Extended property settlement

Discussion in 'The Buying & Selling Process' started by Dcg, 28th May, 2017.

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  1. Dcg

    Dcg Member

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    We are looking at purchasing an IP where the vendor wants an extended settlement on a 5% deposit as he is building and doesn't want to move twice. Has anyone have any thoughts on the pro's and con's . The settlement would be in 6 months.
     
  2. dabbler

    dabbler Well-Known Member

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    Finance is the only catch, but if you easily service with all lenders, then not likely an issue, if your very tight and down to last lender, your taking a risk of not being able to complete.

    But seems they want something, so you should be able to get a suitable agreement/conditions to protect yourself.
     
  3. Scott No Mates

    Scott No Mates Well-Known Member

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    Can have some advantages and disadvantages.

    • Locks in the purchase price (is it a rising market or will it drop in 6 months?
    • Only require 5% deposit
    • Locks you in
    • Can't use the property until settlement
    Is the vendor open to leaseback?
     
  4. twobobsworth

    twobobsworth Well-Known Member

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    Do they want access to your deposit prior to settlement?
     
  5. Dcg

    Dcg Member

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    Thanks for your reply . Our decision will be based on the growth in the area . Also they are open the a lower sale price if they can stay the 6 months. So if we insist on a standard settlement time a leaseback would work for all parties hopefully.
     
  6. Dcg

    Dcg Member

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    I have to find that out but I assume yes .
     
  7. Dcg

    Dcg Member

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    Finance is not an issue. There would have to be certain terms in the contract for our protection I agree
     
  8. dabbler

    dabbler Well-Known Member

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    You also could face a vendor that will not or cannot complete. Finance can always become an issue :)

    You could look at buying,settling & take possible rent into consideration with offer price, then give a lease for x time with a peppercorn rent. This gives everyone certainty, well as much as practical.

    There may be tax things to think of too.
     
  9. Dcg

    Dcg Member

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    That is true thank you so much for your answers
     
  10. Jaggannath

    Jaggannath Well-Known Member

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    I think you'd be better off working out what market rent is, deducting it from the house price, and then renting it back to them at that cost. It avoids potential tax issues if I understand Paul@PFIs advice correctly.
     
  11. dabbler

    dabbler Well-Known Member

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    I do not care how they do it, is no consequence to me, was just offering ideas and also said to check tax issues. I realise you may not be directing at me though :)

    You could put say 400 a week on the lease and not collect it because it has been paid via reduction that can be noted, but again, OP needs to see what their accountant is ok with or suggests.
     
  12. Jaggannath

    Jaggannath Well-Known Member

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    Agreed, tax advice is best. I just wanted to make sure they understood the importance of doing so to their tax situation, so it wasn't directed at you
     
  13. dabbler

    dabbler Well-Known Member

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    Yeah, I did not think so, can be hard to tell on the net though.