Sunday, April 18, 2010

Using the fine print to your advantage

More about buying a property...

While in the negotiation stage for buying the property, we received a copy of the Contract of Sale. Going through the detail with a fine-tooth comb we stumbled upon:
1. The Vendor and their agent had the same surname (and an unusual one at that)
2. There was a caveat on the property from a finance company
3. A clause to release our deposit monies immediately to the Vendor for their use

What's so interesting about that?
Well, the same surname indicated the Vendor and their agent might be related - giving the agent either extra motivation to get a high price OR extra motivation to get rid of the property quickly. And the caveat indicated the Vendor had a second mortgage on the property - meaning they were under pressure to sell to repay this second mortgage. The deposit clause indicated the Vendor needed our money asap to repay debt or purchase another property.

As it turned out, we were spot on with 1 and 2 and sort of right with 3. Having a chat with our Buyer's Advocate, they went in to the negotiation offering an even lower amount than we had originally planned to offer (now AUD50k less than the asking price), but being completely flexible with settlement date. We also got clause 3 removed - our solicitor said this was too dangerous to remain as the Vendor can take your money and run.

And surprise surprise - our first offer was accepted. The Vendor was under financial pressure but also needed to purchase a new home to live in. They took the flexible settlement a step further and made it 6 - 14 weeks so they can have simultaneous settlement when they find their replacement property. To be honest, not having a concrete settlement date is really unusual and a little tricky to manage, so our solicitor and mortgage broker are aiming to have everything ready by the 6 week mark (if we have to delay settlement it costs us an extra 7% of the purchase price - yuk).

Now it's a waiting game to see when settlement occurs.

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