Signing a Deed of Variation when you negotiate a reduction in purchase price

Discussion in 'Legal Issues' started by FatElephant, 3rd Mar, 2020.

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  1. FatElephant

    FatElephant Well-Known Member

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    Hello,

    I am in the middle of trying to secure my first investment property and running into a wealth of issues from finance to now conveyancing.

    Looking at the building and pest inspection I am trying to negotiate a $9,720 reduction in the purchase price. I have since relayed this to my conveyancer and told them to communicate it to the seller's solicitor.

    They have instead come back to me telling me that it is recommended that I sign a 'Deed of Variation' which would cost me and extra $110 to draft up. This deed of variation is supposed to officially reduce the purchase cost of the property so I can pay less stamp duty and the contract is officially chanced so the seller can be bound to the new contract.

    I told them that I just want to request for the funds to be left for me in a trust account at settlement because it's much easier. They then backflipped and told me that it is illegal and that they're obligated to tell the bank that I am getting more than $5000 off the purchase price and then the bank will most likely decline my loan.

    What? Is this correct? What is the standard practise to do when you are negotiating a reduction in purchase price? Do you have to let the bank know? How do people speak of getting 'instant equity' when they buy 'below market value' then? How do you get equity when you have to change the contract and change the amount that the bank will lend to you? I don't get it. I don't know whether I've been given the correct advice.

    This conveyancer is also very rubbish. My finance, due diligence and building and pest inspection clauses lapse TOMORROW and they STILL HAVEN'T sent out a request for an extension for all of these clauses for me. Even though I told them last week! I however do not know the process of switching conveyancers mid contract and what the legal implications of that is.

    Thank you very much.
     
  2. Terry_w

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

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    Why not use a lawyer!
     
  3. FatElephant

    FatElephant Well-Known Member

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    I was originally using a lawyer from this firm for my contract review but my offer for that property didn't get accepted, so I approached them again with this new property I have found. But their system automatically directed my enquiry to someone else as it's a different property address. Will definitely use a lawyer next time but the conveyancer got 'advice from a solicitor'. So apparently this advice was from an in house solicitor.
     
  4. significance

    significance Well-Known Member

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    I don't understand where they are supposed to have "backflipped". My understanding of what you have been told is that negotiating a reduced price is legal and would need to be formalised with a deed of variation, but keeping the same purchase price and getting cash back from the seller is not legal and the bank might take a dim view of it. This makes sense to me, as it would mean that the bank would be providing you with a loan based on a valuation that does not match the revised market value of the house.
     
  5. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    Their system redirected you ?? No. You appoint your own legal counsel. I hope you arent using the vendors lawyers !

    Go see a property and conveyancing solicitor. They may factor the repair cost into the contract that is being paid by the vendor and the lender will actually be cool with it. ie retention sum.

    You cant make deals off contract without expecting a impact. And being harmed may be the result. OSR look at the contract for duty, and so will a lender. One sniff on a issue and the finance will fall over. Lenders stop when they see red flags.
     
  6. FatElephant

    FatElephant Well-Known Member

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    I requested them to ask for some funds to be left for me in settlement because I figured it was the easier way to go as I will be using that money for initial repairs I would need to do before renting out the property. They told me it was fine. And that was last week. Then they didn't end up sending anything to the seller's conveyancer and when I asked them for an update today (when all my clauses lapses tomorrow) - that's what they told me. Why was I not informed that it was ILLEGAL to do what I thought of doing last week? Why was I only told that "we recommend you get a deed of variation done because the benefits of getting one done is xyz but it would cost you xyz extra". So it just seemed to be like something that was totally optional and they perhaps wanted more of my money.

    They are not the vendor's lawyer. They are quite a big firm actually - an Australian wide conveyancing firm. So I didn't expect it to be this bad. They were a recommendation from a friend who had good experiences with them.

    And thank you for confirming that making deals of contracts could have a big impact. I really didn't know this was the case. And they didn't make it clear to me that what I was requesting was illegal and could have consequences for me LAST WEEK when I made the request to them. So I thought everything was fine and it was doable.
     
  7. Terry_w

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

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    its not illegal
     
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  8. FatElephant

    FatElephant Well-Known Member

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    Thank you for confirming. I really wasn't sure because my conveyancer told me it wasn't legal so I wanted to confirm.
     
  9. Archaon

    Archaon Well-Known Member

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    I wouldn't be taking legal advice from a conveyancer, unless they are a property lawyer acting in a conveyancer capacity
     
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