Negotiating contract after exchange?

I'm about to buy my first IP and just wondering about a couple things. I have pre approval, and my buyers agent has found something but I need to sign the contract basically within a couple hours once it's drawn up.

I understand the process as this:

- Sign contract and put down 0.25% deposit
- 5 day cooling off period after vendor has signed contract and exchanged, in which I can do B&PI etc
- 42 day settlement (unless negotiated otherwise)

My buyer's agent said there was a 10 day cooling off period but the NSW Fair Trading website said 5 days..?

Also, my BA said my solicitor can negotiate contracts etc in the cooling off period. But I don't see how they can change the contract once it's exchanged?

Also I understand I usually have to put down a 10% deposit - when does this happen?

Cheers
 
Listen to the department of fair trading! Different states have different rules but NSW is business 5 days and after that it's very hard to get out of a standard contract. If you decide against buying it, you'll forego your 0.25% deposit which the vendor will keep. It's very important that you put in the contract that it is pending a satisfactory building and pest inspection. That way, you can get out without paying the vendor anything.
After you get the inspections back, you can renegotiate with the vendor. If they refuse, you can walk and only be down your ~$500 for inspections.

I actually like to pay a 5% or 10% deposit and not bother with the 0.25%. It's psychologically much harder to give something back that you've had, so it's my belief that the vendor is more likely to renegotiate if they're holding a larger deposit.

Which area of NSW is the property in?
 
It is possible to renegotiate terms of the agreement once it has been entered into - on the implied threat of pulling out of the contract. It is generally preferrable to get the terms done before contracting.
 
Lots of people get 10 days cooling off as part of the terms of the negotiation. Pretty standard really, even though the default cooling off is 5 days.
 
Listen to the department of fair trading! Different states have different rules but NSW is business 5 days and after that it's very hard to get out of a standard contract. If you decide against buying it, you'll forego your 0.25% deposit which the vendor will keep. It's very important that you put in the contract that it is pending a satisfactory building and pest inspection. That way, you can get out without paying the vendor anything.
After you get the inspections back, you can renegotiate with the vendor. If they refuse, you can walk and only be down your ~$500 for inspections.
So if it's pending B&PI then I won't lose my 0.25%?

How can I walk and only be down ~$500? I assume you meant if this happens in the cooling off period?


It is possible to renegotiate terms of the agreement once it has been entered into - on the implied threat of pulling out of the contract. It is generally preferrable to get the terms done before contracting.
I assume you mean I can renegotiate during the cooling off period?

After the cooling off period, the 'threat of pulling out' seems useless, no?

Lots of people get 10 days cooling off as part of the terms of the negotiation. Pretty standard really, even though the default cooling off is 5 days.
If the contract says 5 days, I assume I can just change it to 10 days by hand (assuming the vendor agrees)?
 
So if it's pending B&PI then I won't lose my 0.25%?
That's right, they'll be refunded as you're not cooling off, but exiting the contract due to one of the requirements not being fulfilled.

How can I walk and only be down ~$500? I assume you meant if this happens in the cooling off period?
As above, this doesn't really have anything to do with cooling off. Any solicitor/conveyancer that's worth their money should put a clause into the contract that it's pending satisfactory reports. Usually this is limited to a two week period.
I've renegotiated after a report came back. A building report will never come back spotless, so that usually gives you some leverage. But be careful, if you nitpick through the contract, you'll turn the vendor against you. If there is something worthwhile negotiating in there, do it, otherwise leave it be though.

If the contract says 5 days, I assume I can just change it to 10 days by hand (assuming the vendor agrees)?

That's what you pay a solicitor for. Don't do any changes yourself, just get your solicitor to negotiate them for you. It's easier that way.
 
Any solicitor/conveyancer that's worth their money should put a clause into the contract that it's pending satisfactory reports. Usually this is limited to a two week period.


That's what you pay a solicitor for. Don't do any changes yourself, just get your solicitor to negotiate them for you. It's easier that way.

Thanks for your help, that's cleared a couple of things up. I do have a very good solicitor so no problems there.

My issue is that I need to sign the contract straight away, so I don't have time for my solicitor to negotiate it before I do so. If I do this, I'll miss out on a good deal.

I suppose that when the agent comes to my office with the contract, I'll request a longer cooling off period and make it pending B&PI. I assume they will have to call the vendor to make sure they are happy with this, and then they can add this in by hand on the spot so that i can sign it? I'll then need to get everything sorted in the cooling off period.
 
If you are buying in Sydney, your BA should be able to get hold of the contract as soon as the place is listed. He should be able to pass this on to your solicitor to review before you sign anything (most solicitors won't charge to review a contract of sale providing they get the eventual conveyancing work).
 
Thanks for your help, that's cleared a couple of things up. I do have a very good solicitor so no problems there.

My issue is that I need to sign the contract straight away, so I don't have time for my solicitor to negotiate it before I do so. If I do this, I'll miss out on a good deal.

