Pull out under building and pest

Agents and owners would rather potential buyers pull out under finance rather than P&B anyway, its the good old "it's not you, it's me" problem if they tell other people why it fell through.

 

Today the agent held an open home. I sent in a secret shopper. The agent did not say the property was under offer. Hopefully that will help the seller.

 

Whitecat, you have to do what is right for you. It doesn't sound like you have set out to do the wrong thing by the vendor. The vendor shouldn't (and most wouldn't) count their chickens at least until its unconditional (although even then I've recently been enlightened. My recent purchase, I know full well about an item that will negate our contract right up to settlement if I so wish to do so).

In the scheme of selling a house, 0.25% isn't a whole lot for the vendor, especially if they sell it anyway.

 

The reason I say it is alright is that the contract is not unconditional. Until the contract is unconditional then the vendor should not assume that it is going to go through. In this case the open still happened so the vendor has not even lost time let alone money

 

I admit, I would have assumed there was a good faith element, especially with regards to obtaining finance.

 

I always put the following clause in my purchase contracts:

Due Diligence Clause
This Contract is subject to and conditional upon the Buyer carrying out due diligence enquiries within x business days of the Contract Date. Should the results not be satisfactory to the Buyer in its sole discretion, the Buyer may terminate the Contract by notice in writing to the Seller's solicitors, to be given within the x business days. Upon termination all Deposit monies paid will be refunded to the Buyer.

Finance Approval date is later than the Due Diligence date from above (to give me another out if I need it).

In my last Contract, x = 15 business days and Finance Approval was 20 business days.

 

Kierank - this is a bit vague for vendors. Do you define 'due diligence'?

 

@Terry_w, never been asked to define DD. I am guessing most vendors never read the clause or they mainly focus on the Finance clause. I like the clause being vague/broad.

BTW, I have never invoked the clause and, if I was the vendor and the buyer inserted such a clause, I would try having the clause removed or have it tighten up with a definition or use the clause in price negotiations.

Lucky I am not buying properties from myself .

 

Well, if you can get away with it all good then.

 

Due diligence, in itself, is quite vague and will be different for every site. I use an annexure which says what you say but gives some examples of what it may include - but states it is not limited to those.
Dropbox - Annexure B DUE DILIGENCE_blank.pdf

 

I've paid a 'fully-refundable' holding deposit in the past in order to have a property taken off the market for my own due diligence.

Thanks @Westminster, that looks like a good way of formalising it. I'm going to save that for future reference. Can anyone advise - Would something like that be okay in QLD?

 

The only issue I have with the clause suggested by Westminster is that it implies an obligation for the buyer to indeed conduct the due diligence - "This Contract is conditional upon the Buyer undertaking due diligence enquiries and investigations...".

I would go with something along the lines of:

This contract is conditional upon the Buyer giving notice to the Seller on or before the Due Diligence Date that the Buyer is satisfied with any due diligence investigations conducted by the Buyer including but not limited to:

Due Diligence Date above should be a defined definition or insert the actual date.

 

Agree on the undertaking part. It would be a condition precedent that you actually undertook due diligence and if a vendor was a real PITA then they could go to court to define what that is.

Broad and vague is good in qld for DD but you should make sure that:

1. There is no positive obligation as JDM says;
2. The buyer has the right to waive the clause at any time;
3. The condition is not deeming (if you are the buyer) eg
If the Buyer has not waived or satisfied this condition by the Due Diligence Date then the Seller may terminate this Contract, refund all deposit monies paid and the Buyer and Seller have no further obligation to each other. This is the Seller's only remedy under this condition.

Often the DD clause is not necessary anyway as you can terminate under finance. If during your finance period, as long as you have applied for finance, your investigations lead you to believe that you can't do what you want to do, then you will not be satisfied with your offer of finance. You must take reasonable steps to apply for finance to be allowed to terminate under finance, but you do not have to be reasonable about being satisfied with the offer of finance.