Weird Proposal from REA?

[JustALearner]

Hi All,

Just thought it would be a great idea to get your thoughts on the below:

Yesterday we (we = my partner and I) made an offer on a place. The offer was declined and a counter offer made to us for 10k higher then we offered. We told the agent that our offer was our max for the place, so he said:

"OK tell you what, I think your offer is close to the mark so sign the contract and attach a cheque for 0.25% and I'll see the vendors. If they sign the contract too then your all done and you begin the cooling off period. If they dont, we hand you back the cheque and we move on".

I found this strange. Sign a contract for our offered price (even though it was declined) and see what happens? Weird!!

After speaking to my solicitor about this, apparently this is sometimes used by agents to 'back a vendor into a corner'. Thats all great EXCEPT:

a. Once we sign it, it prevents us from looking at other places as we don't know weather we have the house or not until they let us know. I asked if we can put an expiry on the contract and so if we don't hear from them by a certain date then its over - Im told we cannot do this.

b. If I want our solicitor to look over the contract before we see the agent, they will charge us for this (fair enough) and then if the vendor says no we has wasted our money for the solicitor going over the contract.

So in short, we have 3 possiblities:

1. We give the REA a cheque and a signed contract and they accept, then I sit down with the solicitor and we find a clause in the contract that we don't like and we loose our 0.25% cheque because we backed out during the cooling off period

2. We give the REA the cheque and a signed contract and the vendors don't accept, we loose whatever it costs for the solicitor to review the contract.

3. We roll the dice and see how we go.

Im going to call the agent tomorrow and tell him that my letter of offer and a 0.25% cheque will have to do. Previously we only supplied a signed letter of offer, however we are happy to hand over a 0.25% cheque to back up our seriousness.

If he doesnt like that, we are going to walk away.

Whats your ideas on this?

 

[urban cowboy]

what was the reason given for not being able to put a sunset clause on your offer (point a)??? that is a very common practice in Qld
- i.e this offer is valid until XXpm on XX/XX/XX. Should this offer not be accepted by this time the offer is withdrawn and all moneys paid by way of deposit are refundable in full...etc etc...that isn't verbatim but you get the ideea. i don't like them personally, but they're quite common.

i have no problems with the signing of the contract part or even offering a deposit, however the amount perplexes me...maybe its a NSW thing??

i've never bought in NSW so not 100% on the process, but what other clauses, terms and conditions would there be over and above the standard??? is there a standard form of contract down there??

 

[Ajax]

Hi Justalearner,

I'm in NSW and have just been through the same thing and had the same concerns. My conveyancing solicitor did not seem too perturbed about giving a signed contract and 0.25% initial deposit (with me retaining the cooling off period) to the vendor's agent. My conveyancing solicitor's advice was that the offer could always be revoked where not already accepted by letter from me to the vendor (properly drafted by my conveyancing solicitor).

In my case the vendors agent just wanted to wave a signed contract in front of the vendor and browbeat him into accepting an offer the vendor thought was a bit on the low side. I suppose real estate agents have a hard time getting vendors to accept an offer below the vendors' initial expectations (and may be keen to close a sale if the property has been on their books for a while).

What was a complicating factor was that there were special conditions in the contract drafted by the vendor's conveyancer that I wanted removed (as did my conveyancing solicitor) such as deposit be released to the vendor forthwith. We put in our own terms but these were initially not accepted by the vendors conveyancer. Upshot is if you want to hand over a signed contract and 0.25% deposit to the vendors agent you need to be happy with the contract terms (particularly any unusual special conditions)...and its hard to negotiate both price and conditions (easier to negotiate one and accept the other).

Ajax

 

[JustALearner]

what was the reason given for not being able to put a sunset clause on your offer (point a)??? that is a very common practice in Qld

I had a feeling you would reply Urban Cowboy (appreciate it though! )

There was no problem with putting a sunset clause in the letter of offer, but I wanted to put one on the signed CONTRACT the REA had asked for so that if a week had elapsed and the vendor still hadn't made up their mind, we could forget about it and continue looking around.

