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Agent does not like the Due Diligence clause

Discussion in 'The Buying & Selling Process' started by hash_investor, 5th Apr, 2016.

  1. hash_investor

    hash_investor Well-Known Member

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    Do you normally buy without due diligence clause? My solicitor says to put that in. But agent says finance and B&P clauses are already there so he won't accept the due diligence clause. I wonder why?
     
  2. Bran

    Bran Well-Known Member

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    I've dropped it. The seller's baulk. You can get out on the finance and B&P.
     
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  3. Chilliblue

    Chilliblue Well-Known Member

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    Also have not used them on recent sales. No need to upset the agent.
     
  4. Nick Valsamis

    Nick Valsamis Well-Known Member

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    Simply because it doesn't benefit the vendor to do so.
     
  5. Marg4000

    Marg4000 Well-Known Member

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    So what is the due diligence clause? Never heard of it for residential property.
    Marg
     
  6. Big Will

    Big Will Well-Known Member

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    It is all up for negotiations, say you can remove the DD clause but you would need to reduce the price by 5-10k+ (depending on price)... Put it back on them keep the DD clause in and get a better price or remove it and get a lower price, as you will need to take the additional risk instead of the vendor.
     
  7. sanj

    sanj Well-Known Member

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    I've used it on my last 3 purchases but they were development sites, cash offers and the agents all knew I was serious, had the money, was spending decent $$ during DD so it wasn't a stalling tactic etc. it can and does work, particularly for seemingly difficult properties where other buyers might have been scared off paying a fair price without the results of said DD. In all those cases I wouldve not paid as high a price or not gone ahead at all without the DD clause. a lot of it comes down to the level of comfort you give to the agent that they can then pass on to the seller. if it's just "not sure why the buyer is doing this instead of just a budding inspection" then chances are the seller will say no.

    for a basic buy and hold a DD clause does seem pointless unless you're talking just a couple of days to maybe confirm something with Council as effectively you're being a given an easy "out" instead of abiding by set out terms in a b&p clause.
     
  8. Big Will

    Big Will Well-Known Member

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    Something like this;

    Due Diligence Clause

    This Contract is subject to and conditional upon the Buyer carrying out due diligence enquiries within 10 business days of the Contract Date. Should the results not be satisfactory to the Buyer in its sole discretion, the Buyer may terminate the Contract by notice in writing to the Seller's solicitors, to be given within the 10 business days. Upon termination all deposit monies paid will be refunded to the Buyer.

    Really it is just a throw away clause (on 90% resi properties) but is good to have it in as you can just say it wasn't up to my satisfaction where as STF or STB (or P) requires something. You could not like how the sun hits the windows in the afternoon with the DD clause.
     
  9. Marg4000

    Marg4000 Well-Known Member

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    So basically it is a 10 day, no penalty cooling off clause?

    What vendor would agree to that!!
    Marg
     
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  10. See Change

    See Change Timing Lord Premium Member

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    I don't do a ' Due diligence clause " you should have done that before .

    Building and Pest ( subject to Purchaser satisfaction ) , Finance and ( if I haven't seen it ) subject to purchaser satisfaction with inspection .

    In the example Sanj mentioned , not unreasonable .

    Cliff
     
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  11. mrdobalina

    mrdobalina Well-Known Member

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    I've used it for development sites where I've had to spend money or talk to professionals to confirm a few things. This includes geotech report, confirm lot designs, etc.
     
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  12. Nick Valsamis

    Nick Valsamis Well-Known Member

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    No vendor would normally agree to that on a regular residential transactions unless they only had 1 buyer and are desperate to sell.
     
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  13. hash_investor

    hash_investor Well-Known Member

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    Does that mean my solicitor is doing his "Due Diligence"?
     
  14. BuyersAgent

    BuyersAgent Well-Known Member Business Member

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    As @sanj has said they work on development sites (and some commercial properties too) because there is less competition and the owner knows it is only a developer who will give them top dollar. In very quiet markets you might get the clause agreed to by desperate vendors but in heated markets no vendors of standard resi properties need to leave them in, so refuse them. In NSW the closest equivalent that can be useful is a longer cooling off period with non refundable 0.25% so the vendor knows you have a little skin in the game and you limit your risk to a very small amount. Your solicitor will always suggest clauses that minimise your risk but they don't always live in the real world with an understanding of the market.
     
  15. Nick Valsamis

    Nick Valsamis Well-Known Member

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    Maybe or maybe not. You would need to ask your solicitor what they will do for you.
     
  16. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Building/pest inspections and finance should be all you need - anything else seems like overkill and is going to make the offer unattractive and the vendor nervous.

    Cheers

    Jamie
     
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  17. SmashedEconomy

    SmashedEconomy Active Member

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    If you understood what due diligence actually is, you wouldnt be asking this question. It isnt something to ignore - your own personal due diligence is very important.

    A vendor who doesnt accept your conditions logically gets pinged, but here, it seems people rethink their strategy! Laughable!
     
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  18. RPI

    RPI Property Lawyer, Town Planner Business Member

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    DD clauses are very common on resi properties in QLD. As long as their expiry aligns with the finance date most agents don't have an issue with it. BUT the finance clause in QLD is just as good of a get out as long as you apply for finance, if you don't apply for finance then you can't terminate under finance clause.
     
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  19. mcarthur

    mcarthur Well-Known Member

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    I've used it on a standard resi. Well, sort of standard - it took more than two weeks for the council to decide on whether the underneath could be separately rented, and I knew it would take some time hence using a DD clause. The vendor didn't mind, and in fact the agent suggested removing the other clauses like B&P and finance as the general DD covered anything!
     
  20. Big Will

    Big Will Well-Known Member

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    A desperate vendor or one with no other options or only one offer (yours).

    With all the people I known personally to use the DD clause (one above) none of them have actually claimed on it.

    Again it is all part of the dance and is the first thing to throw away. However if it was a sellers market you wouldn't be using it as it makes your offer a lot weaker.
     
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