long story!

A a couple months ago I was looking at this property up for auction. In my head I had valued it about 750k, it went to auction (which I didn't attend) highest bid was 550k and it was passed it. Following the auction I approached the agent and he said they're looking for offers in the range of 650-700k, with offers closing in a few days.

I put in an unconditional offer of 625k. Apparently they received 3 offers, 1 below and 1 above mine. The one above was for 'just over 700k', but it wasn't a 'clean offer' - i assumed this meant it was subject to sale of their existing house. Agent told me I could have it if i went 700k.

I ended up signing a contract for 670k, with the hope the vendor would drop the price to either accept my offer or a counter-offer closer to mine. Vendor didn't budge and counter-offered 700k and agent expressed that she wasn't going to budge even 1k.

So i ended up signing the contract for 700k. On the last day of the cooling off period, the council finally got back to me and told me that the property was actually only approved for commercial use, and not for residential use (even though the vendor had been living in it for year!). I had brought this issue about the use up with the agent before, and he swore that it was residential. The water bill and council rates were all charged at residential rates, so I wonder why that was the case...

Anyway, i decided to exercise my option to cool off, and made the offer subject to getting council approval for it to be used as residential. The agent tried to stop me from doing this, saying the vendor was having cold feet and if I cooled off they'd take it off the market.

I didn't believe the agent and still cooled off. Unfortunately, the vendor took it off the market and the agent said that was the end of it. I spoke to the agent again the next day, and he indicated it was no longer on the market.

So i don't know what to do now. I've looked for similar property since, but none tick all the boxes that this one did. It's perfect for my intended use and I feel it's likely to have decent capital growth in the future.

What should I do now? I've considered perhaps sending a letter to the owner, asking if they would be interested in a private sale, and saying that I would be prepared to offer 700k? - they might be interested as it avoids agent fees, so they're probably a bit better off?

What would you do in my position? The vendor has been looking to downsize for some time and it's been on the market a couple times in the last few years, but for prices over 900k, which were unrealistic.

Should i approach the vendor? Should i move on? What to do?

 

[alexlee]

I don't get it. If you're going to to it as residential, why would still want it? If you're going to use it as commercial and you were happy with the price, why didn't you just go through with it?

 

[Propertunity]

I'd move on. You still have not addressed the commercial zoning issue if you wanted to live there.

You / the vendor cannot avoid a commission claim by the agent, even if you approach the vendor yourself.

 

[jon2378]

I'd move on. You still have not addressed the commercial zoning issue if you wanted to live there.

You / the vendor cannot avoid a commission claim by the agent, even if you approach the vendor yourself.

It isn't commercially zoned.

It's a very unique property located in the CBD, with a mixed zoning that allows for commercial/residential/retail etc. use.

I guess a further question is how difficult is it to get the approved use changed from commercial to residential? The zoning allows both, but i don't really know the process.

And why would we be unable to avoid a commission claim? Surely, as some months have elapsed and circumstances have changed, the agent wouldn't be entitled to a commission?

 

[jon2378]

I don't get it. If you're going to to it as residential, why would still want it? If you're going to use it as commercial and you were happy with the price, why didn't you just go through with it?

I would use it as residential.

I thought it was perfectly reasonable to request the contract be made subject to council approval, given that it was advertised as a residential property only, and the agent had told me on multiple occasions, despite my doubts, that it was approved for residential use.

Had i know the vendor would pull out, I would have gone through with it, however I thought the agent was saying that purely so I didn't back out of the sale and he would still get his commission.

 

[Scott No Mates]

Had i know the vendor would pull out, I would have gone through with it, however I thought the agent was saying that purely so I didn't back out of the sale and he would still get his commission.

What? An honest agent?

 

[wylie]

It isn't commercially zoned.

It's a very unique property located in the CBD, with a mixed zoning that allows for commercial/residential/retail etc. use.

I guess a further question is how difficult is it to get the approved use changed from commercial to residential? The zoning allows both, but i don't really know the process.

And why would we be unable to avoid a commission claim? Surely, as some months have elapsed and circumstances have changed, the agent wouldn't be entitled to a commission?

I'm confused as to zoning and why you didn't go ahead if it is a unique property, but regardless of that, what is stopping you from asking if you can buy it under the same conditions as your previous offer?

And you will not be able to avoid the commission really. The agent "introduced" you to the property. There has been talk lately that makes me wonder about this, but in the past it was pretty clear that the agent who introduced you was entitled and the vendor couldn't just unlist it and sell it to someone introduced by the agent.

I've never really known just how this goes now, how it may have changed if the agent is not "actively" involved in the sale after it is taken off the market.

If it was that easy, everyone would do it. List the place, ditch the agent and sell to someone the agent introduced... .

And some people say agents have no ethics...

 

[Aaron_C]

It is very common for CBD property to be 'mixed use' so it can be used for both resi and commercial purposes.....doesn't really impact on the valuation.

 

[jon2378]

It is very common for CBD property to be 'mixed use' so it can be used for both resi and commercial purposes.....doesn't really impact on the valuation.

Yes, it is zoned 'City Zone' which allows resi and commercial use. Are you saying that because the zoning allows both, even though the 'current approved use' is commercial, that alone shouldn't be prohibitive to purchasing it from a lending perspective?

My bank lender had concerns over it. I had tried to get a loan at 80% LVR, but they said if it was currently approved for commercial use only, i'd have to pay a higher interest rate and be required to have 70% LVR. He said he required documentation from the council showing it's approval for residential use in order to lend at 80% LVR?

 

[jon2378]

I'm confused as to zoning and why you didn't go ahead if it is a unique property, but regardless of that, what is stopping you from asking if you can buy it under the same conditions as your previous offer?

I tried that a few days after i exercised the cooling off, through the agent, and the vendor said they no longer wanted to sell. I couldn't get more information than that out of the agent.

If the property is off the market, then surely the vendor can sell it privately? Perhaps a certain period of time needs to elapse before it can be sold privately without being liable to pay the agent fees?

An agent can't legally be entitled to a commission for a house they introduced to someone, who 10 years later decided to finally purchase it?

 

[Aaron_C]

If it's being configured as commercial then you will need a commercial loan.

 

[wylie]

An agent can't legally be entitled to a commission for a house they introduced to someone, who 10 years later decided to finally purchase it?

... but you aren't talking ten years, are you?