Developer wants access to funds

[ej89]

Hey everyone,
Put a fully refundable holding fee on a House and land package in Riverstone.
The solicitors have only given me the land contract which comes to 324k for 324sqm but they want me to pay 10% of the whole house and land package but put that towards the land contract and not the building contract.

House and land= 584k. They want 53,400k for land and to give them 5k for building contract when they give me that.

There are a few things I want to ask.
1. Is putting down that much normal?
2. In the contract, it says the vendor is allowed to use my money to make a purchase before settlement. I asked them to take that out cos it's 53k and if they go broke i'm screwed as it won't be in the trust account. Is that normal?
3. The only reason I want to hold onto it is that after I put my holding fee down, the house and land packages in the same estate for the same package are selling for 100k more. In fact, one just sold for 115k more.
4. What can I do to on sell it if I wanted to? sign the contract and pay 53k? Is it worth risking 53k to possibly make 70-100k?

 

[ej89]

or not... lol

 

[S.T]

Hey umm what does your solicitor say about this?

 

[ej89]

Hey umm what does your solicitor say about this?

He's not a big fan, but he's quite pessimistic about everything. Is it normal for that sort of clause to be in a contract?

 

[CosmicTrevor]

A 10% fully refundable deposit sounds a bit odd, surely it is only refundable up until the point the contract goes unconditional?

I don't like the sound of the developer being able to access those funds at all. The way I got around this many years ago for my PPOR was to up my offer by the financing cost of the deposit amount for the build period (from memory this was <$3k). Then I convinced the real estate agent to pay it from their commission (on the basis that I told them right up front that I would not release deposit funds).

You have correctly identified that you are putting your deposit at risk.

Also, is it normal for there to be 2 separate contracts for something like this? Are you also bearing the risk of being stuck with a hunk of land if for whatever reason the building doesn't go ahead.

I'd stick with whatever advice you get from your lawyer.
Trev