Is the agent being difficult - or is this the norm?

Hi All,

I am an avid long time reader and first time poster. I have browsed these forums over the past year and am very greatful to the Somersoft community as I have learnt lots from the masses of wisdom among you all!

This is my first post, previously to be honest I have felt too much of a novice with perhaps not enough experience to contribute, but am now hoping some of you would be kind enough to offer a newbie some much needed advice :)

Here is a brief background....I am 27 years old, and have been with my partner for 9 years. He is the same age as I, and had bought his first investment property at the age of 18. When we were 21 we used the equity he gained from his first investment property to purchase another investment property (this ones ours). We have been very fortunate to have his older brother, who has been in property investing and real estate for awhile, to have given us some gentle pressure / encouragement to take these steps.

We are now in a position where we want to buy our first PPOR. Basically my partner purchased Investment property #1 for $105,000, it is now worth $260,000. We purchased Investment property #2 for $250,000, it is now worth $380- 400,000. We plan to use all of our redraw, equity, plus cash savings, to put towards our PPOR, and by doing so we still allow more than enough rent in both to cover interest only repayments for both investment properties.

So we have approx $250,000 cash/redraw to put towards a house worth 550-650 (depending if it needs work or not). We have been looking around Pascoe Vale, Pascoe Vale South, and Coburg, as I grew up here, and both investment properties are in Essendon. Unfortunately for us, these areas have had an extremely tough market, that just keeps getting tougher.

After 8 months of countless failed auctions etc, we have found a house up for private sale...but with no price range. Fair enough. After the inspection we notify the agent that we want to make an offer. She says section 32 is not yet available, but what kind of offer are we looking at making. She said vendors are hesitant to sell before they buy, so I informed her our offer will include a flexible settlement period of anytime within 6 months of signing of contracts, to be advised by vendors.

She asks me to come in today at 12pm to sumbit written offer, as Section 32 has now been signed. We researched comparable sales and made what we think is a fair and reasonable offer - $620,00. Unconditional, with a $100,000 deposit, and the flexible settlement period as discussed. She asked me to sign one of thier standard offer forms they use, which i said was fine.

Now here is my predicament - I told her our offer was valid until 8pm tonight, or 9am tomorrow morning. i was advised to put this time limit on there as there is another OFI for the same property at 10:30am tomorrow, and I didnt want her to use my offer to negotiate/ bargain with other buyers. She got agitated and said that was not enough time, and the vendors would need to consider it over the weekend and get back to me next week. When I asked why this is the case she said because she was too busy today to make time to get in touch with them, and that their standard practice gives 3 days for the vendors normally to consider offers. :confused:

I told her we wouldnt be here for the long weekend anyway, so I would just wait until Wednesday next week, and come back and put a written offer in then. I didnt want to sign anything feeling pressured and unsure as to whether her reasons were legitimate....or was she trying to bluff me?

So, my question to you more experienced investors / buyers - was I being unreasonable by putting a 12-24 hour time limit on the offer? Is it standard practice to allow 3 days? I dont want to get played or taken advatage of, but I dont want to be an unreasonable buyer as well IFYKWIM?

Phew, thanks for reading if you got this far! Any advice would be warmly welcomed :)

Thanks muchly, Mez
 
So, my question to you more experienced investors / buyers - was I being unreasonable by putting a 12-24 hour time limit on the offer?

I don't think you were being unreasonable - although the $100k deposit seems a bit unreasonable on yourselves!!! :eek:

Cheers,

The Y-man
 
Thanks Y-man, glad to hear a time limit like that isnt considered unreasonable. She actually said she had never negotiatied on a property within a 24 hour time frame, makes me wonder if she is just a little new / inexperienced or trying to buy time...

I know $100,000 is more than standard, but we were just really keen to make the offer as attractive as possible to the vendors, I did state though that the deposit would be handed over upon signing of contracts.
 
As an agent, sometimes putting a deadline on the offer puts off the vendor, particularly if its a big decision and they are elderly or stress easily, having said this though im sure some agents might use it against other buyers to get better offers.

