Found an IP... first step?

[bennos]

Found an IP I would like to make an offer on. It is in QLD and is a 2 year old townhouse.

I’m a little worried that it might go before I am ready. Should I negotiate and settle on a price to get it off the market before performing all the necessary steps like pest/building report and valuation (and a quantity surveyors report). If this is the case, what happens if the valuation comes back lower then the agreed upon price? Will I still be in a position to re-negotiate based on the valuation or am I already already under obligation?

When buying a property you’re not going to see in person. What are some of the reports/checks you would definitely get to satisfy it is a sound property. I’ve listed above pest/building report, valuation and a quantity surveyors report… any other?

 

[yo yo ma]

Should I negotiate and settle on a price to get it off the market before

Yes... you can make the contact subject to "a satisfactory building & pest inspection done within x days"... You can also make to contract subject finance within x days too- These are pretty standard in Queensland.

QS can be done later... I used depreciator who was really good & I would recommend.
If there is a body corporate, you should inspect these records.
Once the contract is signed, you can't re-negotiate if your valuation is lower.
Steve

 

[alexlee]

No, but if your contract is subject to satisfactory finance, you can use the low valuation to get out of the contract.
Alex

 

[stumunro]

I can't imagine you would negotiate based on valuation, i would lock in your offer with subject to an annex with the details as mentioned above by alex and yo yo, subject to approval of finances & pest & building inspections. I would also change the nominated deposit to like $100 or something so that if you do walk away from the contract you aren't waiting 2 weeks to get $1000 back.

 

[bennos]

Yes... you can make the contact subject to "a satisfactory building & pest inspection done within x days"... You can also make to contract subject finance within x days too- These are pretty standard in Queensland.

Subject to 'satisfactory building & pest inspection' and 'satisfactory finance'. Sorry for my newbie-ness. This is something the vendor will need to agree to, and then include it into the contract. If the valuation comes back lower or there needs to be a fix from the building report, this simply means I can walk away from it all? Isn't that what happens in the cooling off period anyway? What exactly does the terms 'satisfactory finance' mean? (again sorry!)

If there is a body corporate, you should inspect these records.

What should I be inspecting it for? What are the specfic things to look out for?

 

[yo yo ma]

You should look at the minutes of past few AGM's of the Body Corporate for things such as:

• proposed works
• potential legal claims
• the financial position of the BC (in debt??)
• fee increases
• disputes
• other liabilities

Basically look for any irregularities or upcoming maintenance issues that may result in a special levy being imposed (such as major structural issues). You usually have to pay the BC to conduct this search. With you being interstate, you can have someone do it for you (google search for body corporate pre-inspection report).

Yes, the vendor needs to agree to all conditions (building/ finance) but these are standard conditions in Queensland contracts... If something comes back unsatisfactory on the building & pest report, you can negotiate with the vendor to either reduce the price or have them fix it. If they don't want to do this you can either buy at the agreed price or walk away (crash the contract due to failed building/ pest report).

If your valuation comes back lower & you cannot get finance, you can crash the contract due to being unable to get finance but you cannot negotiate on price. During the 5 day cooling off period, you can pull out of the contract... it will cost you 0.25% of the price.

Have a read of the Queensland Department of Fair Trading site for some advice on real estate.

Don't apologise for asking questions... we are all here to learn
Steve

 

[alexlee]

Subject to 'satisfactory building & pest inspection' and 'satisfactory finance'. Sorry for my newbie-ness. This is something the vendor will need to agree to, and then include it into the contract. If the valuation comes back lower or there needs to be a fix from the building report, this simply means I can walk away from it all? Isn't that what happens in the cooling off period anyway? What exactly does the terms 'satisfactory finance' mean?

Yes, the vendor will have to agree to it. So if another buyer comes in with an unconditional contract, they might gazump you. But going into a contract with no building inspection clause is risky as you're unable to get out of it if there are problems with the property.

The cooling off period is only for a few days. The building inspection clause gives you a lot more time.

That's the great thing about this clause. Satisfactory finance can pretty much mean whatever you want. It just means 'I can get out of the contract if I don't get the finance that I want'.
Alex

 

[yo yo ma]

That's the great thing about this clause. Satisfactory finance can pretty much mean whatever you want. It just means 'I can get out of the contract if I don't get the finance that I want'.

I have heard that some people now ask for proof that you are unable to get finance.
I guess this would be easy to do though, just go to the bank & say you have a lot of credit card debt, don't declare all your income (my wife doesn't work) & finance is knocked back... Here's your letter of rejection.

Also be aware bennos, that if don't contact the vendor (through you solicitor), within the stated time, it is automatically assumed that finance is approved. For example, the clause may say "subject to finance being obtained by a reputable financial insitution, within 14 days". If you cannot get finance, you have to let the vendor know, because, on day 15 it is assumed finance is approved.
Steve

 

[Bandita]

Subject to 'satisfactory building & pest inspection' and 'satisfactory finance'. Sorry for my newbie-ness. This is something the vendor will need to agree to, and then include it into the contract. If the valuation comes back lower or there needs to be a fix from the building report, this simply means I can walk away from it all? Isn't that what happens in the cooling off period anyway? What exactly does the terms 'satisfactory finance' mean? (again sorry!)

What should I be inspecting it for? What are the specfic things to look out for?

Hi Bennos,

If you're planning on putting in a very "low-ball" offer, usually clauses with "satisfactory" won't work - you can try, but we've been shot down everytime on them - if you're willing to pay what the vendor wants, that may be different - but you can still put those conditions in, with something more attractive to the vendor - eg. finance of "$xxx" by 2 weeks and building inspections with no major structural defects. Luckily building/pest inspections can be done pretty quickly so you may be able to get them done over your cooling off period (organise it now) and then you can withdrawl from the contract if you don't like the results.

Cheers,
Jen

 

[boods99]

Is it possile to make the sale "subject to satisfactory valuation"? So if you get it valued and it comes in low, you can negotiate a lower price to reflect the valuation?

 

[alexlee]

Is it possile to make the sale "subject to satisfactory valuation"? So if you get it valued and it comes in low, you can negotiate a lower price to reflect the valuation?

satisfactory valuation comes under the satisfactory finance clause. If it comes in low, you can TRY to negotiate a lower price, but the seller doesn't have to take it.
Alex