Deposits

[Queen Bee]

Have never done this before in Australia so just want to make sure the process I've got in my head is correct.

I have been told by the REA that since my offer has been accepted (on Saturday), I must pay a deposit by Tuesday 5pm. $20k. I have a 5 day cooling off period, and if I change my mind within this timeframe, I must pay 0.25% of the total price I offered as a adminstration fee. This seems high!

But what I want to clarify is, if my finance falls through, or the building and pest inspection fails, do I get my deposit back in full? I have been told that I will, but will any admin fees or anything be taken out of this?

QueenBee

 

[MichaelW]

Hi Queen Bee,

So long as you have a "subject to finance" then your contract is conditional on you achieving that finance. In that case, all bets are off and full refund if you can't arrange finance. This is a nice safe clause to add to all contracts as it gives you a nice easy out if you change your mind. We can all claim "finance fell through" and walk.

You might still be up for your conveyancing etc but the 0.25% wouldn't apply.

Cheers,
Michael.

 

[Queen Bee]

OK thanks.

I do have "subject to finance".

I had a pre-approval low doc that expired last Monday, which is a pain cos I didn't see the house until after that. The Mortgage Broker is coming back around tonight, she said we have to re-apply. How long usually before we know if we have finance. We got the pre-approval in 2 days, but this is different, we actually want the finance and I spose the bank needs to get a valuation done. So how long do you think they will take?

 

[LynnH]

Queen Bee

Assuming you've bought a property in Queensland ... the 0.25% fee is the penalty for withdrawing for no reason (e.g. you've changed your mind) within the cooling off period - it's legislated, and there's nothing you can do about it.

If, on the other hand, you withdraw because the finance falls through or the building or pest inspection (assuming you have clauses in the contract for these) shows up deficiencies, you will receive 100% of your deposit back - i.e. no deduction of the 0.25%.

BTW, it is very common in Queensland to put down a deposit of $1,000 with the balance of the deposit being payable when the contract goes unconditional - REAs don't like this one little bit, since they don't then get their full commission if you decide to change your mind.

Michael mentions conveyancing costs - the conveyancing process here usually doesn't start until the contract goes unconditional, although you will have to pay your solicitor for any other work (e.g. reading the contract) s/he has done for you.

As always, what applies in your particular situation will be determined by what is written in your contract.

Cheers
LynnH

 

[Queen Bee]

OK thanks, I feel better about that now. I'm was a bit nervous about the deposit getting paid before it was all sorted but as long as if the finance falls over, we get it all back, I feel a bit calmer. We came from NZ four months ago, and I'm not yet up on all the "ins" and "outs" of buying property here.

So, if once your finance has been approved, and the pest and building inspection is OK, then does it go "unconditional"? So we have pest & building to do before Friday, finance is 14 days, so basically we would (if everything went to plan) be "unconditional" in 2 weeks? Is that correct.

 

[LynnH]

Queen Bee

Sort of ... your pest & building part becomes unconditional on Friday, and the finance part becomes unconditional in 2 weeks (from the information you have provided above).

Just be very careful if you have any problems with pest/building. Queensland RE contracts are based on 'time is of the essence'. Under the terms of the contract, you have to notify the REA in writing by 4 p.m. (if my memory serves me correctly - but check the exact time specified in your contract) on the day the pest/building expires if you intend to withdraw from the contract due to issues with pest/building reports - if the vendor's agent does not hear from you within this time frame, it is assumed that everything is OK and the contract becomes enforceable. Exactly the same situation also applies to the 'subject to finance' clause.

Cheers
LynnH

P.S. If you withdraw due to problems with pest/building, you will have to provide the REA/vendor with a copy of the relevant report.

 

[Queen Bee]

Thanks, that's good to know.

Just another quick question. What happens if say the builder finds that there is a leak behind the shower and the wall is rotted, or something like that. Does that mean that it has failed the building report, and either a: I pull out, or b: I decide that I will fix it or c: ask the Vendor to remedy it, d: ask for a discount? What is the scenario here. Who states that the building report has failed. Will it say "failed" on it, or something to that effect. Or is it up to you to decide that it has failed.

Also with regards to council permits for other structures. The REA said there was no permit for the pergola thing attached to the house out the back. I said, should they have one - and he said yes.

Then he said nobody ever gets permits, because they're so expensive. I said are there any implications in not getting permits and if they discover an unpermitted structure on your property, can you get fined.

He said no one ever gets fined. Yeh right? Or is that true. He said you're even spose to have a permit for a Bali Hut, but it's so expensive (like $3k he reckons) that nobody bothers.

