Reimbursment or lower sale price

Hi all,

Want to get your opinion on which way you would handle a situation.

You have signed a contract with a vendor and it was accepted for $500,000.

Later you find an issue (pick anything) but request $50,000 to proceed either through a lower sale price or refund/reimbursement at settlement.

Which would you choose?

Lowering the sale price would mean less stamp duty being paid (stamp on 450k) but you wont have access to the money and if you were to sell you would need to pay more in CGT.

Getting the refund means you will have to pay stamp on the full amount (500k), but will have access to the money (50k) and will pay less CGT if you were to sell.

Let me know your thoughts and does it change your decision if you had 10k in the bank after the sale compared to 100k or 1M?

Finally would it change it the issue was an easement that got you 50k back compared to a building issue which would cost to repair?

 

An allowance usually, otherwise all paperwork will be stuffed and need re doing. Also you both signed contract, check with solicitor.

You wont get cash, lender will only pay the agreed LVR usually.

 

Yes it is legal both solicitor (property lawyer) and mb know about it. Not that I would trust trust the mb of if it is legal but considering the solicitor suggested it and the mb knows of it.

Have I double check, no but makes sense to me and not my licence on the line.

 

Yes this is legal and happens from time to time. CGT should be effected, stamp duty might tho.

You should disclose to the lender though and they would reduce the loan amount to reflect

 

That is legal.

 

The fraud aspect may come into play if you are not paying CGT or Stamp duty at market values or deceiving a lender to lend you more money.

 

How is it not legal?

 

Could be part of a scheme to launder money I guess. But having 2 contracts in itself is not illegal - one written and one oral.

 

Stamp duty and CGT are both worked out on market values.
At face value the duty would be worked out based on the consideration listed in the transfer, but where this differs from the market value the OSR can ask you for more - if they catch on.

 

Often transfers between family don't have contracts in written form - a valuation would be needed in this case.

 

I have not asked to try what Terry says, because it highly irritates everyone in the chain when you try and change the original contract price

 

Brokers and conveyancers see it all the time. Damage found just before settlement and a 'discount' is offered. Usually if it is a small amount it would just be reimbursed at settlement so save having to redo all docs again.

 

The amount would not matter, but you would have to consider that your paying stamp duty for nothing (and we already pay it for nothing, no stamp anymore)

There is the time issue too, 30 days in QLD and vendor could walk, do not trust them all to re do docs, hard enough to get them right the first time often it seems !

I was yelled at a few times, my broker at the time sick of doing loans I think

PS reminds me of a Rowan Atkinson skit where he asked, Am I paying for this abuse or is it all part of the service....or some such.

 

@Big Will, good question.

Never been in that scenario. I would have at a guess that I would go for reimbursement at settlement and put the $50K in that loan's Offset account, especially if I didn't have lots of spare cash. Then I would use the cash to fix up the building issues.

There would come a time when I would take the lower price. Say, If I had $500K or $1M in cash already in Offset account, I would bother about getting $50K more .