Contract of Sale questions

[gprp]

Gents ,

Concentrate on the steak my friend and the peas won't matter

Thank you vey much for your advice.

I'm afraid the wording is irrelevant at present . It will be someone who would agree to sign any statement without any hesitation.

This is a seller's market at present.

The property range was 440-500K . I offered 500K without subject to finance , but with my bulding and pest inspection clause .The agent specified that offers are in high 400Ks .
I've got a call from RA today - sold for $454,000 .

Do I miss a complete picture ? I don't see any reason why RA would lie to me .
I am still unable to understand why he's specified a high 400K range and accepted the offer...

Kind Regards
gprp

 

[AlmostBob]

should be
I dont see any reason why the REA wouldn't lie
REA is employed by the vendor to the benefit of the vendor, if the vendor at the rea's suggestion or against the REA suggestion thought the 454k was good NOW, then that is.
in real estate speach 454 > halfway 400 -500 ergo High 400
views of the river (looks over the sewage plant)
fixer-upper (condemned notice)
Huge potential (condemned notice)
development site (condemned notice)
delightful bedroom (fit a baby crib)
STCA (never gonna happen)
interesting (falling down)
historic (condemned notice, falling down & not allowed to repair)

the REA has got his 4% Right Now, and can add another SOLD sticker to his ad

picture this property in your mind

interesting historic property 3 delightful bedrooms views of the river this fixer-upper has Huge potential as a development site STCA​

 

[Propertunity]

This is a seller's market at present.

Yes it is.

The property range was 440-500K . I offered 500K

With respect......that is insane

Well take your learings, don't dilly dally around when you find a place you want to buy. Don't offer top of a price range either. Know what the property is worth before you start making offers (clauses or no)

Better outcome next, I trust.

 

[Perp]

I think it's odd that the vendor would take $454K over $500K subject to B&P. I can only conclude that they *have* to have a confirmed sale very quickly to avoid foreclosure or something, or the B&P would have been a nightmare.

I wish that "seller's market" would hurry up and return to Brisbane commercial property so that I can get a half-decent valuation and buy again...

 

[gprp]

Hi Guys ,

Sorry , for the confusion . It was 11:30AM and I was really tired

The sale price is $554,000 .

54K more than the top range !!!!

I have Residex report for this property - evaluation is $486,000

I was able to offer $520,000 for this house , however it looks like there is no point to mess around .

I've always adhered to idea to give a lower offer and to increase it gradually , however I think it's useless taking account the situation at present.

Is it madness or what ???

 

[Propertunity]

My only comment is that when the market gets hot, like it is, I think some sales prices genuinely surprise the REAs.

I know a couple of fairly honest REAs and they've sold properties many $10K's over what they thought was a top price. I know we all like to beat up on REAs for underquoting - fair enough too - but I don't think it is deserved in every case.

Market price is determined by a willing but not anxious buyer, buying off a willing but not anxious seller. Outside of this, if you get an anxious buyer - they will overpay just like an anxious seller will sell cheap.

 

[AlmostBob]

$554 VERY high 400s, If Vendor and REA were hoping for hi4, I'd jump too,
still dont trust agents

 

[Dazz]

So the air-con worked OK then.

 

[willair]

I was able to offer $520,000 for this house , however it looks like there is no point to mess around .

I've always adhered to idea to give a lower offer and to increase it gradually , however I think it's useless taking account the situation at present.

Is it madness or what ???

Nah,just make one offer and walk away,who knows yours might be the only one on the table,and the vendors may have had a gutfull of each other and just want out,sometimes you just have too step back and have a look from other peoples eyes..willair..

 

[gprp]

So the air-con worked OK then

LOL

Anyway I've put a statement " air-con is in good working order "

Nah,just make one offer and walk away,who knows yours might be the only one on the table,and the vendors may have had a gutfull of each other and just want out,sometimes you just have too step back and have a look from other peoples eyes

Off cause I will ...

My only comment is that when the market gets hot, like it is, I think some sales prices genuinely surprise the REAs.

