Pitfalls With Property
What you need to know when buying & selling residential property.
When acting for a vendor or purchaser on an agreement for sale and purchase of residential property, we like to check the agreement before it is signed, to ensure that any conditions inserted into the agreement are achievable, workable and to your advantage. We are often not aware that a client is purchasing or selling until the agreement is sent to us by the real estate agent. If we do not know beforehand then we often cannot have any input into the agreement. Below are just some of the matters to be considered that both vendors and purchasers should be aware of before signing an agreement.
If you are selling:
- Do you have enough time between unconditional date (when all the conditions are satisfied) and settlement date (moving day)?
- Is the deposit being paid by the purchaser sufficient? If the purchaser defaults after the agreement is unconditional, you are still obliged to pay the real estate agent their commission, therefore is the deposit enough to cover that commission so you are not out of pocket?
- If you are on-purchasing do your dates match? Do you have the same conditional and settlement dates? This is important because if your settlement date on any future purchase is before the settlement date on your sale, you will have a shortfall of funds (if only for a few days). In such cases you may need to apply for bridging finance to cover the period in between. However, bridging finance from a Bank is not a certainty. Hence, any application for bridging finance needs to be made before the agreement is signed or make the agreement conditional upon obtaining such finance.
If you are purchasing:
- Do you have available funds to pay the deposit requested by the vendor and/or their agent or do you need to arrange for an overdraft facility? More often than not, the balance of the deposit from a sale is insufficient to cover the deposit on an ongoing purchase, not to mention the time delay between having those funds available and having to pay the deposit.
- LIM – are you ordering the LIM report or are you relying on a LIM report from either the vendor or agent? If you have received a LIM report via the vendor or agent are all the pages there?
- Are you being called upon to order an urgent LIM report that costs extra when really it may not be necessary to do so?
- Finance – If you have pre-approval from the Bank is it an unconditional pre-approval? Often pre-approvals from Banks are still conditional offers; conditional upon valuations, guarantees by third parties etc. These conditions need to be satisfied before finance can be approved.
- Do all the conditional dates match? If there is an issue with the LIM report we are obliged to advise the Bank. This could jeopardise any finance offer made by the Bank therefore it is best to have the same date for all conditions.
As above, these are just some of the matters that should be considered before you sign an agreement and is not meant to be an exhaustive list. We recommend that before you sign an agreement for sale and purchase, whether to buy or sell, you have us check it for you.