Process to sell a land

Discussion in 'Investment Strategy' started by lassy, 15th Feb, 2018.

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  1. lassy

    lassy Member

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    Hi all,

    I'm new to this forum and thought of getting some opinions with regard to the situation that i have.
    I have a land which i bought for 350k and the settlement happens during september 2018. Due to financial issues i need to sell this land prior to the settlement. Kindly explain me the process on how to sell this land ?

    I would like to make a profit as the land prices have gone up in my area. I have also inquired from my conveyancer, he mentioned i have to wait until settlement in order to get my 10% deposit and during the settlement i will receive the balance amount. I'm confused as the process is not clear to me when it comes to a sale.

    If i settle the land and later on if i want to sell it back how the process works? buyer has to pay 10% deposit again for the newly adjusted amount?

    Thanks all...
     
  2. Terry_w

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

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    You get a contract of sale drawn up and then get an agent to look for a buyer.

    If you find a buyer you enter the contract with them, after getting legal advice, and then you settle with the seller, and simultaneously settlor with your purchaser - if you are onselling.
     
  3. lassy

    lassy Member

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    Hi Terry, Thank you for your prompt response. Real estate guys only need there commision and it's a hefty amount which i cannot afford at the moment.

    Should i go through the settlement and then resell on later date ? what will be my costs? i.e. do i have to pay stamp duty again?

    Thanks
     
  4. lassy

    lassy Member

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    I also have an unconditional contract with the seller, should i need another new contract created for the new contract price and that has to be done via the lawyers i believe?
    Should i still have to go through the settlement when the land is titled?
    Kindly advise. Much appreciated.
     
  5. Terry_w

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

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    That is a personal choice. Yes you would have to pay duty.
     
  6. Terry_w

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

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    if you are going to sell you would need a contract with the purchaser - in writing.
     
  7. Xenia

    Xenia Well-Known Member

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    It blows me away how many people ring to ask for open inspection times on vacant land.

    I’m not kidding lol
     
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  8. JDM

    JDM Well-Known Member

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    The usual process would be finding a buyer and entering into a contract with a clause making settlement contemporaneous with your existing purchase contract. This means if settlement is extended under the first contract, it is automatically extended under the second. Usually it would also terminate the second contract if the first contract is terminated.

    Your lawyer should prepare the contract and ensure it is properly drafted to contemplate contemporaneous settlement.

    I specialise in Qld so am not 100% sure on the position in VIC, however you may have to pay transfer duty under your purchase contract and then the second purchase will also have to pay transfer duty under their contract (ie double duty is payable).
     
    Last edited: 16th Feb, 2018
  9. Scott No Mates

    Scott No Mates Well-Known Member

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    They're lonely. :oops:
     
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  10. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    Payment to a real estate agent would be made at settlement and is not required up front.
    Stamp duty is paid by the buyer. You will pay it when your purchase settles and then your buyer will pay it when they settle. You won't have to pay it twice, just the once when you complete your purchase of the land.

    There is a very very small possibility that you might be able to assign your contract under a nomination clause to another buyer but that would be at the same price you paid and highly unlikely anyway.

    Basically you/REA find another buyer and enter into a contract of sale with them and get it to settle on the same day or near after the date you settle on it. You can choose to wait until you settle then market and sell it but you can do it now before settlement if you wish.

    Even though land prices may have increased there is still a real possibility that you will make a loss when you consider
    - stamp duty
    - bank loan mortgage fees - there might be break fees on the loan
    - tax on any profit
    - selling fees (REA etc)
    - conveyancing/lawyer fees (for your purchase and then selling)
     
  11. alicudi

    alicudi Well-Known Member

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    Hi

    If the buyer lassy has "&/or nominee" clearly written after their name in the purchase contract, can't they just nominate the new buyers details come time of settlement? This eliminates two amounts of stamp duty payable as the property only transfers once and ;assy will not be the one paying for this stamp duty?

    Come time of settlement the new buyer will pay the original developer the original agreed purchase price PLUS whatever extra the block was sold for will go to lassy correct?

    Am I missing something here?

