Conditional Offer- Maintaining Confidentiality

[Joe D]

Hypothetical Question – Conditional Offers

Consider two neighbouring properties for sale each with different RE agents. Individually, the properties are average. However, if both were owned the possibility exists for creation of a “third and possibly fourth” property with boundary changes without loss of either house.

Assuming the DD works out okay, how can one structure offers of purchase on each of the properties such that :

1.each offer is conditional on acceptance of the offer on the other property, and;
2.maintaining confidentiality such that each neighbour isn’t aware of the other arrangement lest they counter-offer too high and kill the viability of the deal.

Any suggestions?

Joe D

 

[Bmok]

Hi Joe,

Have you considered including a "Secrecy Clause" in your Contract.

This way, only the people that you are negotiating with on any particular deal are to know about the deal until everything is 'signed, sealed & delivered' - that is, after it has become unconditional with finance approval.

I'd find it hard to believe that you'd get the 1st property at a fair value if you mentioned to them that you were interested in purchasing the 2nd. This is when you'd put in the "Secrecy Clause" as part of your offer to make sure that they don't 'blab' to the 2nd seller.

You should make sure that the 1st was subject to finance and if the 2nd didn't accept your offer, then maybe (?? not sure on ethics of this) you could arrange with your broker for your finance application to fall over on the 1st so you weren't committed to an unprofitable deal.

Any thoughts on the ethics of the above.

Cheers,
Bmok

 

[paulzag]

The more obstacles in a deal, the more chances you have of tripping. I suggest you make simple offers.

I can think of ways to structure offers with some sort of Non Disclosure Agreement or secrecy clause, but you probably lack the resources to pursue a breach, and neighbours love to gossip NDA or no-NDA.

How about offering an option to purchase for $X over the next Y months? Pay them some money as option premium, tell them you are interested in floating some ideas past council but don't want to incur the expense of preparing the submission unless they are willing to sell the property. Tell them you don't think it has a huge chance of passing but what the heck it's worth trying.

If you are trying to pick up the properties below current market value (as houses) you are in for an uphill battle. But if you support your price with data that shows your price if "fair" then what do they have to lose?

You can also try sweateners like "I'll pay your legals (to a value of $X) with the local solicitor of your choice." Make sure you do that right with your state bar association, you want their solicitors acting for them, the option must be enforceable.

Regards

Paulzag
Dreamspinner

 

[Joe D]

Thanks Bmok and Paulzag + others for PMs.

Got some good thoughts there.

Upfront and open - nah!

But at least do the right deal by the first party with a few opt-out clauses if the deal doesn't come off .........

Thanks again

Joe D