The Ultimate Guide To Renovation Course - Module 6: Conditions of Offer

So let's have a look at the conditions of offer. You might consider some of the following as your conditions offer that Subject to due diligence Pest and building inspections Development or planning approvals Items to be in good working order Vacant possession Now this might be necessary if you're doing a renovation. However, be aware of the rental agreement and the notification terms for tenants in some states and territories, which could be 60 days or even more, each of which would be noted in your letter of offer. Another term could be early access. So you're putting your offer in subject to due diligence. While not very common and a little bit cheeky, making an offer subject to just due diligence pretty well covers off most unique other things subject to conditions that you'll need. For this reason, agents are often reluctant to take on such a broad condition, but you can always ask Office Subject to Pest and Building Inspections as discussed in the last module, a pre purchase building inspection can save you thousands. Be assured that a building and pest inspection should be considered as mandatory. Indeed, some states are considering making this a mandatory condition. You will know what you're buying and what expenses you're likely to be up for, and the inspection report could be used as a bargaining tool to lower the purchase price of the property. Look for the major faults and don't let the minor faults trouble you too much. For example, poor guttering is much less of a concern than poor foundations. So check out your pests and building report and use it for negotiation purposes. But don't be too scared by what's in it. I've never seen one that's come back perfect. Now make your offer subject to let's be clear here. You'll be dealing with a vendor's agent. They have a contract with the owner to make the best endeavours to get the best price for the owner. Not to save you money or necessarily go to any trouble to protect your interest. This is in no way suggesting that real estate agents do not act in an ethical manner. It is simply putting some common sense in into the equation. The agent may say one thing, but it is necessary for you to go and do your due diligence. Allow yourself enough time to get the information that you require and make it a priority from the time you sign the letter of offer, because it is your responsibility. Now, all of these may not be conditions in your letter of offer, but they are things you need to do in the time you have requested, usually the cooling off period. Now let's have a look at approvals and reports and what they can include it might be council approval for existing extensions or additions. It could be the shire approval for an existing pool and pool security. It could be items to be in good working order or the shire confirmation of the current zoning your due diligence for the subdivision Potential offers subject to development approval or planning permission. Let's have a look at those. Making an offer subject to development approval or planning permission takes the property off the market while giving you time to make sure that the council will let you do what you need to do. Developers often use this condition but it can also be used for renovators, particularly if your local council offers a fast track planning process. By making use of your council's pre application meeting service it is sometimes possible to get all at least preliminary approval in a surprisingly short amount of time. Other council approvals could be for dual occupancy or subdivision. These are more complex matters and do normally require negotiations between the parties and or their solicitors. But clearly if both parties agree it would be preferable to have a contract subject to council permissions granted where the buyers are specifically interested in upgrading the property to their requirements. This would also be the case where a buyer may have an interest in capitalising on the development potential of the property in relation to subdividing the property for future development. Now a property that has some type of overlay and requires a DA or planning permission could be a major buyer objection to most renovators. Overcoming it could actually allow you to get yourself a bargain. Lets have a look at offers subject to good working order. Now this is an important clause and one which can save you hundreds of dollars to rectify. After settlement you will need to conduct a pre settlement inspection which is after the offer has been accepted and the day of settlement or the day before you check the property to make sure everything is ok. The notion of good working order should take into account all electrical and plumbing. You can list every item on the offer, for instance all swimming pool equipment, reticulation, bore, air conditioner etceter where applicable. As the buyer it is in your interest to test all the equipment or bring in an expert to test it for you. In the case of example a swimming pool or air conditioner. Now let's have a look at office subject to early access. Sometimes early access is able to be negotiated with the vendor prior to settlement taking place. This can be a huge benefit because in some cases the renovation can be completed before before settlement even takes place. Proceed with caution if considering doing this because if the sale doesn't go ahead the vendor has A house with a half completed kitchen and you have spent $10,000 for nothing. A clause for early access might look like this. Remember this is just an example. Your solicitor should really word this for you to suit your particular needs. The clause could be subject to the purchaser buyer being permitted to take possession of the property immediately after this offer becomes uncondition. This requires special clause within the contract of sale that allows you to gain access to carry out works or just for the tradespeople to go and quote. This is a worrying prospect for many vendors and at the very least there will be need for a licence agreement. Evidence of insurance and building certificates will be needed to