Its a tricky one.
 
thats silly. what does the agent have to do that is more important than submitting offers to vendors.

the time limit is very reasonable, and unless for somereason the owners are uncontacable i (as an agent) would be putting it in straight away to the vendors.. even if i just did it by phone between appointments and followed it up in writting later.
 
Andrew I can see you what you are saying, although they are a younger couple (from wedding photos I saw around the home) with a very young daughter. I do get the impression though they are perhaps not 100% sure if they want to sell. It is a silent listing, i.e. no real estate board up, no printed brochures, only advertised on the internet.

Alabex that was my first thought - was it impossible to find 5 minutes to make a phone call, or at least try? Particularly since on Tuesday this week when I indicated that we wanted to make a formal offer once the Section 32 was available, the agent asked me what ballpark figure we were looking at - I told her 590-640, and I also told her what the conditions would be i.e flexible settlement and unconditional. There was an OFI the following day, so I would have assumed that the agent would have communicated this information to the vendors, so they would be expecting an offer of the like and may have already had some ideas about what they think of it.
 
makes me wonder if she is just a little new / inexperienced or trying to buy time...
I vote option B. She definitely wants to use your offer to up the pressure for tomorrow's open.

I think your strategy in putting in a limited-time offer, and another offer next Wednesday if it's still for sale, is perfectly valid. Let them believe that you'd rather lose the property than do things their way.
 
Rethink the Deposit

Hello Mez

Welcome to the Forum

I would strongly suggest that you do not offer more than the general commercial practice of 10% Deposit.

The Sale of Land Act does not specify the requirement to pay a deposit ie no deposit is legally required, but where a deposit is paid this is the amount of forfeit (up to, I believe, 10%) which a vendor may claim if the buyer does not complete

Making an unconditional offer relies heavily on your pre-approval for finance (if any) and that the property will be acceptable to a lender as suitable security for a loan.

In Victoria, there is provision for Early Release of Deposit should the vendor request this, and this cannot be unreasonably refused by the buyer.

However, this then puts your $100,000 in their pocket and you have no security on that money, other than relying on the Contract of Sale, as this is money paid forward of settlement.

While problems with purchases of property are surprisingly few, your Contract conditions should at least include a clause that the vendors are the registered proprietors of the land / have the right to sell.

Not much point in handing over $100,000 to people who may not own the property.

You think this doesn’t happen? It can and does, with surprising frequency. Just because someone occupies a property and pays rates does not make them a proprietor with the right to deal with the property.

So even though you may be confident of your finance, please err on the side of caution and include at least a couple of conditions such as Subject to Valuation or Subject to Solicitor’s Confirmation of Title.

And please rethink the amount of Deposit. There is no need for this grandiose gesture and you may be putting yourself and your hard earned at risk simply to ‘impress’ the vendor.


Cheers
Kristine
 
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Andrew I can see you what you are saying, although they are a younger couple (from wedding photos I saw around the home) with a very young daughter. I do get the impression though they are perhaps not 100% sure if they want to sell. It is a silent listing, i.e. no real estate board up, no printed brochures, only advertised on the internet.

Alabex that was my first thought - was it impossible to find 5 minutes to make a phone call, or at least try? Particularly since on Tuesday this week when I indicated that we wanted to make a formal offer once the Section 32 was available, the agent asked me what ballpark figure we were looking at - I told her 590-640, and I also told her what the conditions would be i.e flexible settlement and unconditional. There was an OFI the following day, so I would have assumed that the agent would have communicated this information to the vendors, so they would be expecting an offer of the like and may have already had some ideas about what they think of it.
Mez,Welcome to the site,what a lot of people don't undersand is the agent is employed to act for her or his Principal who will own the re business
under some trading name,and also the agent is not a agent for th purchaser only the seller,but most agents are a law within a law,
all i can think of is ring up the principal of the re company or walk in and talk face to face and ask the question,they may both act the same,afterall the principal trains the agents that work under them:rolleyes:,
makes me wonder when you drop 100k on the table,submit an offer close to what they want and they still play the i'm too busy and i'm too important to do the job the vendors are paying a lot of money for..
good luck willair..
 
