Getting out of an Unconditional Contract - Is it possible?

[Property Invest]

Hi guys,

Is it possible? because I need help.

My current situation;

I purchased an OTP property about 7 months ago from a major and well know house and land builder, with intentions of it being our PPOR.
When dealing with the salesman, I mentioned that I was interested but wanted to make sure my few defaults on my credit report would not be too much of an issue if I settled them. He proceeded to tell me that it shouldn't, and that if I could provide him with my credit report he could have his finance guy look into it and provide advice. Well I had a recent copy of my report so I emailed it to him. The finance guy who works under a different name but the company being an arm (owned by the building company) of the builder. He qualified us by conversation over the phone and also added that if I payed my defaults I would get finance. They also said that I should sign unconditionally. Big mistake this was. At least I have an and/or nominee condition in case I choose to on-sell.

Now, obviously obtaining finance is being very difficult as no lender will look at us except for one or two non-conforming lenders but at a higher rate.

What's worse now, I find a couple of properties in the same development (16 units) with the same layout and all selling at almost $30k less by the BUILDER!!
I'm really concerned about my valuation too, now.

I hope someone has read all this boring stuff and can provide me with some ideas/advice/etc.

Help me!

 

[Jacque]

They also said that I should sign unconditionally.

You signed unconditionally because the agent told you "you should"?
Oh dear
Did your solicitor review the contract and know you were doing this?

Now, obviously obtaining finance is being very difficult as no lender will look at us except for one or two non-conforming lenders but at a higher rate.

So you signed an unconditional contract without having finance approved?
Did your solicitor know you were doing this?

I really can't see how you can crash this contract without forfeiting your 10% deposit. You need to speak to your solicitor ASAP to see what legal recourse you have open to you (if any). Best of luck.

 

[mattnz]

Did the builder advise that you were buying at a discount by getting in early and promise that later ones would be sold for more? Thats about the only chance I could see. Definitely an example where professional and independent advice was required.

The market in Melbourne has dropped $30k and then some in the past few months, especially off the plan sales.

 

[Property Invest]

You signed unconditionally because the agent told you "you should"?
Oh dear
Did your solicitor review the contract and know you were doing this?

Yes, solicitor "apparently" looked through this and knew what I had done. I have used my solicitor for over 20 years now. Maybe he has lapsed, i don't know. But he tells me there is no way out of this.


So you signed an unconditional contract without having finance approved?
Did your solicitor know you were doing this?

Yes he did, and I told him why.

I really can't see how you can crash this contract without forfeiting your 10% deposit. You need to speak to your solicitor ASAP to see what legal recourse you have open to you (if any). Best of luck.

He can't see a way out. I'm currently fighting with the builder in regards to them having my CRA details and having passed several hands and yet still get approved by them for purchase. Their procedure is to check all purchasers can purchase the property. How was mine approved? ???
Also another salesperson that I spoke to from the same company said to us that he would not do that to his clients, he would not have approved them, that it is wrong.

They are investigating this and have 42 days to respond.

 

[Property Invest]

Did the builder advise that you were buying at a discount by getting in early and promise that later ones would be sold for more? Thats about the only chance I could see. Definitely an example where professional and independent advice was required.

The market in Melbourne has dropped $30k and then some in the past few months, especially off the plan sales.

Hi Matt,

They always say that if you buy early you will buy cheaper, at a discount.
My biggest problem is now they are selling their properties almost $30k cheaper. Even though I have 20% deposit, that will now not be anywhere near enough to get any loan.

 

[mattnz]

In one I purchased recently, they actually put it in writing that I was buying at a discount by getting in early and stated the "standard" price. You may be able to argue they misled you if they never sold any units for more than your "discounted" price and are now selling for below that price.

 

[Jacque]

He can't see a way out. I'm currently fighting with the builder in regards to them having my CRA details and having passed several hands and yet still get approved by them for purchase. Their procedure is to check all purchasers can purchase the property. How was mine approved? ???
Also another salesperson that I spoke to from the same company said to us that he would not do that to his clients, he would not have approved them, that it is wrong.

They are investigating this and have 42 days to respond.

I'd get a new savvy solicitor to look through your contract with a fine tooth comb to see if there are any holes at all. Good luck.

 

[Property Invest]

Matt,

Construction is under way, and I'm flabbergasted by the signs of "for sale" up on the windows of at least 6 of the 8 property shells already built. In a complex of 16. I don't think they have sold many by the looks of it.
Even at the beginning we were lied about only 3 to 4 properties left. Then we found another real estate agent selling on their behalf other units in the development.
It's just lies after lies.

 

[Aaron_C]

Now, obviously obtaining finance is being very difficult as no lender will look at us except for one or two non-conforming lenders but at a higher rate.

What's the problem? You can get finance - who cares if they are non-conforming lenders? Would you rather pay 7.50% or lose your 10% deposit? Please don't be so fussy and you will get out of this with the shirt on your back.

 

[mattnz]

I should add that there are many examples in consumer law where if a product is advertised as being discounted, but was never sold at the higher price, that it is seen as misleading conduct.

See some of the examples here http://www.accc.gov.au/content/index.phtml/itemId/815335

eg: a jewellery store promoting that a watch 'was' $200 and is 'now' $100 when the store never sold the watch for $200

 

[Property Invest]

I'd get a new savvy solicitor to look through your contract with a fine tooth comb to see if there are any holes at all. Good luck.

Thanks Jacque, I appreciate it.

