Gone unconditional/buyer bailing

[MTR]

Hi everyone

I am very curious regarding this issue and whether anyone has been down this road. I have a couple of properties currently under contract subject to finance, just waiting to go unconditional, fingers crossed

Has anyone ever been in scenario where sale of property gone unconditional however the buyer pulls the pin?? Have you actually gone down the legal route to recoup losses and what happens to the deposit??

I personally know a buyer who tried to bail out after sale going unconditional. The sellers got solicitors onto it sent a nasty letter and pointed out that he would be liable for any losses incurred by their client, this worked, he went ahead with the sale?
All good for seller, but what if the letter was ignored, do you think that buyers would actually pursue this legally, I expect this would cost big $ not worth the effort. By the way in Perth the average deposit seems to be around $5000, peanuts, not like Syd and Melb 10% deposit as most properties go to auction.

MTR

 

[skater]

Happily I've never been in that situation. We've got one at the moment due to settle on 15th December. While I'm confident they won't bail on us, I'm sure my Solicitor would set it all straight.

 

[MTR]

Yes, hopefully Skater all will go well.

We don't use solicitors in Perth when settling on properties, we use conveyance , not sure why this is the case in Perth.

 

[cu@thetop]

Seen it quite a few times from the lawyer pov. OTP sales that pull out due to changed circumstances pursued for:
Original agent's commission
default interest
marketing expenses
Legal fees on aborted sale plus recovery
Legal fees on 2nd sale
agent commission on 2nd sale
Shortfall in 2nd sale price

It all adds up.

Tip for players in qld market.
Biddy signs standard agency agreement with nice Toowong (can be any other suburb for that matter) Agent.
Property sells- deposit received $10k. Commission owed by seller on sale= $17k
Unconditional contract which buyer pulls out of and goes back to NZ.
Biddy's lawyers cancel contract.
Agent seizes 10k and issues an invoice for remaining 7k to Biddy.

If I see the standard agency contract before signed I always alter it to reflect commission payable on settlement and not sale.

 

[perthguy]

Yes, hopefully Skater all will go well.

We don't use solicitors in Perth when settling on properties, we use conveyance , not sure why this is the case in Perth.

You can use a solicitor in Perth but the settlement agents are so good at their jobs that I don't know why you would bother. You only need to a solicitor involved if something goes wrong. For a straightforward settlement, I usually just DIY. Last time I had to deal with a solicitor, out of myself, the settlement agent and the solicitor, it was the solicitor that stuffed things up and nearly derailed settlement. That was in Perth so one of the parties had selected a solicitor to settle the deal. The settlement agent took over and made sure the deal went through. Guess who did my next settlement?

 

[MTR]

Seen it quite a few times from the lawyer pov. OTP sales that pull out due to changed circumstances pursued for:
Original agent's commission
default interest
marketing expenses
Legal fees on aborted sale plus recovery
Legal fees on 2nd sale
agent commission on 2nd sale
Shortfall in 2nd sale price

It all adds up.

Yes, it would certainly add up, I thought that vendors would not pursue due to legal costs involved, however with the above costs that vendor may claim it would be worth pursuing I guess as long as you can recover the money/they cough up??? that's the big one.

 

[MTR]

You can use a solicitor in Perth but the settlement agents are so good at their jobs that I don't know why you would bother. You only need to a solicitor involved if something goes wrong. For a straightforward settlement, I usually just DIY. Last time I had to deal with a solicitor, out of myself, the settlement agent and the solicitor, it was the solicitor that stuffed things up and nearly derailed settlement. That was in Perth so one of the parties had selected a solicitor to settle the deal. The settlement agent took over and made sure the deal went through. Guess who did my next settlement?

Not a fan of DIY, its just one of those jobs that I would hate, same as organising stuff for tax, its on a par for me. Also, I would not be comfortable, need to know that everything ticks the boxes and got the right professional doing this. However, if it works well for you then great.

 

[perthguy]

Not a fan of DIY, its just one of those jobs that I would hate, same as organising stuff for tax, its on a par for me. Also, I would not be comfortable, need to know that everything ticks the boxes and got the right professional doing this. However, if it works well for you then great.

I agree with you that its a lot of running around. My only point was it is so straightforward there is no need to get solicitors involved. Settlement agents do a great job!

 

[Blacky]

This happened to our "BlackMinster" purchase. Basically there was debate in regards to what date was 'unconditional'. As it was "30days from acceptance". There was some "argy bargy" over what date it was accepted.

