Would you take this deal? (2yr settlement)

[Cassettee]

We are selling our PPOR after only owning it a couple of years. It's on the market for $499,000 but we'd be happy with $475,000, which is what we paid. Market here is stagnant. We weren't intending to sell at all when we bought, but have decided we don't want to live in this area/type of property after all. It's a big place with a fair bit of lawn/garden maintenance and it's a bit isolated. We're over it.

We're selling privately. We've had quite a few interested people - everyone loves it; no one actually has any money! We accepted an offer a few weeks ago at $470,000 but the buyers pulled out due to finance issues.

We've now been made an offer of $450,000 which is $25,000 less than we bought the place for. That sucks; however, the buyer has finance, and the deal has allows us to rent back as long as we need to for a lower-than-market rent, allowing us to plan our next move. Taking this deal means we'll pay out our mortgage and be left with $20k. We've accepted and are supposed to be signing the contract early next week. Settlement is 30 days.

Here's the pickle: another buyer has popped up today who is prepared to buy for $520,000 ... but not for another 2 years.

PROS: Obviously better price. She is prepared to put down a 5% deposit, released to us, and says the contract will be unconditional. She has her property on the market and supposedly a buyer whose offer she's prepared to accept. She wants to move in asap and rent the place back at higher-than-market rent. Weekly rent would cover about 70% of our weekly repayments. If we change'd to an interest-only loan, the rent would cover that plus a bit. She intends to get bank finance to settle at the 2yr mark. Taking this deal means we'll pay out our mortgage and be left with $90k.

CONS: We are hoping to get into our solicitor on Monday, but an ex-solicitor friend says it would be unwise to allow a settlement any longer than 12 months, as a lot can happen to scupper the deal in 2 years. We're also a bit leery of what might happen if she can't settle in 2 years - she's been very, very pushy and has even been trying to encourage us to not go through a solicitor (not gonna happen). She wants to make some alterations to the property shortly after moving in - she has a lot of animals and our place will need some changes to make it meet her needs. Basically we're worried that we reach the 2yr mark, she's unable to settle, she won't move out, she's altered the property making it harder to sell, she has to rehome her animals, and I wouldn't be surprised if she went to the media and tried to make us look like a***holes.

My questions are:
* At what stage is it too late to back out of the first deal?
* Would you take the first deal or the second?
* Is there any way we can minimise the risks of having a 2yr settlement?
* What are our rights if she can't settle in 2 years? (ie, financial penalty to her, returning property to original condition, making her leave or giving her more time for what payoff)
* Am I overlooking anything?

Hope this all makes sense. I would really appreciate "you guyses" advice - I've read through pages and pages of threads without finding this particular situation.

 

[DaveM]

I would run to the bus, ride it to the train to the airport, and get on a plane to get away from that deal.

 

[wylie]

I would run to the bus, ride it to the train to the airport, and get on a plane to get away from that deal.

I'm on the same bus and plane , sitting beside DaveM. (He is hogging the armrest. )

 

[westminster]

Whilst the money is tempting try and think a few things through

1. Will you be able to buy your own PPOR if your current one still has it debt on it.
2. With a 2 year settlement and her renting it it kind of turns it into an IP. Will this affect your ability to be able to claim it as CGT free
3. Will the 5% deposit being kept by you guys make up for any problems that will happen if you can't sell it in 2yrs time

The money is tempting but she knows she is high risk which is why she is offering way over market price to make up for that.

My gut say don't do it

 

[Scott No Mates]

Take the lower offer - it is a done deal. The other is a maybe at best, even if they sign an section 66w to waive the cooling off period.

You will be getting 5%/$26k released and possibly the rent.

You will need to rent somewhere else (and pay rent).

 

[Cassettee]

Thanks, you guys are awesome for replying so quickly (and definitively!). Also thanks for your sense of humour in gently telling me I'm an idiot to even be considering this

 

[Joe D]

I would consider it but only if the deposit is increased to between 10-15% (non refundable).

If things went pear shaped you wouldn't be too badly off and if the buyer can't raise the 10-15% now, it is highly likely they wouldn't be able to finalise the deal in 2 years.

 

[TMNT]

I'm trying to work out the motivation for this

When it comes to rentals some people offer more because their references are no good

But if her finance position was bad why would she offer more? And if she had the cash why wouldn't she go in low

The only thing I.can think of is she I'd sure that the property is going to shoot up in value hence paying the extra 50k

Or some personal reasons

 

[marg4000]

The only thing I.can think of is she I'd sure that the property is going to shoot up in value hence paying the extra 50k

Or some personal reasons

Or she has no intention of completing the contract so it really doesn't matter what price is offered on the contract.
To me, the high amount offered is very suspicious.
Marg

 

[Terry_w]

What are the terms of the agreement? If she doesn't settle you may only be entitled to keep her deposit.

In 2 years it may be worth $550k and then you may not have made as much as you could, however, it could be worth only $500k and then you would have made more.

What happens if she dies, goes bankrupt, crazy or divorces?

Will she be lodging a caveat?

You won't get the funds for 2 years so where will you live in the meantime? If you can afford to borrow for a new PPOR then you may have higher interest because your cash is tied up, this won't be deductible.

Does she have the ability to get finance in 2 years? Even if she could now a lot of changes can change.

Under what terms will she be able to reside there- lease of licence to occupy.

Who should pay the insuance, rates etc. What about repairs.
What if the house burns down and no insurance?

what if she has no other assets and you need to sue her for something?

What if she wants to grow opium poppies hydroponically? Run a brothel?
Start a toxic waste dump?

 

[TMNT]

Or she has no intention of completing the contract so it really doesn't matter what price is offered on the contract.
To me, the high amount offered is very suspicious.
Marg

Why on earth would she do that unless:

She is nuts?
She has a personal vendetta against the vendor
She has some sentimental attachment to the house and doesn't want anyone to buy it?

 

[jackbak]

Have you negotiated the deal at all - demand a 10% deposit or a 12 month settlement? If she wants the house so bad then you may have room to move.

 

[b simpson]

Seems a bit dodgy to me. Too many possible negative outcomes with the 2 year period. As previously suggested, perhaps try to negotiate better terms if she really wants the place?

I would reply with different terms and an expiry date for the offer to be accepted.

 

[Cassettee]

She really, really wants the place, to the point of almost being a bit harrass-y hence the high purchase price offered. I think she wants to keep some cash free and not put it all into a deposit, and plans to work her butt off for 2 years to qualify for a home loan.

We're not going to be buying any other property in the near future anyway, so having cash to do that is not an issue.

Has anyone ever had a deal go bad? In hindsight was there really any adequate protection for you as the vendor?

All other factors aside, we've said that we can't even consider any other terms and conditions unless settlement is within 12 months. However, she seems to take that as a sign to increase the purchase price or rent!

 

[D.T.]

Tell her to get back to the asylum

 

[neK]

I could have sworn i read something here a few months ago about a person offering a delayed settlement then moving in.

The "purchaser" ended up moving in and refusing to move out....

As for your actual question, i would take the lower deal too. The 2nd deal sounds suspicious and pushy people just arent very nice to deal (especially when things don't go their way).

 

[vaughan]

Would this be a situation where vendor finance deal would be appropriate?

 

[jackbak]

I think you need to ask yourself one question:

If someone said to "Ill give you $26,000 if you don't put your house on the market for two years", would you take the offer or let it go?
If you would take the $26k then you've got nothing to lose, if you would leave the $26k then go with the first purchasers offer.

Regardless of her motives and chances of getting the money together, the fact remains that she is giving you $26,000 upfront to do what you like with.