I know a couple of fairly honest REAs and they've sold properties many $10K's over what they thought was a top price. I know we all like to beat up on REAs for underquoting - fair enough too - but I don't think it is deserved in every case.

Market price is determined by a willing but not anxious buyer, buying off a willing but not anxious seller. Outside of this, if you get an anxious buyer - they will overpay just like an anxious seller will sell cheap.

Agree , but $54K over the top ???? It means people don't give a s..t about real market value or any other factors . For instance, what is the difference between 2009 and 2007 ? I was able to negotiate the price in 2007 , pointless nowadays .

BR
gprp

 

[Propertunity]

Agree , but $54K over the top ???? It means people don't give a s..t about real market value or any other factors .

gprp, value in determined in this case by the purchaser. People have all sorts of emotional reasons for buying a property. As investors we tend to look only at the numbers. But we are only a sub-set of people who purchase property. So you are quite right - some ppl could not give a toss about the 'real market value'. If they have the money and they want it, then they just buy it - like any other commodity. Price may not even make the top 10 for them.

For instance, what is the difference between 2009 and 2007 ? I was able to negotiate the price in 2007 , pointless nowadays .

You can still negotiate the price in 2009, however, it is a sellers market in a lot of places around the nation. The difference is that in 2007 it was a buyers market. You just have to adjust your strategy (incl negotiating techniques) for the time of the cycle we are in. There is no use complaining that, what worked 2 years ago, does not work now.

 

[gprp]

Hi Propertunity ,

Thank you for your comments .

value in determined in this case by the purchaser. People have all sorts of emotional reasons for buying a property. As investors we tend to look only at the numbers. But we are only a sub-set of people who purchase property. So you are quite right - some ppl could not give a toss about the 'real market value'. If they have the money and they want it, then they just buy it - like any other commodity. Price may not even make the top 10 for them.

I agree with every word . You're absolutely right ; this is the situation and we can't change it .

You can still negotiate the price in 2009, however, it is a sellers market in a lot of places around the nation. The difference is that in 2007 it was a buyers market. You just have to adjust your strategy (incl negotiating techniques) for the time of the cycle we are in. There is no use complaining that, what worked 2 years ago, does not work now.

There is no doubt that my negotiating techniques don't work , otherwise I would say " "never underestimate the power of denial"

My strategy is to make an offer offer without subject to finance to attract the vendor taking into account that after pest and building inspection the offer becomes unconditional .
My perception is that seller who's willing to purchase another property is always at risk due to " subject to finance" .
I assumed that an offer without subject to finance will compensate for my pest and building inspection statement .

I've made 3 offers recently .

1) Price range: $500-550K . I've offered $540K . Sale price $570K
2) Price range: $440-500K. I've offered $500K . Sale price $554K
3) Price range: $400-486 . Residex value $443K. I've offered $456 .
Sale price $478K.

All the above mentioned properties are located in middle-range average North Eastern Suburbs in Melbourne .


It appears that absence of subject to finance doesn't make any differences .

What would you suggest in terms of negotiation techniques

Kind Regards
gprp

 

[Perp]

Do you have the entire purchase price as cash in the bank? If not, then I don't understand how you think the B&P clause will save you from the following eventualities:

1) B&P clause probably gives you a week, but your lender is going to take longer - possibly quite a lot longer - to give you an unconditional approval.

2) Property doesn't value up - particularly problematic in a hot market. You want to buy for $550K on a 90% lend. What if the property's value comes in at $500K, and the bank will only lend 90% of that, or $450K? Do you have the $100K that you'll need to put in? And even if you have it, do you want to pay $50K over val?

3) Lender wants to do a walk-through (rather than desktop) valuation. Vendor refuses access for this purpose - and is within his rights to refuse. This doesn't give you a right to get out of the contract, because you didn't make it a condition of the contract.

There are a bunch of other potential problems that I foresee if you're relying on your B&P to cover your finance issues.