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Ozperp I am beginning to agree that it is more likely option B, I think I just needed some reassurance and a more experienced opinion to convince me I was not being paranoid and unreasonable!!!

Thanks so much Kristine for your detailed and helpful post.

Perhaps I will reconsider the $100,000 deposit, if the general consensus is it will not make my offer any more attractive to the vendors then that makes sense. I was just under the impression that it may sway the vendors and give me some leveridge in such a competitive market we are currently dealing with. I am not sure if anyone else has been looking at buying in these areas, but we have missed out on at least 3 auctions where the houses have sold 80k - 120k above reserve prices :(

We have finance approved and ready to go for a higher amount than what we need to purchase this property. We have been told that bank valuations shouldnt be an issue, as if we purchase for $620,000 we will only be taking out a loan for $380,000 on the house, leaving quite a bit of room for security. Otherwise, we still have equity left in our 2 investment properties if we must use it and cross - collateralise.

I have a copy of the signed Section 32 including the title, so made sure the offer was written to the title holder of the property...do you think I should still include a clause subject to confirmation of title holder? I hadn't thought of that...but I can see what you are saying in terms of what can happen. I actually heard from a buyer last week who was 2 weeks away from settlement and the house burnt down :eek:

Thanks Willair, I actually have a friend who knows somebody who works at the same office, I might try and contact them directly and suss out whether they have the same philosophy or not. FWIW the agent is Barry Plant, so I thought being a mainstream and fairly big named agent it would be unlikely they would be undertaking such tactics....

I feel a bit better about my decision now, and ozperp I also feel I have given a message that I am willing to be fair and reasonable, but not desperate enough to buckle to whatever they want. Part of me also wonders if they took one look at me (young 27 year old female) and thought I would be slightly more gullible and naive!
 
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Hello Mez

Fire & General Insurance really should be effected immediately upon the purchaser having an insurable interest in the property.

For a few dollars each month the risk is then covered. A small fire may be no reason not to settle, and even a small fire can be a real problem. A big fire is a real problem and Fire & General covers 'loss of rent' meaning loss of the amenity of the property. You would still have a mortgge to pay plus the cost of renting accommodation yet amazingly many people begrudge the insurance premium and take the risk themselves!

Cheers
Kristine
 
Mez - slightly off topic, but please don't pull money out of "redraw" from your IP's to fund you PPOR!!!! If it is in an offset account, go for it, but not redraw!
 
Katrina thanks once again, that is something I hadn't even considered!

Rugrat I appreciate any feedback or guidance I can get!! Excuse my ignorance, but what is the difference between using redraw vs offset? To help explain, here is the exact situation:

Investment property #1
Purchase Price: $105,000
Currently Valued: $250,000
Currently Owe: $60,000
Rental per week: $190

Investment Property #2
Purchase Price: $250,000
Currently Valued: $400,000
Currently Owe: $40,000
Rental per week: $270

As you can see they are both highly positively geared, our Lender advised us to draw out the first loan back to what was originally borrowed (105) and likewise for the second (250), so apparantley by doing so they will almost be neutrally - negatively geared, the rent will cover interest payments on both, and we can use the cash we redraw (45k from Investment #1 and 210k from Investment #2 = $250k) to reduce debt on our PPOR....is this totally wrong?? Eeek!
 
The difference is the tax deductibility of the interest on the loan. Do a search of threads on tax deductability. I am not very good at explaining this, but I'm sure someone else can butt in and clarify...

Basically if you use your redraw facility, you are draw money off the loan again. If you use this money for personal use rather then investment use - then that portion of the loan is no longer tax deductible.

If you take it out of an offset account, then the money is not actually coming off the loan, so you haven't messed up it's tax deductibility.
 
WOW :eek:

I had no idea, that could cause some serious problems, and if I can avoid them by simply setting up an offset account for each then I am getting onto it asap.

Thankyou so much !!!
 
As you can see they are both highly positively geared, our Lender advised us to draw out the first loan back to what was originally borrowed (105) and likewise for the second (250), so apparantley by doing so they will almost be neutrally - negatively geared, the rent will cover interest payments on both, and we can use the cash we redraw (45k from Investment #1 and 210k from Investment #2 = $250k) to reduce debt on our PPOR....is this totally wrong?? Eeek!