    Regards,

    alicudi
     
  12. Masih

    Masih Well-Known Member

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    There are two ways you can sell it but could be more. I'm only aware of these two ways:

    1. Settle the land and then get your solicitor to create a new sales contract. Give it to an agent or sell it yourself. You will pay stamp duty and maybe CGT if you make any profit. Titled land is in huge demand in Melbourne right now as there is hardly anything available. I'm assuming it's in Melbourne since it says you're from Vic. If you bought in a good area then you could make a handsome profit on it.

    2. Sell via nomination. Give it to an agent or advertise it yourself. Your solicitor will draw up a nomination form instead of a new contract. New buyer signs the nomination form and you nominate them as the new buyer to settle the property. They pay you the original deposit you paid the developer plus any extra profit you want on top usually called a nomination or consideration fee.

    If you sell it for contract price then you shouldnt be liable for stamp duty. If you ask say $30k on top and declare it to the State Revenue then you could be liable for stamp duty as there is additional consideration involved meaning you made a profit (read more about Parallel Arrangements, sub-sales). You may also have to pay income tax or CGT depending on how the ATO treats it. If you don't declare it and somehow get away with it then you probably won't have to pay anything.

    If you sell it yourself then you keep the profit. If you give it to an agent then you may have to split it or whatever arrangements you've made with them.

    If you want to sell via nomination then you need to sell it cheaper than the developer as no one would want to pay so much cash on top of a deposit to buy it from you for the same price as they could buy it from the developer without paying any extra cash. If you sell it after it titles then you can sell it at market price because as I said before that there's hardly any titled land available.

    Also keep in mind that the contract you signed most likely has a clause that say if the nominee fails to settle on the land then you could be personally liable for it and may have to settle yourself. Plus if the land is settled then you may need to ask the developer's permission first to sell it, which you may or may not receive. If they say no then in most cases you can only sell it once you build a house on it. Some also have clauses that say they have the option of purchasing the land back from you at 90% of the contract price or whatever they put in the contract. They normally do this to stop people from on-selling their land.

    Did you originally have a solicitor to take you through the contract when you bought it? If yes then go to him/her and ask all your questions as youre already paying them a fee to answers these questions for you.

    Can you give some more detail on the land such as suburb, estate size etc. and I'll see if I have any buyers for it. I work as sort of a buyers agent for new properties so I find cheap land for my clients and then get one of my builders to build them a house on it. I make my money of the build so you won't be paying me anything.
     
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  13. lassy

    lassy Member

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    Please advise the process how to sell the land after settlement.For example, if i settle the land for 300k + stamp duty etc after the settlement i wish to sell for 400k, i this situation, what will happen to the deposit i paid? and how much of a profit ill make..?

    Im willing to settle the land rather going for noination and looking for other options.

    Thank you all for great responses.

    Regards
     
  14. Terry_w

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

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    When you settle the deposit will be released - to pay the vendor.
    Then you sell as per normal.
     
  15. lassy

    lassy Member

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  16. Terry_w

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

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    When you sell a property the deposit is held in trust until settlement. The agent is usually the one holding it and the bank is not involved.

    When you settle then the agent can apply the deposit as you instruct.
     
  17. lassy

    lassy Member

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    So after the settlement, If i'm planning to sell
    1. do i need to create a new contract for the new sale price
    2. buyer has to pay the 10% deposit?
    3. How does the balance get transferred if i'm selling for a higher price?

    Thanks
     
  18. Terry_w

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

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    1. Of course
    2. up to you
    3. the purchaser pays you,
     
  19. lassy

    lassy Member

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    Hi Masih, Thank you for the detailed answer, In the first process during the settlement i have to pay the stamp duty costs, once the land is transferred under my name would i still be liable to pay stamp duty? i hope not. Also, please advise if we are trying to make a profit from selling this land how does it get calculated ? lets say current price 300K selling for 350K, so during the new contract settlement stage 50K only will be my profit? or is there any deposit buyer has to pay?
     
  20. Terry_w

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

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    Duty relates to the transfer of title. So if you settle you will definitely have to pay duty unless one of the exemptions apply.

    Sounds like you don't understand the basics Lassy so get some legal advice.