Contract Clauses

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From: Anonymous


I want to put on offer on a new unit and want to put a clause in the contract that allows me to pull out if I can't get finance.

But I don't know how to do this. Do I just write it in, or should I go to a solicitor and get them to do it? or can the agent do it?

Can anyone please offer some advice? Thank you in advance.

Tony
 
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Reply: 1
From: Nigel W


Hi Anonymous Tony

No. I won't offer you advice because it would be negligent of me to do so based on the skimpy instructions you have provided here.

Sorry if that sounds callous but that's the way it is.

What I suggest you do is carefully read the general conditions to the standard contract which is used in your state or territory (your real estate agent will have this).

By way of example, in Queensland there is provision for the contract to be "subject to finance" by you completing certain items in the contract schedule - namely the financier, the amount of finance and the date by which you must get your finance and advise the seller - the "finance date". You will probably find the same applies in your jurisdiction.

Again, this isn't intended to be a criticism, but you REALLY need to understand the tool which you're using - namely the purchase contract. By way of contrast, you wouldn't try pick up a chainsaw and start hacking away without figuring out how the safety features work. You should also see your solicitor to get an explanation of any issues you don't understand - and keep pestering him or her until they give you a satisfactory answer!

Don't feel too badly though - this seems to be a common issue for people. And whilst there are many great books (Jan's included) which explain the theories of property investing at a "macro" level there seems to be a bit of a gap for a lot of people in how that theory translates into reality when they're sitting across the desk from an agent being asked to sign on the dotted line.

At the risk of blowing my own trumpet (and you know they say self-praise is no recommendation) I'm writing a book which explains the contract and conveyancing process in an easy to read and fun format. [Apologies if this should be in caveat emptor]. If you like I can keep you posted when its ready.

Good luck

N.
 
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Reply: 2
From: Geoff Whitfield


Tony,

Forgive me if I've got this wrong. Are you talking about two different things?

I'm not much up on these things, but I thought an offer is not binding. Even after it's been accepted (I've had an accepted offer turned down before exchange, without penalty to the vendor).

My impression was that an offer can be made subject to financing (and inspections). But that's not a contract.

If you put in an offer, it's accepted, and you get finance approved, exchange of contracts can go ahead. That's when it gets difficult to change if you don't get finance. You may be liable to perhaps 10% of the sale price if you don't proceed. Is this the stage you're taliking about?
 
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Reply: 2.1
From: Kristine .


Hi, Tony

As Nigel pointed out, industry pre-printed contracts such as used by REIQ or REIV members etc, make provision for the usual 'Conditions of Sale' and there is plenty of space for other "Special Conditions".

Finance clauses usually require $amount, Bank or other supplier, and date by which the Contract may be avoided by relying upon the finance clause.

Geoff, an offer made in writing becomes an enforceable contract once accepted by the vendor, and any / all conditions are satisfied.

Any Agent worth their salt is not going to take an offer to the Vendor unless the offer is in writing, preferably on contracts whether conditional or unconditional, with some form of deposit accompanying the offer.

If Tony spends an hour with his solicitor or conveyancer prior to going out property hunting it will be money very well spent. But keep in mind that, in Victoria, the three day cooling off period is forfeit should Tony take a contract to the solicitor and then change his mind if there are no other conditions to rely on.

It's most important not to offer to buy anything unless you are confident that you can complete the deal. You wouldn't bid at an auction without confirmation of finance, so why approach private sales with any less caution or preparation

The Real Estate Institutes have lots of hand outs, and the principals of the agencies, if not the salespeople, will be able to give you advice on common practices.

Tony, it sounds as you are doing a deal directly with the builder. If that is so, take the contract, Section 32 (if in Vic) and any other information to your solicitor first. The Bank won't put much time into it unless they see signed contracts, so ask your Solicitor to request a four week finance clause.

Remember, even if you don't go ahead and get your full deposit back, the solicitor will charge you for time, the Bank will have various fees including valuation fees, maybe survey charges etc So be progressive and courageous but tread slowly

Sorry if I sound like your Mother, but you sounded kinda nervous. If this is your first purchase, get as much help as you need and take as much time as you need.

Good luck

Kristine
 
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