Hi, I was looking at a property that goes on auction next Saturday. I finally got the S32 document and was going to run it through the solicitor. But when I checked it myself, I saw that there was a $7000+ amount due in water charges and a $15000+ amount due in council rates/charges. The house is only about 6 years old; so I cannot believe how these figures materialised in the first place. (Check attachments) As I was told, the vendor was facing a lot of financial difficulties and that's what the real estate agent gave as the reason for selling. But the house appears to be renovated (painted walls, new carpets, new artificial grass backyard etc.) Am I reading this correctly? If so, what are the complications of these "debts"? Do these get transferred to the new buyer??? Would there be service disruptions (eg: water) because of this? Is this something you would want to steer clear of? I know the solicitor might be able to help me better on this topic, but I'm wondering if anyone else has ever had to deal with a case like this and how it turned out. If this is a definite no, I would rather save the money I spend on solicitor's services. Cheers
How do you make sure they do that? Add conditions to the contract? But isn't an auction purchase "unconditional"?
Solicitor will need to negotiate & agree prior to auction that separate cheques will be drawn to pay these amounts at settlement from the settlement monies and not in addition to the auction price. It may already be covered in the sales agreement (as happens at settlement for most properties).
Very common AND a REALLY REALLY good sign to be buying at. It may sound vicious but a seller in financial distress is a motivated seller IMHO. As people above had said, at settlement your solicitor and vendors solicitor basically gets the bills paid, and whatever is leftover goes to the seller. The Y-man
If there is a lender shortfall at settlement the lender will normally delay settlement if they havent worked a deal to get their full amount of debt repaid by their client. They wont release security if they dont get all the cash or agree to some other solution. I have seen a handful of clients affected with this and they faced lengthy delays. And penalties arent assured since the vendor has no further cash. In one I recall the lender wanted a price adjustment (upwards) or it refused to settle...Easier to agree but cost the client $8K or so....They wanted a deduction...No !!
@nushydude Worst case, factor in $25k by lowering the maximum amount your a willing to bid to by the amount. The Y-man
Its a unknown value until you get to settlement. Its one of the hidden traps in buying property - You assume the other party can contract. Their bank is the ultimate go / no party. If the bank doesnt want to hand you title then they wont. Who will you sue at high cost and high risk - The party with no money ? If you believe the vendor is distressed you will need to determine this before making a contract. If they are...stupid....they may disregard the issue of ensuring their bank gets paid and the problem will become yours - Forget suing them. You stand in line after the secured lender. These issues are all part of the court arguement against dodgy property spruikers who claim to buy distressed property. You can end up dealing with someone who cant freely contract. Its an assumption in property contracts that both parties enter into a contract freely...The vendor may not be in such a position if they have neg equity. I would argue the selling agent would also be concerned. They may not get paid. I'm sure Daryl and other lawyers / conveyancers have seen instances of this from time to time.
@Paul@PFI So, after the buyer settles, the vendor pays off the debt I mentioned and with the remaining money she received from the buyer, she would have to settle her mortgage. There is a chance that there will be a shortfall and her lender will not release the title because of it. Is this what you mean by the lender shortfall? This is bad! Even if all the conditions are included in the contract, if she doesn't have money - SHE DOESN'T HAVE MONEY, right? @The Y-man I know that we can limit our budget 25k less. But the risks seem too high. I will talk to my solicitor shortly anyway and get an opinion.
No. She owes council $9k for example. As part of money you pay for vendor you draw a cheque for $9k and you pay council after settlement on behalf of the vendor.
So there is no risk in there, as long as the house sells for more than what the vendor owes her bank + what she owes the council & yarra water?
There is a risk, you just need to take it into account and assess the likelihood of something happening.
After checking the documents provided in the Section 32 document, I was advised against bidding by my solicitor, unless proof of vendor's mortgage details and some caveat details were provided.