'Getting out of' an accepted offer.

[Will00]

Hey,

I have a question regarding the tactic some people use, of short listing multiple properties, and making time sensitive (say 24 hours) offers that are drastically below value. In hope that someone will bite, and you'll be all the happier.

For example, a businessman was walking around my Suburb recently offering properties (with worth at least $1.5 million, typically over $2m) a grand price of $1,000,000 cash with full payment within 1 week. Surprisingly, by the time he got to 10ish offers made, 2 or 3 had accepted. Rich people doesn't mean money-smart people.

Now. Lets say i was to employ a similar strategy, albeit tailored for much cheaper lots. Lets say i can only afford 1 offer, but make 8-10 across a 24 hour period. And 2 accept. Can i bail on one of the offers?

I am aware i have a 5 day cooling off period, so, while some may say unethical, i could rescind the (less favourable) offer and take the other. True? False?

Thanks in advance,

-Will

 

[boomtown]

In Qld if you trigger the cooling off you need to pay a penalty of something like 1 percent of the property value.

 

[Will00]

In New South Wales, it is 0.25%, so $250 per $100,000. Which is pennies in the event of taking a great purchase.

Is this the extent of the requirements?

Oh, and before anyone asks, i forgot to mention, this is obviously not sales by Auction, or using a 66W Certificate, etc.

-Will

 

[Perp]

Will, if you get more than one "bite", rather than try and get out of the excess, I'd either:

1) Try and finance both, arguing that valuation is more than purchase price due to the unusual purchase method - some lenders may agree and you could borrow 100% (assuming you have income to service), or

2) Try and on-sell the excess properties at a profit, by having an assignment clause in the purchase contract/offer. ie You can nominate who the purchaser is going to be.

 

[Peter_Tersteeg]

In some states cooling off periods only apply when the offer is below a certain value, I vaguely recall $300k in Victoria but I could be wrong. It would be worth investigating further.

You could always make it 'subject to satisfactory inspection by business partner', and just explain that your business partner will want to sign off on it before proceeding.

Your business partner can be your cat.

 

[Propertunity]

Lets say i can only afford 1 offer, but make 8-10 across a 24 hour period. And 2 accept. Can i bail on one of the offers?

2 kinds of offers: the verbal type which is the one I'd assuming you'd be using for this strategy. Whereby, you just go out and as you say "make 10 low-ball offers" and see who takes the bait. You can bail on any or all - verbal offers (as they say) are not worth the paper they're written on.

The other kind of offer is where you write 10 cheques representing 0.25% of each one's purchase price (or more acurately, your offer price) and sign 10 contracts in the REA's offices. Worst case scenario - they all accept and you bail on 9 of them (cool-off) leaving you with the one you want. This way you'll forfeit 9 x 0.25% x $300K (say) = $6,750.00 But the way to view this is firstly you are not going to get 100% acceptances anyway and even if you did, you got a place for $100K off the asking price (say) and it only cost $6,750 to do it.

A couple of things though that you might like to consider:
1. You are probably going to 'burn' some relationships with some REA's doing this - and ultimately you want them to be ringing you with good properties over time....short term gain = long term pain ?? You risk being rejected by REA's straight up and being branded as a tyre-kicker.
2. You are not proposing to do this at the 'high end' but at the low end - in FHB territory. No vendor in their right mind (and you may find some who aren't btw) would accept your low-ball.

Am I saying this strategy won't work - not at all. Just be aware of the shorter and longer term consequences.

 

[Bargain Hunter]

2. You are not proposing to do this at the 'high end' but at the low end - in FHB territory. No vendor in their right mind (and you may find some who aren't btw) would accept your low-ball.

Low-ball offers will work anywhere, anytime. It is a numbers game but as Propertunity states there is a risk of burning bridges.