 

[Glucose]

It's pretty common here to sign a contract as an offer to purchase, but no cheque with it. If you know what clauses to put on a contract this is fine. Then if the vendor agrees to your offer they sign the contract & then you give them a cheque. I usually only give cheque for $1000. Of course you can put a sunset clause in the contract - you can put pretty much what you like in the special conditions section. I also put in the finance part "sufficient to complete" and in the bank section "bank of buyers choice".

 

[steveadl]

Posted by JustALearner

1. We give the REA a cheque and a signed contract and they accept, then I sit down with the solicitor and we find a clause in the contract that we don't like and we loose our 0.25% cheque because we backed out during the cooling off period

In this scenario, would'nt you get your cheque back? In SA during cooling off you can back out without any reason and you don't lose anything.

Although you usually only pay a token deposit after the cooling off in SA, not before - does that make it different?

Cheers
Steve

 

[JustALearner]

In this scenario, would'nt you get your cheque back? In SA during cooling off you can back out without any reason and you don't lose anything.

From what I understand, you loose this if you back out during the cooling off period..

 

[urban cowboy]

I had a feeling you would reply Urban Cowboy (appreciate it though! )

hehehe, that's why i'm here...no seriously, i will be doing some IP buying in NSW soon (hopefully) and this is new to me!!! so very keen to learn as much as i can - its soooo different to QLD...

I meant what is the problem with a sunset clause on the contract??? we usually don't deal with letters of offer here...an "offer" (our most common form of offer anyway) is the full contract paperwork signed by the buyer that hasn't yet been signed off by the vendor...i.e. that very same paperwork becomes the contract once the vendor signs it...

so, why can't you put that clause in the contract???

 

[JustALearner]

so, why can't you put that clause in the contract???

To be honest, I dont know. Im going off the advice of my solicitor. Maybe someone can confirm if this can/cant be done?

 

[Dazz]

"OK tell you what, I think your offer is close to the mark so sign the contract and attach a cheque for 0.25% and I'll see the vendors. If they sign the contract too then your all done and you begin the cooling off period. If they dont, we hand you back the cheque and we move on".

I found this strange. Sign a contract for our offered price (even though it was declined) and see what happens? Weird!!

This is the exact process we go through over in WA. We do this about every week. What's weird about it ??

If the vendor signs, done deal. If they don't....oh well....nothing ventured nothing gained. If they are close, there's usually a whole bunch of chook scrawling with contracts faxed backwards and forwards until you finally agree. Argy bargy in it's purest form. Gotta love it.

Why you guys over in the East insist on agreeing everything up front before sitting down and signing a contract is beyond me....must be your individual State laws that I don't know about.

 

[Firsthomelooker]

Why you guys over in the East insist on agreeing everything up front before sitting down and signing a contract is beyond me....must be your individual State laws that I don't know about.

In NSW & ACT when you sign the contract and hand it over the vendor... that's it, it's a done deal. You can't negotiate on anything in the contract and you can't change your mind, except if it is during the cooling off period, and then you loose 0.25%.

The problem with the cooling off period is that the standard 5 days is usually not enough time to get pest, building reports, building certificates etc. and unconditional finance. Commonly it is extended to 10 days but even this isn't enough. Even if your finance if pre-approved, most banks will want to do a valuation (typically 5 days turnaround) before giving unconditional. If your cooling off period expires and the property valuation comes in too low... you have lost 10% of the purchase price.

How does negotiating the contract after it has been signed & exchanged work in QLD/WA? Doesn't it make having a contract pointless if nothing is actually agreed upon when signing?

 

[urban cowboy]

that explains my question...thanks!!!!

In qld, and i assume WA by the sound of it...a contract is a standard form document that you fill in the blanks...

if you were to put an offer in on a property i had for sale, i would encourage you to sign the contract documents with the details of your offer, i.e. price, finance clause, pest/building clause etc etc. this document DOES NOT become legally binding until both parties have agreed to the terms, conditions and price...for that to occur, the vendor has to sign the paperwork without alteration and the vendor/vendors agent must date the contract and supply copies to both parties or their rep's

Without the above, the contract documentation is only an offer and can go back and forth as many times as necessary to get agreement...hence Daz's comment about chicken scratch - they often look like that by the time they're finished due to crossing out figures and rewriting etc...

does that make sense??

