Section 27

[antistar]

What risks would a purchaser face for signing a s27 in Vic one month into a 90 day settlement? The vendors agent has requested I sign it out of the blue.
It will be of absolutely no benefit to me as purchaser so I won't do it but it got me interested in why people do this and what the downside for the purchaser could be. Anyone have any experience they can share? Cheers

 

[fresh investor]

No experience sorry, but what's a section 27?

 

[Peter_Tersteeg]

A section 27 allows the deposit in the REA's trust account to be released prior to settlement. The REA is then paid their commission and the vendor gets the balance.

Obviously the benefit goes primarily to the REA and the vendor.

The benefit to the purchaser is goodwill. It keeps the vendor happy and they might be more amenable to allowing early access for rental inspections or trades people making quotes. Even if they've agreed to this previously they can block it until settlement if they decide to.

This might be worth a lot, or it might be worth nothing at all to the purchaser.

Danwatto had an interesting experience recently with a purchase and the ATO as per this thread:
http://somersoft.com/forums/showthread.php?t=102285

This is a situation where you would definitely not want to release any deposit money early. The section 27 does have some provisions to protect against this sort of thing however (although I imagine it could still go badly).

 

[antistar]

Cool thanks Peter

 

[Terry_w]

The risk is mainly:
1. Vendor doesn't complete and you need to chase to get the money back
2. vendor goes bankrupt and you lose both the property and your deposit...

Best to seek legal advice, probably at least lodge a caveat, but as you say no benefit to you and you already have a binding contract so just refuse.

 

[fernfurn]

I have always requested a section 27 and never had one refused. I've also ok'd them and never had a problem. Par for the course in Victoria

 

[Tigerboy]

The vendor actually doesn't need your signature / agreement to the release of the deposit. Once a section 27 statement has been served, then unless you have a ground to object after, I think, 28 days, the deposit can be released.