Personally, I wouldn't do it. If you don't have time to have the contract looked at by a solicitor, then it wouldn't be for me. Whatever you do, don't sign a section 66W if you're going to sign the contract without the solicitor looking at it. This will waive your cooling off period and you don't want that if you don't know what exactly is in the contract.
I've looked at dozens of contracts now and pretty much know what to look for (in NSW anyway), but I wouldn't be comfortable with saying that I haven't missed anything.
If you sign a contract and a section 66W, it could potentially cost you hundreds of thousands of dollars.

Try what Scott suggested, sounds like good advice.
 
Thanks for all the advice. I think you've covered most of my questions. Once the contract is drawn up, I'll do my best to buy enough time to get the contract emailed over and get my solicitor to look over it quickly before I sign it.

Thanks again :)
 
Spludgey, you can't sign a S66W without first getting solicitor's advice ie the conveyancer/solicitor must explain the implications of signing such a document.
 
Quote:
Originally Posted by Terry_w View Post
It is possible to renegotiate terms of the agreement once it has been entered into - on the implied threat of pulling out of the contract. It is generally preferrable to get the terms done before contracting.

I assume you mean I can renegotiate during the cooling off period?

After the cooling off period, the 'threat of pulling out' seems useless, no?

A cooling off period allows you to back out of the contract for a short period after entering it. Designed for 'buyers remorse' probably. You should really be agreeing on all the terms of the agreement upfront.

But it would be possible to exchange and then, during cooling off, say to the vendor you are going to rescind the contract if you don't change the following..... in the contract. They may or may not agree.
 
If you are considering cooling off then why put an offer in? You should know within 5 days after vendor accepting if you have any remorse.

Heck in Vic you only get 3 clear business days.
 
If you are considering cooling off then why put an offer in? You should know within 5 days after vendor accepting if you have any remorse.

Heck in Vic you only get 3 clear business days.

True but in NSW things work a bit differently. In some cases clients just verbally agree on a price with the vendor, put that price on the contract, but don't formally 'exchange'. In the meantime, they get valuations/finance approved, and then once that is all settled they formally exchange and the cooling off / settlement begins. This is because in NSW there are 2 contracts, not 1. In Victoria of course this doesn't happen as there is only ever 1 contract.
 
How I approach to put an offer on a property.

Why not:
1. Produce the offer in writing (price and conditions you want) and email to real estate agent with any legal contracts and perhaps copy of PL insurance if trying to negotiate immediate access.
2. Offer negotiation and if accepted forward the contract to your property lawyer for review. I have agreement with the lawyers that they review for free but I will pay a fixed fee ($1600) and will use them if successful in buying process.
3. If happy with the review of contract: Exchange 'conditional' contract (a. satisfactory outcome in building & pest inspection, b. Unconditional finance approval, c.any special due diligence requests).
4. Organize building & pest and asbestos report if needed (determine costs for rectifying if any issues arise)
5. Now, after finance approval and inspection reports proceed to an 'unconditional contract'. At this stage, you are locked in to buy and cannot terminate without incurring heavy penalties.
6. On exchange of contract organize building insurance if renovation starts then perhaps "Construction all risk insurance OR Owner-builder insurance.
7. Project plan what you wish to do with the property (tradies, council approvals, fixtures, etc...)
8. Inspect 1-2 days prior to settlement to advice if OK. Then you become the owner and start to incur mortgage holding cost from this point if you have finance on it.

So you see anything is negotiable. If you are active and you have the right team with you they will do this for you. There are property lawyers that do check contracts upfront for free and have a fixed fee arrangements, but their fee may be higher when compared with solicitors fees.
IMHO, a good property lawyer would be worth the money as they can save you money and lots of hassles down the track... Good Luck!
I suppose it's up to who plays the game the best then can get the results first, right? I know the hard way when I dealt with RE agents in unprofessional ways and how I missed out on some deals.... Now I wish I made the offer in a formal way rather than just through words and mouth..
Example, rang agent, I asked questions, IP going to auction, agent wouldn't even state the asking price, wouldn't let me make an offer, he gave out 28 contracts so was I told, etc... said he had to go, didn't even want to pass me the contract, yes, really! I was willing to offer up to $670K. Guess, how much the property went for at auction? $640K and I was mad as my inexperience passed on the deal. I never went to see the property and never followed through - my mistake which I learned from!
So now, I use the strategy outlined above as IMO, I don't think even the agents can predict how much the property will go for, right? Imagine if I was the seller, I just missed out on extra $30K, so perhaps he was a good agent to deal with when buying but a bad agent to deal with when selling!
Just remember, no-one gets all the deals all the time and if it wasn't meant to be, so be it. Sometimes we get too emotional playing the game, and that's what it really should be. Most unprofessional investors do buy just on emotion, as we are only human after all. Just see some of the prices they pay for the properties!
 
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