 

[Dazz]

Sounds like Qld and WA are exactly the same.

I'm looking at a cracker of a property in NSW....and absolutely dreading the process as I have no clue as to all of the different contract toings and froings.


Maybe Justalearner can teach me about NSW, and I'll explain our dodgy system to him....

 

[aim_higher]

I also put in the finance part "sufficient to complete" and in the bank section "bank of buyers choice".

I tried that on the weekend (in Brisbane) - the agent wouldn't take the 'sufficient to complete' clause - he wanted a figure or LVR - can they do that?

He basically said the vendor wanted it and would be using it to assess the offers...

 

[Sultan of Swing]

In qld, and i assume WA by the sound of it...a contract is a standard form document that you fill in the blanks...

if you were to put an offer in on a property i had for sale, i would encourage you to sign the contract documents with the details of your offer, i.e. price, finance clause, pest/building clause etc etc. this document DOES NOT become legally binding until both parties have agreed to the terms, conditions and price...for that to occur, the vendor has to sign the paperwork without alteration and the vendor/vendors agent must date the contract and supply copies to both parties or their rep's

Without the above, the contract documentation is only an offer and can go back and forth as many times as necessary to get agreement...hence Daz's comment about chicken scratch - they often look like that by the time they're finished due to crossing out figures and rewriting etc...

Same process we go through in Tazzie. Makes sense to me....

 

[urban cowboy]

I tried that on the weekend (in Brisbane) - the agent wouldn't take the 'sufficient to complete' clause - he wanted a figure or LVR - can they do that?

He basically said the vendor wanted it and would be using it to assess the offers...

I smell a bit of BS there... i'm not sure where the law would stand given the chance of it being tested in court, but i have never ever written a figure in that field...always used sufficient to complete or similar. I suspect its an agency practice - most vendors wouldn't know let alone care...and the agent is required to communicate all offers anyway...

 

[geoffw]

Sounds like Qld and WA are exactly the same.

That was my experience of selling in Queensland.

I'm looking at a cracker of a property in NSW....and absolutely dreading the process as I have no clue as to all of the different contract toings and froings.

Maybe Justalearner can teach me about NSW, and I'll explain our dodgy system to him....

It's easy. The process is similar- except that in NSW, it can take a week or two until "exchange" (which, in Qld and WA effectively occurs when an offer is accepted and signed by both parties).

It will probably help to deal with a NSW solicitor who will be familiar with the processes, and who knows all the legals for that state. After all, many thousands of people in NSW manage to deal with it every day

 

[sunshine]

b. If I want our solicitor to look over the contract before we see the agent, they will charge us for this (fair enough) and then if the vendor says no we has wasted our money for the solicitor going over the contract.

Is this same solicitor doing the conveyancing?? I would expect this to be included in the conveyancing fee.

In NSW I have ONLY made offers verbally. After acceptance contract goes to my NSW solicitor and then he sorts out the details with the Vendors solicitor. E.g 5% deposit, early access etc etc. We get the reports and finance together, decide if its a go, THEN we sign and exchange contracts and pay deposit.

In Qld, well the game is a bit different. Contract and clauses are nutted out with offer, deposit, settlement date etc etc, then signed. REAs certainly earn their money up here. Gosh, going back and forth from purchaser's place to Vendor's place to get the contract changed and signed again. Then when all agreed and happy holding deposit paid ($1000).

I think your NSW REA may be pushing the boundaries...

Sunshine

 

[Firsthomelooker]

It sounds like the processes really arn't all that different, except that in QLD/WA the physical paper contract is to-ing and fro-ing with suggested changes, whereas in NSW/ACT the solicitors each have identical contracts and are to-ing and fro-ing with phone calls to suggest changes.

 

[JustALearner]

Just an update for anyone interested.. I spoke to the REA and advised we were not comfortable signing a contract without an agreed price and he said that was fine. So now he has a letter of offer and a cheque for 0.25% to show the vendors, if they dont take it nothing lost