Is one able to negotiate on a SIGNED land contract after valuation has come back low...

Discussion in 'The Buying & Selling Process' started by swin87, 24th Jul, 2020.

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  1. swin87

    swin87 Member

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    ...but before "Subject to Finance" deadline?

    Have a relative who has signed a contract to purchase land for $X. The valuation by 2 banks has come back much lower than expected. On average 15k lower than what was offered.

    Now the subject to finance expires this coming Tuesday and yesterday she had asked for an extension on the contract because he was still sorting out finances.

    Can she negotiate the land contract deal after being signed by both parties?

    Thanks!
     
  2. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    As you're still in the finance clause period, you can negotiate. If they don't agree, you can either front the extra $15k cash, or you can withdraw from the contract using the finance clause.
     
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  3. swin87

    swin87 Member

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    But can't the seller then ask for the buyer to produce a document stating the lender has actually DECLINED to give the buyer the loan?

    In that scenario, is the buyer not contractually obligated to purchase the property?
     
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  4. Beano

    Beano Well-Known Member

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    How much is the contract $$ of the land ?
     
  5. swin87

    swin87 Member

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    Hey Beano, just wondering how does the actual contract $$ matter. It is between 290 to 315k w/o trying to be too specific.
     
  6. Perp

    Perp Well-Known Member

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    It depends a lot on the precise wording of the finance clause, but I respectfully disagree with Peter that a finance clause is necessarily an "out" in this scenario. eg If the clause says "sufficient to complete" and the purchaser can borrow sufficient to complete - they likely just may have to pay LMI - they're still obligated.
     
  7. Beano

    Beano Well-Known Member

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    If you were buying land at $30k (deposit $6k) and the valuation came out at $15k then probably the bank would not fund .
    If the land was $300k I would say a valuation of $285k that is $15k variation is pretty immaterial
    Many of my best buys have been properties paying over valuation .
    Many of my worse buys have been properties buying under valuation.
    Use your gut instinct and put faith in your own judgement not the valuer
    You will probably find the valuer has only a fraction of the portfolio and income of many successful property investor
     
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  8. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    No matter what the contract says you can always ask
     
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  9. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    I agree, my response was a little general. It does depend upon the specifics of the finance clause wording.

    Still, It's very easy to get a decline letter from lenders right now. Simply expressing concern about the viability of your employment will be enough.
     
    Last edited: 25th Jul, 2020
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