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Buying a property with a very long settlement

Discussion in 'The Buying & Selling Process' started by James Bond, 26th Jul, 2016.

  1. James Bond

    James Bond Well-Known Member

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    Hi

    I have an opportunity to buy a property privately. The owners want a very long settlement (say 24 months). They are looking to buy a piece of land elsewhere and continue living in the old house during the settlement period while they build a new house.

    They would be happy to accept a below-market price in return for this arrangement.

    The property in question is fairly run down and would need redevelopment once settlement had passed.

    Has anyone else ever entered into this kind of arrangement and could give me any advice?

    Thanks

    JB
     
  2. kamchatsky

    kamchatsky Well-Known Member

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    What happens when there are repair requirements within those 24 months? What happens if the vendor trash the house? Who is going to pay for the damages/repairs?

    What happens if the bank's lending criteria changed so that you cannot borrow money from them?
     
    Terry_w likes this.
  3. Tonibell

    Tonibell Well-Known Member

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    Why not just have a leaseback arrangement ?

    Why do they want to sell now - do they think the market will drop ?
     
  4. James Bond

    James Bond Well-Known Member

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    They want to sell now because they need the deposit money to buy the land, but they want to keep living in the house until they finish building.

    I don't want to lease it to them and I don't care if it is damaged - the house itself is a wreck and probably dangerous so I don't want the responsibility of anyone renting it off me.

    Once they moved out I would either sell it as a knock-down or redevelop myself.

    JB
     
    Perthguy likes this.
  5. MTR

    MTR Well-Known Member Premium Member

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    I love these long settlements, especially if a development site as I can get my plans and permits approved during this period saving money

    If your intention is to develop the site I think it's great, most builders /developers want these terms, saving on interest
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Don't forget that in some states such as NSW stamp duty is payable within 3 months of the contract.
     
  7. timetoact

    timetoact Well-Known Member

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    What is the risk of the Vendor walking away from the deal if property prices move upwards in that time? My understanding is that is very little, if anything, the buyer can do about it?
     
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Low because of the contract, but a possibility.

    Often contracts have a clause allow parties to terminate on the death of either, on insolvency, insanity etc. Longer settlement means more risk of any of these happening.

    Also a greater chance of getting cold feet.

    And a greater chance of other's making a claim on that property and taking priority over the purchaser (a caveat may help)
     
  9. timetoact

    timetoact Well-Known Member

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    @Terry_w
    But in a stock standard contract is there any penalty to the vendor for breaching the contract?
    Does the buyer have any legal backing to pursue the vendor for costs involved or missed opportunities.

    Vendors get to keep the deposit and sue for any short coming in the re-sale price.

    Buyers get nothing - right?
     
  10. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    If the purchaser doesn't settle they buyer to obtain a court order to force them to. The buyer could claim costs too.

    But most buyers on't do this as it is too risky.
     
  11. timetoact

    timetoact Well-Known Member

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    Cool, thanks.
    Good to know there is some protection for buyers.