Please enlighten me, is he telling me porkies. LOL.

QueenBee

 

[LynnH]

Hi Queen Bee

What happens if say the builder finds that there is a leak behind the shower and the wall is rotted, or something like that. Does that mean that it has failed the building report, and either a: I pull out, or b: I decide that I will fix it or c: ask the Vendor to remedy it, d: ask for a discount? What is the scenario here.

It will depend on the wording of the 'building inspection' clause in your contract. The contract has a standard clause, and sometimes REAs use their own version - if you are unsure of where you stand, may I suggest that you see your solicitor a.s.a.p. and have the matter clarified. I can't help you here, as I always use a clause that makes the inspection subject to my satisfaction, so that if I'm not completely happy with the building report, I can end the contract.

Who states that the building report has failed. Will it say "failed" on it, or something to that effect. Or is it up to you to decide that it has failed.

Building reports vary enormously, but the one thing they seem to have in common is that they make you think the property is going to fall down tomorrow! (Building inspectors have to cover their backsides, I guess). They will list all the faults, structural problems, etc etc, but don't actually say "Failed" or "Passed". It's up to you to decide whether you're happy - then it's back to the wording in the contract to determine what happens next.

Also with regards to council permits for other structures. The REA said there was no permit for the pergola thing attached to the house out the back. I said, should they have one - and he said yes.

Then he said nobody ever gets permits, because they're so expensive. I said are there any implications in not getting permits and if they discover an unpermitted structure on your property, can you get fined.

He said no one ever gets fined.

This depends on the council - I assume it is the Gold Coast City Council, and I'm not familiar with their by-laws and regulations.

Something to think about with illegal structures - will your insurance cover something that's been built without council approval? This is particularly important if you ever rent the property out - I would hate to lose my public liability cover over an illegal structure.

At the very least, you should have the building inspector check the pergola for structural soundness, and have it pulled down if necessary. Again, a question to put to your solicitor.

The above is provided for information purposes only - may I suggest that you see a solicitor, who can peruse your contract and give you advice relevant to your particular situation.

Cheers
LynnH

 

[Queen Bee]

Hi Queen Bee



It will depend on the wording of the 'building inspection' clause in your contract. The contract has a standard clause, and sometimes REAs use their own version - if you are unsure of where you stand, may I suggest that you see your solicitor a.s.a.p. and have the matter clarified. I can't help you here, as I always use a clause that makes the inspection subject to my satisfaction, so that if I'm not completely happy with the building report, I can end the contract.

Thanks. That's helpful to know.

I was in the bank today for another reason, and the teller said that when you are buying a property and it goes unconditional, make sure you get the property insured, because if something happens, then the onus is on you. Is this correct. I would have thought it wasn't yours until settlement date?

QueenBee

 

[boomtown]

Thanks. That's helpful to know.

I was in the bank today for another reason, and the teller said that when you are buying a property and it goes unconditional, make sure you get the property insured, because if something happens, then the onus is on you. Is this correct. I would have thought it wasn't yours until settlement date?

QueenBee

I understand why you think that but Queensland is different. Its dumb but its at your risk from the contract date. Annoying as hell but there you are.

 

[investor888]

Yes, I never quite understood that. You don't own the place until settlement date, can't have access to it, can't touch it, but somehow you are expected to have it insured from contract date.
What half-wit thought of that. What if the pest or building inspection fall through, but technically, the advise is to have insurance from contract date.

 

[boomtown]

I dont even understand how you have an insurable interest in a house that is subject to a contingent contract but whatever thats the way things are.

 

[Queen Bee]

I told my husband and he said "well do we get the tenants rent". LOL.
Queensland does some odd things alright. I've actually found it quite backward compared to NZ in some ways.

One of the most annoying things when I first arrived was eftpos. Hardly anyone has it. And they say cheque or savings, like you're an imbecile and can't do it yourself. I don't get that. I went to get a donut at Donut King at Pac Fair, and they didn't even have eftpos. I nearly had a meltdown.

Supermarkets close early, and they don't sell alcohol. Said to this Queenslander, what is it with the supernarkets here, why aren't they open late. He said "why would you want them to be". I said, because I want to do my grocery shopping at 10pm if I feel like it. I spose that's laid back Queensland for you.



QueenBee

 

[boomtown]

Yeah well if you get a job in Qld they dont expect you to work very hard. Consider it a bonus.

 

[Queen Bee]

Boomtown. My husband noticed that. He's had to slow right down. LOL