Our settlement agent was a solicitor - so we pulled out some nasty-pasty letters and it resolved the issue. However, at one point we did discuss what would happen if they played hard ball.

It is a debate as to weather it is worth the hassle of taking the 'next step' however, I think it can be worth while making it appear that you would take that step if push came to shove.

Each scenario would be different.

Blacky

 

[Blacky]

I I have a couple of properties currently under contract

So much for taking that step back and de-stressing

Blacky

 

[westminster]

I threatened to walk on an unconditional deal only last month I would have lost my deposit and packed up the $2 company I was buying it in so there was nothing to sue.

It didn't end up happening and after some negotiations we agreed to proceed to settlement after receiving a discount on the original sale price.

Again, my lawyer was a legend and got me through it and gave good advice on my risks had I not gone through.

 

[MTR]

So much for taking that step back and de-stressing

Blacky

Blacky

this is actually a great stress release (another project completed) - by selling I have reduced the number of projects on the go, reduced debt and bring profits back

The problem was too many projects on the go, this is now bedded, New Years resolution - balance in life, don't work to hard......"work" a dirty word

 

[HappyCamper]

If I see the standard agency contract before signed I always alter it to reflect commission payable on settlement and not sale.

The standard contract in Queensland changed last week to reflect the above.

 

[Ausprop]

hi MTR, you saw what happened to me after enforcing a contract, you must be prepared to spend up to $200k on legals and a good 5 to 10 years int he court system and accept that you may actually lose the argument and also pay the $200k legal bill for the other side. So you have to question, is this the best use of $200-400k and 10years of your life?

 

[MTR]

hi MTR, you saw what happened to me after enforcing a contract, you must be prepared to spend up to $200k on legals and a good 5 to 10 years int he court system and accept that you may actually lose the argument and also pay the $200k legal bill for the other side. So you have to question, is this the best use of $200-400k and 10years of your life?

Yes, nasty stuff, I could imagine this happening a fair bit with OTP stuff when the market turns.

Have you read any of the posts RE: Armchair developer/EOS, I suspect this is going to happen with a few of their clients as costs skyrocket, interest rates for buyers nearly 18%, and valuations do not come in at the end. Classic scenario for disaster.

MTR

 

[RPI]

I have 3 of these running at present, due to the large number of conveyances we do it is inevitable that some go bad. If the buyer is an entity then anything less than $50k deposit held in trust would not be worth litigating over. When it is an individual buyer then if they have sufficient assets it can be worthwhile regardless of deposit.

 

[MTR]

I have 3 of these running at present, due to the large number of conveyances we do it is inevitable that some go bad. If the buyer is an entity then anything less than $50k deposit held in trust would not be worth litigating over. When it is an individual buyer then if they have sufficient assets it can be worthwhile regardless of deposit.

Very interesting RPI
Its never happened to me, and certainly hope it does not with my recent contracts under offer.

However, I recall good old Dazz stating don't waste your time if someone bailed out of their contract. I find it interesting if individual buyer with sufficient assets may be worthwhile. Its very good to know this just in case and relatively easy to find out.

Thanks
MTR

 

[Blacky]

Blacky

this is actually a great stress release (another project completed) - by selling I have reduced the number of projects on the go, reduced debt and bring profits back

The problem was too many projects on the go, this is now bedded, New Years resolution - balance in life, don't work to hard......"work" a dirty word

Ahh - selling not buying... Sorry. I read it as you had a couple of contracts unconditional to buy.

I agree 'work' is a dirty work... says the guy working 6hrs on a Sunday

 

[MTR]

Ahh - selling not buying... Sorry. I read it as you had a couple of contracts unconditional to buy.

I agree 'work' is a dirty work... says the guy working 6hrs on a Sunday

Oh no, work. Yes, its wonderful selling and in part this is my biggest stress. Once I have made up my mind to sell I want the stock to move quickly as holding costs will eat into my profit. That is in part why I now will reduce the number of projects, or stagger them so I am not selling too many at the same time as it the financial burden that is the worry, but I am a conservative person I guess which does not help

MTR

 

[Ausprop]

I find it interesting if individual buyer with sufficient assets may be worthwhile. Its very good to know this just in case and relatively easy to find out.

regardless, it is still very prolonged and expensive to pursue and one slip and you can lose your case and be liable for their legals as well. It is something to give serious thought to before kicking off, because once you start there is no going back