Failure to settle on property costs buyer over $200k

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Kyanar

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#3217846 13-Apr-2024 18:20

Scott3:

May have a term deposit maturing in a few weeks and not want to carry the break fee.

May have a property sale settling soon which will release the funds.

This is why bridging loans exist. Financiers are willing to extend short-term credit in these scenarios as they are quite low risk.

cddt

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#3217987 14-Apr-2024 08:43

The bank will happily loan you the deposit once your offer is unconditional.

As a seller I would not accept a deposit of less than 10% again. We sold our first home mid/late 2022, with a long settlement and 5% deposit. By the settlement date in 2023 the property market had dropped significantly. The purchaser started making various demands about the property the week prior to settlement and we got the sense he was regretting his purchase and considering any avenue for cancelling the contract.

If I was selling to a company rather than an individual I would want an even larger deposit.

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Kyanar

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#3217995 14-Apr-2024 09:12

cddt:

As a seller I would not accept a deposit of less than 10% again. We sold our first home mid/late 2022, with a long settlement and 5% deposit. By the settlement date in 2023 the property market had dropped significantly. The purchaser started making various demands about the property the week prior to settlement and we got the sense he was regretting his purchase and considering any avenue for cancelling the contract.

I don't really see how the amount of the deposit has anything to do with how much of a pain in the neck the purchaser is. That's why you adequately cover yourself with the conditions in the sale contract.

cddt

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#3218060 14-Apr-2024 12:14

Kyanar:

I don't really see how the amount of the deposit has anything to do with how much of a pain in the neck the purchaser is. That's why you adequately cover yourself with the conditions in the sale contract.

If the purchaser is unable to settle, forfeiting a larger deposit makes it slightly less devastating for the vendor. Not much is left of a 5% deposit after a 2% agent commission, legal fees, any advertising or staging expenses. If you take a 10% deposit, you should have at least 5% left after expenses.

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Kyanar

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#3218244 14-Apr-2024 14:45

And if the purchaser is unable to settle, as has been demonstrated by this entire topic, their liability is not limited to the size of the deposit anyway. I just don't get your point.

Handle9

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#3218247 14-Apr-2024 15:00

Kyanar:
And if the purchaser is unable to settle, as has been demonstrated by this entire topic, their liability is not limited to the size of the deposit anyway. I just don't get your point.

Liability is fine but you have to sue to potentially recover that money. Cash is cash - you have it and don’t need to do anything further.

cddt

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#3218253 14-Apr-2024 15:27

Kyanar:

And if the purchaser is unable to settle, as has been demonstrated by this entire topic, their liability is not limited to the size of the deposit anyway. I just don't get your point.

If a purchaser fails to settle would you rather be holding on to his cash deposit or have to pursue him through expensive and time consuming legal processes (which may ultimately be unsuccessful)? If there's no money, there's no money.

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nova

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#3219102 16-Apr-2024 14:15

cddt:

If a purchaser fails to settle would you rather be holding on to his cash deposit or have to pursue him through expensive and time consuming legal processes (which may ultimately be unsuccessful)? If there's no money, there's no money.

100% agree, and in the example being discussed, there is every chance that the vendor will be unsuccessful at getting the money from the purchaser, it's quite possible they they won't be able to pay and declare bankruptcy. It is also worth pointing out that the purchaser would have lost money even if they had settled on the property. If you've agreed to buy something for more than it is now worth, you are going to take a loss, and it is just a question of whether you go through with it and take a paper loss, or crystalize the loss by either pulling out and getting sued, or by immediately on-selling the property. But at least by going through with it you have control, rather than relying on the intentions of a vendor who has a reduced incentive to get a good price, now that they can sue you for the difference.

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