Mez,
Unfortunately, the gearing on the IPs won't change. Although you will be taking money (equity/redraw/borrow against) from your IPs, the purpose of the loan(s) is personal - to purchase a PPOR. In short, you cannot redraw from an investment loan to top up "personal" loans without contaminating the loans for tax. A "clever" accountant may have a solution, but be careful - the ATO generally doesn't like it!
 
The difference is the tax deductibility of the interest on the loan. Do a search of threads on tax deductability. I am not very good at explaining this, but I'm sure someone else can butt in and clarify...

Basically if you use your redraw facility, you are draw money off the loan again. If you use this money for personal use rather then investment use - then that portion of the loan is no longer tax deductible.

If you take it out of an offset account, then the money is not actually coming off the loan, so you haven't messed up it's tax deductibility.

Thankyou wobbycarly, It seems that rugrat is suggesting an offset account may be a way of getting around this?

I am going to the bank on my lunch break today to organise offset accounts for our investment loans, hopefully this is a means of getting around it, if not, then I guess I will just have to wear it....we need to use that money to put towards our PPOR anyway.

I will let you know what happens though!
 
Mez,

An offset account is a way around this - however it needs to be in place before you make the "extra" repayments. If you have already put extra repayments into your loan account (rather than in an offset) then getting an offset account won't fix your problem. (you can't simply open an offset account, transfer from your loan to the offset and then say everything is deductable)

However any future extra repayments should be put into the offset account and then can be later withdrawn for personal purposes without tainting the original loan.

If you haven't made extra repayments and are simply looking at redrawing equity in the investments properties (that has built up from capital growth) then the only way this new drawdown is tax deductable is if you use it for investment purposes (so not buying a PPOR!).

Regards,

Jason
 
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Jason thanks so much for clearing that up for me - all makes sense now.

Sadly it seems I have missed the boat a little :( but I guess better late than never. I have got my forms from the bank and will be setting up the offset accounts this week, so any future repayments at least will be made into here.

Thanks again to all of you - I am so glad I found this place! :)

P.S Here is an update on my original post - a friend of mine knows an estate agent from the same office as the girl I was dealing with, so he called him up for me and he was immensely helpful! Basically the guy said that the girl I was dealing with was obviously young and inexperienced, and he even knew the exact price the vendors wanted (650k) although she said there was no price range :rolleyes: He also said the vendors were hesitant to sell before they have bought their next house, so I put in my offer again today (with the original agent - the young girl), with an extremely flexible settlement (anytime by July 31st). Her attitude changed immensely, she actually asked me today 'So what time limit would you like to put on your offer?' and when I said 24 hours she said no problem!

I don't think we will get it for 620, but I'm hoping they will come back with a counter offer a little under 650...thankyou all once again and I will be sure to come back and let you know the outcome!
 
Update re my original post for those who were interested:

I submitted an offer yesterday for 620k, unconditional, flexible settlement, and 100k deposit.

The agent (original one i dealt with, the younger girl), called today to advise that the vendors were very grateful and appreciative of my offer, but have declined as it's not the price they are looking for. When I asked what price they are seeking (considering she insisted a few days ago there was no price range :rolleyes: ) she said close to 700k. She didn't make a counter offer, or ask if I'd like to reconsider another price closer to this range. We never indicated that we wouldn't pay more, we just made our offer based on recent sales and made an assumption considering there was no price range.

I then spoke to the other agent I know from the same office, who told me in no roundabout way, that I could offer them a million dollars right now, but the vendor has insisted and given clear instruction that she won't sell until she has found another home, no ifs or buts. He said he knows they would be happy to get 650k for it, but not without having another house first, so any offer at the moment is useless basically. Pays to know someone in the real estate industry hey...

So that is why they refused to put a price range on it, because if they quoted 650-690k, and I put in an offer of 690, they would still say no.

I used to hate auctions because of the unpredictability of the selling range, and always getting outbidded, but I can see now why some buyers prefer them - at least you know the vendors WILL sell at a certain price and there's no mucking around. :(

Oh well, back to the drawing board....
 
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