 

[Dazz]

but $54K over the top ???? It means people don't give a s..t about real market value or any other factors

There's so much you just don't know about the transaction and the Vendor's motivation.

For all you know, the successful Purchaser might be the registered proprietor from next door, who also owns the lot on the other side as well, and is planning a large development and that was the key linking site to amalgamate all of his/her plans......and was quite willing to go way over 600K to secure it.

You didn't know it, but you were never in the hunt. They probbaly thought 554K was a complete bargain as it allows them to get their multi million dollar development off the ground. Happens all the time.

That is but just one likely scenario.

 

[schmick]

2) Property doesn't value up - particularly problematic in a hot market. You want to buy for $550K on a 90% lend. What if the property's value comes in at $500K, and the bank will only lend 90% of that, or $450K? Do you have the $100K that you'll need to put in? And even if you have it, do you want to pay $50K over val?

Oz, how often does this happen? This statement has made me question whether or not i should participate in Auctions...

 

[Perp]

Oz, how often does this happen? This statement has made me question whether or not i should participate in Auctions...

Somewhere between "not infrequently" and "occasionally".

Look, it's certainly not an everyday occurrence, and if you're only seeking to borrow 80%, you can usually "get around" a lower valuation by paying LMI, but it's certainly quite possible that you could be stuck having to buy a property in this scenario.

I know that auctions are popular in Victoria, but for this and many other reasons, I have not been an auction buyer, and can't imagine that I would buy at auction in the future.

 

[Propertunity]

Hi Propertunity , Thank you for your comments
What would you suggest in terms of negotiation techniques

What TPFKAD & Ozperp have said is entirely correct.

In a hot market, which we are clearly in, you cannot rely on published sales data or reports that use it (Residex and the like) to give you a good indicator of the market worth of a property via the comparable sales method. The data is 2 - 3 months old by the time it is reported and collected and made available, and the market has moved on from there.

You need either one or some of the following:
1. Access to "agent advised" sales data - in RP Data, or PDS Live or similar (exchanged but not settled sales)
2. If not 1. - access to the agents who are reporting the sales
3. Your own knowledge of the sales because you are going to every auction, in constant contact with the selling agents etc
4. An agreement with a buyers agent with all of the above

As for negotiation techniques, that is a whole 'nother topic. Start with doing some searches in here on the forum.

 

[Spectre]

Just thinking - re the air conditioning issues and whether it will or wont break etc. Im not talking about what this contract was about just the general question about the insurance.

Dont some agents offer a homebuyers insurance which covers them in the first year? Think its through Lumleys Insurance for some reason. then you dont need all those clauses and can get on with the transaction.

I'm pretty sure years ago we listed a place with an agent who offered it. In qld anyway.

 

[gprp]

Thnx you for your replies .

Perhaps I should explain my situation .
Yes , if the property price is up to 500K , I have 25% in cash . therefore I am not concerned if there is a shortfall in bank's evaluation .
I do use " subject to finance clause " if the price is $500K -540K .

In addition , I have an official pre approval letter from St George , hence it won't take me longer to get the finance. As you know , banking system utilizes the same database to check your credit . Westpac and St. George ( the same entity) are very difficult to deal with ,therefore preapproval from St. George gives you a solid base and confidence in obtaining finance.

Regarding banking valuation - bank takes into account the same RP data and Residex reports +-10% ( trust me , this is how they work) , then they test your borrowing power by applying a safety margin of present interest
rate +2% .

I tend not to deal with auctions because at the moment the prices went far beyond any banking valuation .

In regard to the $554K property - Propertunity was absolutely right .
I've spoken with the agent today and he said that vendor was amazed that someone decided to offer that price . This is simply an emotional factor and nothing else . No numbers , development potential etc

I do know the area and the average pricing , however how do you expect to bargain if so many people are willing to offer ridiculously high prices ?
Off cause Residex will be-out-of date

Guys, regarding the insurance policy raised by Spectre .

Do you have any information if it's available in VIC ?

Kind Regards
George

 

[Spectre]

actually I always found westpac easier to deal with than st g