Canberra Property Negotiations

[Billy_Bokkie]

Hi Everyone!

I have been floating around these forums for quite a while taking in the vast amount of experience and attempting to apply this knowledge to my own property investment philosophy and practices.

I currently own four IP's in both Brisbane and Melbourne and I am just about to buy another property in Canberra. I submitted an offer today and it has been accepted with a small modification to the settlement date as the owners are moving into a retirement home in April. I was more than happy to reduce the settlement from ninety days to sixty days to accommodate this.

My wife received a phone call tis evening from the Real Estate Agent saying the letter of offer (not contract) had been accepted, however during the period of the property being unconditional, once contracts are signed (21 Days to cover finance and valuations) the agent told her that the property would be noted as under offer, however offers on the property could still be received and acted upon.

If it was Melbourne or Brisbane I would have laughed it off and told them what to do with there conditions, but I thought I would just check with this forum if this is common practice in Canberra? The problem I foresee with this is that it leaves me open to be gazumped! or for the agent in the next 21 days to use my offer as leverage. This will leave me with valuations bills and a rather annoyed bank to appease.

Any help or advice would be greatly appreciated......

 

[Perp]

Yes, laws vary between states, but surely a contract is a contract wherever it is signed! I would agree you could be vulnerable whilst it's only a letter of offer involved, but once both parties are in a conditional contract, unless one of the conditions is "unless the vendor gets a better offer", I can't see how you could be gazumped. Make sure there is no such clause in the contract; if there is, cross it out!

 

[mystery]

Billy,

We have just agreed on a price to purchase a property in Queanbeyan, .... and the same thing applies in NSW as it does in the ACT, ... until contracts are exchanged agents can present further offers to the vendor. If it's a hot market it can be a nervous time as higher offers can be accepted and you can be gazumped.

Once the special conditions are met like building & pest inspections and finance is formally approved , .. only then can the contracts be exchanged between solicitors. It is my understanding that at this point the property is safe from gazumpers..... and it progresses towards settlement.

IMO, .. ACT and NSW have an outdated contract system, .... I much prefer they way other states and territories operate.

Martin

 

[Billy_Bokkie]

Thanks Tracey!

Your advice is greatly appreciated. After spending the day doing DD it has come to light that the agent is attempting to do some creative (dodgey) selling . The REA has stated that the Vendors are happy with the letter of offer and the conditions which were set, however he wants me to complete the conditional clauses of the letter of offer, prior to exchanging contracts.

So from my understanding the REA only wants to sign on an unconditional contract once I have met my conditions which was only (21 Days finance due to valuations required on other properties). In that time they will keep the open for inspections continuing (and hence use my offer as leverage). But they promise me (by phone) that they will state the property is under offer but wont take any further offers .

Unfortunately, their creativeness has now backfired on them. Our letter of offer expires tomorrow and if I do not receive a signed vendor contract with the conditions as stipulated on the letter of offer, the deal is null in-void and they will receive a further letter of offer minus $10,000 for my troubles. I am sure that the REA will have difficulty in explaining this to the Vendor as the Vendors have bought elsewhere and need a quick sale.

I love being an Investor as I have the choice and power to take and leave a property at will. Once again, I would like to thank you Tracey for your help and reiterate what a great forum this is for anyone wanting to learn about property.
Kind Regards,

Billy

 

[Billy_Bokkie]

Martin,

Thanks for the heads up! I have spent most of the day looking into this on the ACT Fair Trading Website (which lacks any real detail) and asking a number of people in Canberra and it appears that I have come to the wrong conclusion, regarding my response to Tracey.

What a ridiculous way to conduct property transactionsWhy would I go to all of the trouble of getting a number of valuations (and the cost if the loan did not proceed) to confirm that the bank will lend me the appropriate amount (as a standard condition of most contracts around oz), to be guzumped.

I don't want to get on my soap box, but surely the ACT and NSW cant think this is fair to either the buyer or seller (i.e. Buyer and Vendor Originally agree on a set price and then prior to formal approval, buyer offers less than asking price).

Thanks Martin for your advice, it is greatly appreciated and it clarifies in a couple of sentences what the REA tried to do in thirty minutes on the phone.
Kind Regards,

Billy

 

[Perp]

Wow, learn something new every day.

I've done a bit of research and my understanding is that essentially there's no such thing as a conditional contract for purchase of property in NSW/ACT! As you say, what a bizarre way of doing things. I'm glad that if I do decide to venture into this property market, I'm now aware of this.

Does anybody know if it's possible to "create" a scenario that has the same effect as a conditional contract, by, for example, making it a condition of your offer that the property be removed from the market for a period of 21 days? And therefore if the vendor accepts your offer, they've agreed to take the property off the market for that time?

 

[mystery]

Billy & Tracey

We are fortunate with the agent we are dealing with, ... she has put under offer on the listing, but a one liner down the bottom of the page stating that "An acceptable offer has been made but contracts have not yet exchanged".

We have dealt with her before and she won't actively seek further offers, it's only if someone is determined to put an offer forward will she be obligated to present it to the vendor.

I can probably understand now why Sydney has so many auctions when it's in a boom property time, ... apart from the possibility of getting a higher sale price it does away with this gazumping situation. Could you imagine trying to secure a purchase in a hot market with shortage of listings, .... it would be one big gazump-athon ...

I think the trick is to pretty much have your finance pre-approved if possible, .. this also speeds up the process. Also ... it's common for deposit bonds to be used instead of cash deposits.

Not sure if this helps you, ... thought I'd share.

Martin

 

[Firsthomelooker]

It's not common but you can make a contract subject to finance in ACT & NSW. There is a standard law society annexure for this.

You can also sign up subject to the standard five day or negotiate an extended ten day cooling off period and get your finance approved during this time.