 

[Property Invest]

What's the problem? You can get finance - who cares if they are non-conforming lenders? Would you rather pay 7.50% or lose your 10% deposit? Please don't be so fussy and you will get out of this with the shirt on your back.

Hi Aaron,

I have no problem with a non conforming lender nor with 7.50% as that is much lower than what I have found so far.
My problem however is, that they want 20% deposit of purchase price which is not a problem until they do a property valuation and find that the builder is selling the same unit for $30k less. This I cannot do.

 

[Aaron_C]

Hi Aaron,

I have no problem with a non conforming lender nor with 7.50% as that is much lower than what I have found so far.
My problem however is, that they want 20% deposit of purchase price which is not a problem until they do a property valuation and find that the builder is selling the same unit for $30k less. This I cannot do.

Then find a Plan B. Get an 80% LVR loan but use some cash advance on your credit cards to plug the gap. Or use a personal loan. Whatever it takes. You cannot get out of an unconditional contract - that is why it's called 'unconditional'.

Others here are suggesting getting out of it using the voidable principles of contract law - namely unconscionability, undue influence, misrepresentation etc. Sadly, you can never prove any of these things and if you go to a court, upon which time the settlement date would have long since passed, you would have already surrendered your 10%. Why bother? Stop whining and fix the problem.

 

[Property Invest]

I should add that there are many examples in consumer law where if a product is advertised as being discounted, but was never sold at the higher price, that it is seen as misleading conduct.

See some of the examples here http://www.accc.gov.au/content/index.phtml/itemId/815335

eg: a jewellery store promoting that a watch 'was' $200 and is 'now' $100 when the store never sold the watch for $200

Great link, lots of good examples.
The problem with that though is that they don't advertise a discount anywhere, it is simply what the salesperson said.
I can understand if the market slows down that the builder may want to sell the units for less for a quicker sale but that may be detrimental to obtaining finance for people who have already purchased and have been approved by their finance department. Maybe a compulsory "subject to finance" is in order for all contracts.

 

[Marty McDonald]

A) Counter sue the finance arm then try and settle with the builder for somewhere in the middle. If they have dropped $30k it might be worth forfeiting some of your deposit?

B ) Non conforming that it's going to be 10% with risk fees included if you go over 80%.

C) ask the builder to fund you the difference between valuation and contract prices at say 7% interest only? Then borrow 80% of valuation? See a) above if they refuse.

 

[Property Invest]

Then find a Plan B. Get an 80% LVR loan but use some cash advance on your credit cards to plug the gap. Or use a personal loan. Whatever it takes. You cannot get out of an unconditional contract - that is why it's called 'unconditional'.

Others here are suggesting getting out of it using the voidable principles of contract law - namely unconscionability, undue influence, misrepresentation etc. Sadly, you can never prove any of these things and if you go to a court, upon which time the settlement date would have long since passed, you would have already surrendered your 10%. Why bother? Stop whining and fix the problem.

This is part of my plan B formulation. I don't own any credit cards and with my credit defaults I don't think a personal loan would be easy easier.
I am however selling personal stuff to try and bridge the gap.

I will continue to argue the point with the builder, because you just never know. I have won tougher battles in life, I have seen the impossible become possible.

This is just me looking for all of my options so I can make a better decision.

 

[Aaron_C]

Fair enough. But I think in your situation you have to be complete the contract - no builder will ever release you from your obligation, particularly so if other units in the same development have had their prices cut.

I suggest you talk to a broker and get a lender who will get you the loan you need. The non-conforming area is a very murky one and if you are not careful you will be ripped off big-time.

 

[Property Invest]

A) Counter sue the finance arm then try and settle with the builder for somewhere in the middle. If they have dropped $30k it might be worth forfeiting some of your deposit?

B ) Non conforming that it's going to be 10% with risk fees included if you go over 80%.

C) ask the builder to fund you the difference between valuation and contract prices at say 7% interest only? Then borrow 80% of valuation? See a) above if they refuse.

Hi Marty,

a) I have mentioned to the builder that I'm happy to lose a few thousand dollars but not my 10% deposit. They are looking into this as part of the whole complaint. Forty two days to reply though

b) I have found a mortgage managers company who will lend me at 8.69% but I'm not sure about their risk fee.

c) I can always ask them that. Good suggestion.

I will also add that the slab has been poured and the garage roof is going up, yet they cannot give me a completion date. How am I supposed to know when to organise finance?

 

[Aaron_C]

I will also add that the slab has been poured and the garage roof is going up, yet they cannot give me a completion date. How am I supposed to know when to organise finance?

Under the terms of the contract they will notify you after the certificate of occupancy has been provided by council, upon which you have 14 days to get finance. But usually they will let you know much earlier.

If they are still at the slab stage you won't be finished for at least another 3 months.

 

[Property Invest]

Fair enough. But I think in your situation you have to be complete the contract - no builder will ever release you from your obligation, particularly so if other units in the same development have had their prices cut.

I suggest you talk to a broker and get a lender who will get you the loan you need. The non-conforming area is a very murky one and if you are not careful you will be ripped off big-time.

I agree with your comment but I still got to give it a try. I simply want to get out of this contract or settle it. Problem is on both sides.

I have had two brokers look into my situation, the first just simply gave up by saying I don't think I can help you, and the second just never followed me up.
I'm currently having discussions with a broker from this forum to see what they can do for me.

But I agree a good broker is hard to find.