Is this a dodgy deal

[Ekki]

Hi all,
We live in the Noarlunga Council and would like to sell our home so we can relocate to Qld.
On hearing from our neighbour that she sold her home to an investor/developer group and got an above market value price. She needs to be out in 21 days.
All this sounded good to us so we got in contact with the agent she dealt with.
On meeting with them yesterday we were informed of the full deal.
1. We wouldn't get our money for up to 2 years until after all the paper work is cleared through council.
2. The property doesn't get transfered into their name, it stays in ours until after the new townhouses are built.

Is this a legit deal?
If they rent out the property, which they talk about doing with our neighbour, who is liable for the council rates, any damage done to the property through the tenants?
Who gets the rental income?
What happens if the developers go bankrupt and they have already demolished our home?

This deal sounds and feels really dodgy to us but was wondering if this is a standard investor/developer business practice.

thankyou for your time
Ekki

 

[vaughan]

Hi all,
We live in the Noarlunga Council and would like to sell our home so we can relocate to Qld.
On hearing from our neighbour that she sold her home to an investor/developer group and got an above market value price. She needs to be out in 21 days.
All this sounded good to us so we got in contact with the agent she dealt with.
On meeting with them yesterday we were informed of the full deal.
1. We wouldn't get our money for up to 2 years until after all the paper work is cleared through council.
2. The property doesn't get transfered into their name, it stays in ours until after the new townhouses are built.

Is this a legit deal?
If they rent out the property, which they talk about doing with our neighbour, who is liable for the council rates, any damage done to the property through the tenants?
Who gets the rental income?
What happens if the developers go bankrupt and they have already demolished our home?

This deal sounds and feels really dodgy to us but was wondering if this is a standard investor/developer business practice.

thankyou for your time
Ekki

It might not be dodgy legally, but it shifts all of the risk to you.

Does the deal also include exit clauses for both parties and penalties?

 

[Ekki]

It might not be dodgy legally, but it shifts all of the risk to you.

Does the deal also include exit clauses for both parties and penalties?

Not sure yet, they are coming back with proposal next week, but the longer I think about it the less I am liking it. We do want a quick sale, and it would save us time & money as the property has been rented and not looking flash at the moment. As we have just been rezoned and they would be demolishing anyway it sounded "Too good to be true". thinking it might just be.
What sort of exit clauses would we be looking for. We've been on the road for last four months and our money reserves have been depleted. Huge bills left by tenants (unfortunately one of the tenants was our own child, so ofcourse we didn't get a bond, more fool us) so we have no money (and at this stage not even a job) to pay a solicitor to check over the contract when they get back to us.

 

[spludgey]

I'll pay above market value for any house if I can get it for 24 months interest free!

Well, maybe not "any", but you get the point.

 

[laurencei]

...anyway it sounded "Too good to be true". thinking it might just be...

That sums it up IMO

 

[Macca]

I sure would not be doing it without legal advice, their solicitor is going to cover their a**, not yours !

 

[pennyk]

Its not necessarily dodgy.. people do these sort of deals regularly. But as others have said, you carry all the risks.

If the sale is subject to the DA being approved, and its not approved, the deal will fall through. At which time, you may well be a year or so down the track.

you may not get the same amount of money doing a normal sale, but you will probably be better off both short and long term.

and you definitely need to get your own solicitor......

 

[pully]

Not sure yet, they are coming back with proposal next week, but the longer I think about it the less I am liking it. We do want a quick sale, and it would save us time & money as the property has been rented and not looking flash at the moment. As we have just been rezoned and they would be demolishing anyway it sounded "Too good to be true". thinking it might just be.
What sort of exit clauses would we be looking for. We've been on the road for last four months and our money reserves have been depleted. Huge bills left by tenants (unfortunately one of the tenants was our own child, so ofcourse we didn't get a bond, more fool us) so we have no money (and at this stage not even a job) to pay a solicitor to check over the contract when they get back to us.

ekki the thing that strikes me is because you find yourself with no money, no job and a property that you want to quickly dispose of, you are potentially in a vulnerable position and therefore more at risk.
i have no idea about the proposal to sell and be paid in 2 years etc, but certainly seek professional independent advice.
there maybe better options for you.
be cautious about telling people how motivated you are to sell too?

just a few thoughts.

 

[Player]

Its not necessarily dodgy.. people do these sort of deals regularly. But as others have said, you carry all the risks.

If the sale is subject to the DA being approved, and its not approved, the deal will fall through. At which time, you may well be a year or so down the track.

you may not get the same amount of money doing a normal sale, but you will probably be better off both short and long term.

and you definitely need to get your own solicitor......

I am with Penny. The risk may be all yours and they may actually word this up as an option. If it is a call option all the discretion is theirs. If it is a put and call, you may have some recourse. Suggest you have ALL paper work looked over by a lawyer (or two) BEFORE you sign anything.

I could be wrong however it appears like they may want you to have all holding costs whilst they go about adding value to your land and either developing or onselling with development approval. Nothing illegal with this of course however be careful you aren't stitched up on paying all holding costs for them unless it is for a juicy premium that appeals to you and you are comfortable with an eventual sale....well, not eventuating.

 

[rastus2]

Hi all,

This deal sounds and feels really dodgy to us but was wondering if this is a standard investor/developer business practice.

thankyou for your time
Ekki

Sounds like the perfect deal... for the buyer, not the seller..

If I was in your situation I would do the maths and make a simple choice.

As others have pointed out, all the risk is on you... if anything goes wrong with the company, the economy, the application to develop or indeed, the mood of the developer to go ahead... then you are left holding the bag. Your property will also be older, more run down, and possibly in a difficult market to shift.

If you are really in a rush to sell, then personally... I would discount the current asking price by enough to make it stand out from other similar properties on the market right now and shift it quickly rather than thinking you have sold it immediately but really holding your breath for the next 2 years that the sale will not fall through.

 

[lizzie]

We do want a quick sale, and it would save us time & money as the property has been rented and not looking flash at the moment.

But it's not a quick sale ... you won't get any money or sale for 2 years, during which time you cannot sell to anyone else or recind on the offer - during which time you still have to pay whatever outgoings are on the property.

I'd be doing the math and seeings whether the "above market" value is worth it.

If you can sell now for (say) $500,000 - and you put that money in the bank at 6% - in two years you'd make an extra $60,000 (not including compounding). How much above market are they offering you? It'd have to be at least $200,000 (on $500,000) above market to make it worth your while taking on the risk, costs and inability to move on and use your money elsewhere.

 

[Ekki]

Thanks everyone,
You've all confirmed what we were thinking. So decided not to take the deal when they come back unless it's cash now.
Back to cleaning, working and in 6 months time we will put the ol girl on the market and see how we go.
Thanks again.