allay their fees. If you are going to complete works before settlement. Some other things I might include as clauses. If I know the owner is an investor, I might ask for their depreciation schedule or a copy of it. It could save me $500 and it's no use to them anymore. I might need to have the warranty insurance policy for any renovations they've already done. I have some inclusions could be based on the actual property itself. So think about what you really want. Put that on your want list. You already should have a bottom line established of the bottom number or conditions that you accept. Somewhere in between is where you're going to end up. So here's a tactic for you submitting multiple offers. I like to submit written offers that contain several different prices so the vendor is not presented with a yes or no decision to my offer, but either or decision. Hence I have them thinking between the offers not if they're actually going to slaughter me, rather in which way they're going to sell to me. These are ranked in order of what suits the vendor the most. So the lowest offer down to what suits me the most the highest offer. This is why it's so important to find as much information about the vendor as possible so you can submit offers that reflect their needs and their circumstances. Written offers should always be accompanied by a deadline. For example, if I was aware that the vendor had already purchased another home which was approaching settlement, it would stand to reason that they are interested in the shortest settlement possible. It's probably also a safe guess that they could use some extra cash quickly to cover the out of pocket expenses involved in moving house. Let's say that the asking price is $470,000. In this scenario, my offer might look like this. Offer 1 $435,000 with a 30 day settlement and a 15% deposit which is released immediately. Offer 2 A $450,000 prize with a 30 day settlement offer. 3 A $470,000 prize with a 90 day settlement with immediate access to doworks. Of course, in this scenario you may need to be absolutely sure that you can settle in 30 days. If you don't proceed for some reason and the sale doesn't go ahead, it's important for you or your solicitor to notify all parties involved at the first opportunity. Don't just assume that because you haven't confirmed anything the sale is not going ahead. They will assume it is unless you tell them otherwise. These conditions apply to home units, townhouses, semi detached houses and even freestanding houses. In the case of a unit or a dwelling governed by company or strata title laws, that is where there is an owners corporate responsible for the building, it is also necessary to check a few other things. You need to make sure that the financial position of the owners corporation is good. Check out any disputes or problems associated with the building. Whether insurances are adequate for the building in the event of flood, fire or storm damage. Sometimes your lender will insist on citing these insurances for reference. Get a body corporate report in my opinion this is just vital. Either you or your solicitor can organise it. You can actually make a time to visit the body corporate manager where it might cost you $30 or it could be free to view it, but you need to go through all the information. In some cases the vendor may arrange with their solicitor for you to come into the office and read the report. In other cases you need to purchase it. It should cover the last 10 years in my opinion. One thing you're looking for is the past history and any anticipated future expenses in the sinking fund. You need to check out. If the sinking fund has funds to cover these expenses, then you should not be up for any additional expenses. Otherwise the body corporate will be requesting a special levy. This could be as little as a few thousand dollars for each owner or subsidiary. Substantial. There was an instance of an apartment block in the eastern suburbs of Sydney that experienced significant concrete cancer. Each of the 21 owners needed to contribute $100,000 each to cover the $2.1 million roof replacement. Now I bet you know I was really happy when I found that out before my offer was considered finally and we went ahead with that purchase. In short, make sure you know what you're up for. So I have to really insist that you go and get this report now. It's also important for renovators. If you're going through the past body corporate information or meetings or minutes and there's evidence of the Body Corporate permitting or refusing renovations to occur in the building, you need to know about it. All buildings, including units should be adequately examined physically and there should be conditions in the contract which point out defects or deficiencies. For example, one client was troubled by a neighbour's spa which was not shown on any plans and which did not have any formal approval from the Body Corporate or the neighbours in relation to the machinery operating outside of the premises which could present noise or vibration problems. Such structures may require a particular statement or condition in the offer. You might decide that you will check out the Body Corporate minutes and notes to see if there is any indication of pests and building issues before you decide to commit the money for those searches themselves. Be prepared that the cheques, pest and building inspections can cost $500 each. So saving yourself a little bit of money by finding evidence of those issues in the last 10 years of body Corporate minutes or data is actually going to save you some money. You need to complete a pre settlement inspection. This is really important. Not only are you checking that the property is in the condition that you expect expect, but also that there's not any unwanted surprises. It has occurred that a new owner has put up with a removal truck and family only to find that the tenants have refused to move. You need to know that you're buying what you entered into contract to buy. The last thing you want is to turn up and the last tenants have trashed the house or the property has been stripped of all the plants and appliances.