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Urgent! Settlement Reduction

Discussion in 'The Buying & Selling Process' started by Kai41314, 26th Aug, 2015.

  1. Kai41314

    Kai41314 Well-Known Member

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    Hi,

    I just done my building and pest inspection and found a major issue for the main bathroom. I was told the worst case I might need to build a new bathroom (may cost $10K?). There are some other smaller issues I need to spend money on (may cost $2K~3K). The selling agent has suggested a settlement reduction to cover the costs of getting professionals in to fix the identified issues. I am thinking to ask $15K off ($13K plus the potential vacant period.)

    Is asking $15K off too high or too low? What do I do?
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    What do you think the vendor is going to say to that.

    Are you in a binding contract already?
     
  3. larrylarry

    larrylarry Well-Known Member

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    You can only try with justifications and see how it goes, imo. As long as it's justified I don't see how vendor will not be amenable to proposed amount. The
     
  4. wylie

    wylie Moderator Staff Member

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    If the contract is not yet unconditional, the vendor can agree to a reduction or not agree to a reduction. If vendor doesn't agree, then you need to decide whether to go ahead or use your building and pest clause to crash the contract.
     
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  5. Azazel

    Azazel Well-Known Member

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    Hey @Kai41314 , you should consider yourself fortunate the building inspection picked it up before it went through.
    No harm in asking the question.
     
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  6. Kai41314

    Kai41314 Well-Known Member

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    Contract is not yet unconditional and subjects to BP and finance. Still 4 days to go until the BP condition expires.



     
    Last edited: 26th Aug, 2015
  7. FireDragon

    FireDragon Well-Known Member

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    I think this depends on:
    - The price of the property. It will make a difference if the property price is $1M vs $250K.
    - Whether the vendor has other offers.
    - If the vendor want to sell it urgently.
    - If your original offer is below market value.

    In any case, it shouldn't hurt to try asking the agent and see what the response.
     
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  8. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Yep - that will be the determining factor. If it's unconditional - there's not a lot you can do. If it isn't - then you can try to negotiate.

    Cheers

    Jamie
     
  9. neK

    neK Well-Known Member

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    Depends on circumstances.
    If the property was in Sydney and had other buyers lining up, I would tell you to go away :)
     
    Last edited by a moderator: 26th Aug, 2015
  10. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Haha - and that's the main risk with haggling after having an offer accepted. If it's a sellers market - you're probably going to annoy the vendors and they'll move onto the next offer.

    Cheers

    Jamie
     
    Last edited by a moderator: 26th Aug, 2015
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  11. Kai41314

    Kai41314 Well-Known Member

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    1. Price is $340K
    2. I guess vendor wants to sell quickly because they have asked a shorter settlement.
    3. Vendor had another offer with a slightly lower price and worse conditions before accepting mine.
    4. My original offer is a fair price not below market value.
    5. Location is in Logan not Sydney

     
    Last edited: 26th Aug, 2015
  12. neK

    neK Well-Known Member

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    The plus you have is that the sellers agent is suggesting it... work with the sales agent and see what they think you can reduce the price to.

    That said, Logan seems to have some activity (based on the forum questions about the area). You might have some competition.
     
  13. Bryan Loughnan

    Bryan Loughnan Well-Known Member

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    Don't forget to remind the agent that now that they are aware of this issue they will be required to bring this to any future buyer's attention... also remind them that any future buyer is also likely to conduct a building and pest inspection and that they will also obtain the same feedback.... also remind the agent that realistically, the vendor (and the agent) are only a couple of weeks (depending on your settlement clause) away from having money in their pocket..... might help your case..... Vendor might just be keen to agree if you confirm that subject to the adjustment you will be satisfying all of the due diligence clauses and everything will be full steam ahead for settlement!

    Good luck!
     
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  14. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Perhaps they want to settle quickly so as to reduce the chance of purchasers finding something else or of other problems arising.
     
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  15. Chilliblue

    Chilliblue Well-Known Member

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    Work with the agent seeing they made the suggestion to you and have them lead you.
     
  16. Kai41314

    Kai41314 Well-Known Member

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    I guess so. The standard BP clause is 14 days and they have asked for 7 days while finance approval clause is still 14 days. It is fishy.

    In addition, they signed the contract before I signed and added special conditions. LoL



     
  17. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Bryan raises a good point though. Emphasis the disclosure aspects to the agent and the vendors lawyers.
     
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  18. Fungus

    Fungus Well-Known Member

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    I'm in a similar position as you. Except my B&P inspection is this Friday. Logan area too.

    Original contract was for 14 day finance and 7 day B&P. Changed the B&P to 14 days on the contract and they accepted. Wonder if it's the same agency...
     
  19. Esh

    Esh Well-Known Member

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    @Kai41314 and @Terry_w bring up great points.

    Just have discussion with the agent. Get a few quotes for bathroom and any other issues so you know what the worst case and best case scenario would be for costa and present that to the owner.

    Also, beauty of building and pest- if it's not worth the trouble you can get out of it. Are there other properties in the area that would be more of value, no work required because you also have to consider the time it will take to get the work done, that's income you will be loosing
     
  20. JacM

    JacM VIC Buyer's Agent Business Member

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    Hi Kai,

    When buying second-hand property it should be assumed a couple of small things will be "wrong with it", even if that is only minor settlement cracks in the plaster cornicing. With that said, $15k worth of problems is not "small".

    The thing with building and pest inspections is that to cover their liability, the inspectors often word their reports in a very dramatic manner which makes things seem worse than they are. This can be handy if you decide to let the vendor see the report as they will worry that nobody else will want to buy the property, so they might as well agree to your "reduction".

    Talk to your legal rep about appropriate process but also talk to your mortgage broker. Explain the dilemma to them and ask for comments on options for the way forward. Try not to ask closed questions such as "should I bail out of this contract" because this restrict answers to yes or no, and closes opportunity for other ideas. Open questions such as "what are your thoughts on the options for the way forward" are great because it offers a wide range of responses that are not restricted to your knowledge-base.

    The issues I foresee are:

    - The bank valuer might put a very harsh figure on the valuation and put a halt to the whole purchase anyway. This is no big deal as long as you have an appropriate finance clause that can be used to exit the contract if needs be.

    - An actual price reduction is a giant pain as it requires re-doing the mortgage application with the new price. This is a problem because it is a waste of your broker's time, and it will almost certainly mean you'll run out of time on your finance clause. It is easier for everyone if it is instead done as an adjustment at settlement in favour of the purchaser.

    - If you don't physically have access to the funds needed to fix the bathroom, it's a moot point because you'll not be able to drive your investment in a controlled manner. You'd try to move a tenant in, they'd complain about something and you'd be obliged to fix it. If you cannot afford to resolve the bathroom, you'd probably be better off not taking the property on.

    There will of course be heaps of different opinions from various folks on the topic of your dilemma... these are just a few ideas to throw in the mix. It's not to say these are the "only" ideas.

    Good luck, and remember to check back in and let us know how you got on. It will allow your thread to become a useful reading resource for others in the future.
     
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