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Timing of sale

Discussion in 'The Buying & Selling Process' started by Burramys, 21st Sep, 2015.

  1. Burramys

    Burramys Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    89
    Location:
    Melbourne
    I hope to sell an IP and with the proceeds buy a new PPOR The current plan is that settlement be long, up to 12 months. As the sale price is locked in I can then look for a new PPOR and sort out a new PPOR mortgage with more certainty. When I have both I can give the buyer of my IP 30 or 60 days to settle. The buyer pays me and I pay the vendor of the new PPOR. I don't want masses of cash sitting in a bank account as this would attract interest income and tax. The government guarantee will not apply unless I split the proceeds into three accounts, or three banks.

    The IP selling REA has advised that settlement terms must be fixed. Is this so and is the above plan acceptable? TIA.
     
  2. Ed Barton

    Ed Barton Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    1,118
    Location:
    Brisbane
    Unless it's a potential development site and the long settlement period suits a developer I doubt you will get much interest at all. If I was a developer (I'm not) such a deal might suit me and allow me time to get approvals etc. As an investor or PPOR buyer I would not consider such a long settlement.

    The longer the settlement the more likely the buyer is going to have something go wrong - change of financial circumstances, change of bank funding, death etc.

    Reduces your buyer pool even more.

    Why?
    A. Settle now. Plonk the $1m (made up, nice round figures) in the bank for a year and earn $30k in interest. Pay, at most $15k tax.
    B. Settle in a year get $1m. No interest.
    Which option is best?

    That would be so hard to do?

    I don't see why you can't have a 'variable' date settlement. Perhaps you should ask your lawyer rather than a REA?

    The above plan would unlikely to be acceptable to a selling agent who will have to wait up to a year for their commission and is also unlikely to be acceptable to a buyer.