Financially distressed seller

[Tillie]

Considering buying an property that has 4 separate mortgages and 2 caveats on it. Never seen anything like that on the title documents before. Clearly vendor is under financial pressure to sell it, but the current asking price is well above the market value based on comparatives. My offer would be below the asking price.

I do not want to be in the situation that the vendor accepts an offer and in the settlement day I found out that he can not settle because he does not have means to clear debts and caveats can not be lifted.

Has anyone been in similar situation before? Is there a way to add the condition to the contract stating that transaction is subject to vendor providing a proof that he has suffient funds to clear mortgages and caveats on the settlement day and proof has to be provided by purchases satisfaction by xx/xx/2015. What would be the right legally sounding wording for the condition?

 

[spludgey]

By the sounds of it it might be likely that the vendor can't sell below the price of all the mortgages combined.
Does it make sense at that price point for you or not? If not, there might not be too much room to move.

 

[Tillie]

By the sounds of it it might be likely that the vendor can't sell below the price of all the mortgages combined.
Does it make sense at that price point for you or not? If not, there might not be too much room to move.

Thanks spludgey for the quick response. The current asking price is way too high compared to the recent sales in the area and I would not offer asking price. The house is not worth of it.

The problem is that I do not know about the value of those mortgages and other debts or assets, so even if he accepts my offer he might not be able to settle and I rather know that now than on the settlement day.

 

[spludgey]

Have you spoken to the agent? I've found agents often like to let you know the line in the sand, as otherwise you're wasting their time.

 

[Perp]

I do not want to be in the situation that the vendor accepts an offer and in the settlement day I found out that he can not settle because he does not have means to clear debts and caveats can not be lifted.

My understanding is that a clause would not be needed because the vendor would usually have to have the permission of all the mortgage holders prior to accepting an offer.

But that doesn't stop vendors doing the wrong thing, so I get why you'd want more protection than that. You could certainly put in a clause, but drafting clauses isn't a business for amateurs; I would get a lawyer to draft it.

If you have a conveyancing lawyer in mind, they'll usually do this as part of their standard conveyancing fee, in my experience.

 

[Terry_w]

Has anyone been in similar situation before? Is there a way to add the condition to the contract stating that transaction is subject to vendor providing a proof that he has suffient funds to clear mortgages and caveats on the settlement day and proof has to be provided by purchases satisfaction by xx/xx/2015. What would be the right legally sounding wording for the condition?

I've seen one with 10 caveats.

Best to expect a rough ride on this one. You could have such a clause but it would essentially be meaningless. This person, even if they have money now would probably not have it in a few weeks.

 

[DaveM]

And to add to this, do not under any circumstances allow release of deposit to vendor.

 

[TMNT]

other then caveats for being financially naughty, how would you get 4 mortgages on it,

if an unencombered house was worth $1m for example, I assume they would have obtained 4 different mortages throguh different lenders at different times??? of $<250kx4

 

[Terry_w]

other then caveats for being financially naughty, how would you get 4 mortgages on it,

if an unencombered house was worth $1m for example, I assume they would have obtained 4 different mortages throguh different lenders at different times??? of $<250kx4

Yes just from further borrowings probably - more of the private type lenders.

 

[willair]

Considering buying an property that has 4 separate mortgages and 2 caveats on it.

Has anyone been in similar situation before? Is there a way to add the condition to the contract stating that transaction is subject to vendor providing a proof that he has suffient funds to clear mortgages and caveats on the settlement day and proof has to be provided by purchases satisfaction by xx/xx/2015. What would be the right legally sounding wording for the condition?

Iv'e had one where the title had one caveat on the property ,vendor was in jail ,the mother who's name was also on the title with the son,,the ATO had the caveat ,and the previous purchase price was 110k, and five years later it was only 52k,took me several contracts that fell over to get that property
but it was hard going --good luck..

 

[Tillie]

Yes just from further borrowings probably - more of the private type lenders.

Only the first mortgage was from the bank 3 others were from companies that I have never heard off. Two other caveats were actually law firms.

 

[Tillie]

Have you spoken to the agent? I've found agents often like to let you know the line in the sand, as otherwise you're wasting their time.

Something completely weird. The agent was clearly lying (or is extremely naive and dum) when saying that he did not know anything about the financial troubles. You can clearly see mortgages and caveats on vendor statement documents. But at the same time he told us that they are not planning to run open houses and the vendor does not accept any offers outside of asking price range. It looks like to me that the agent knows that no-one is going to pay asking price and have given up trying to sell it.

Decided to put this one to too hard basket and moving on to the other targets...

 

[Perp]

Something completely weird. The agent was clearly lying (or is extremely naive and dum) when saying that he did not know anything about the financial troubles.

If the agent acknowledged that the vendor was financially distressed, he could be breaching his fiduciary duty to obtain the best price possible.

 

[Tillie]

If the agent acknowledged that the vendor was financially distressed, he could be breaching his fiduciary duty to obtain the best price possible.

I know the rules. Naturally REA does not need to disclose the fact. But he can not lie either, when asked specific questions that potentially impacts on the sale process.

 

[Perp]

I know the rules. Naturally REA does not need to disclose the fact. But he can not lie either, when asked specific questions that potentially impacts on the sale process.

If by "lie", you mean say that they don't know when they do, I suspect they can. The alternative is to say something like "Yes, they're distressed" - which they can't do - or to say "I know but can't say" - which is as good as the same.