Buying a house - Real estate agents

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tdgeek

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#1404709 12-Oct-2015 23:02

joker97:
Handle9:
joker97:
Handle9: When you enter into a contract you are generally obligated to take all reasonable endeavours to satisfy the contract. This has been upheld a number of times by the courts. The article below is quite a good summary.

http://www.lawlink.co.nz/articles.php?articleid=110

With joker97s example above you would in all likelihood be up the creek without a paddle. You would have to prove why you didn't have the money and probably all your financial and email records would be discoverable.

So the judge rules one must buy the house. How is one going to buy the house? By paying $14,000? He can rule all he wants, the buyer can't afford the house.

If the purchaser doesn't complete an unconditional contract then they are responsible for compensating the vendor for their losses incurred under that contract. They don't have to buy the house but they will have to pay any costs incurred as a result of them not buying the house -eg the agents fees, interest lost, costs incurred in chasing the money, the price difference if the value of the house etc. We went through this when selling my grandmothers house in a rural town when the purchaser chose not to settle. It cost them about $40k settlement on a $150k house as values dropped in that town.

It's a bit of a moot point as generally the deposit is paid when you go under contract.

When did the SAP go unconditional? The buyer cannot confirm finance. Not a cent is paid. The vendor takes him to court to investigate his finance. Waste of time and money for the vendor.

The signing off the SAP is a contract, you pay the deposit then. Typically 10%

Word back from my agent. Sometimes the SAP is not the document, it may be a conditional offer. Or my wife misunderstood. Is there such a thing? She said (wife) that its an offer, with the finance condition, so that is not a contract its just the offer. Or wife got it wrong as she did mention its not an auction (which we had last week)just a normal sale. The idea of the offer is that I assume it ties the seller in? And allows short period of time for the buyer to secure guaranteed finance.

Googling tells me this is actually a SAP where the offer is made and subject to finance, but it is not accepted. Short term. Allowing finance to be approved. The vendor can later accept, or not accept, so the buyer doesnt get the house locked in, and the vendor, for a short investment in time, can erase what we have been discussing and lock in the sale 100% in the few days or a week. (Sunset Clause) A much cleaner way to go

eracode

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#1404731 13-Oct-2015 06:09

joker97:
Handle9:
joker97:
Handle9: When you enter into a contract you are generally obligated to take all reasonable endeavours to satisfy the contract. This has been upheld a number of times by the courts. The article below is quite a good summary.

http://www.lawlink.co.nz/articles.php?articleid=110

With joker97s example above you would in all likelihood be up the creek without a paddle. You would have to prove why you didn't have the money and probably all your financial and email records would be discoverable.

So the judge rules one must buy the house. How is one going to buy the house? By paying $14,000? He can rule all he wants, the buyer can't afford the house.

If the purchaser doesn't complete an unconditional contract then they are responsible for compensating the vendor for their losses incurred under that contract. They don't have to buy the house but they will have to pay any costs incurred as a result of them not buying the house -eg the agents fees, interest lost, costs incurred in chasing the money, the price difference if the value of the house etc. We went through this when selling my grandmothers house in a rural town when the purchaser chose not to settle. It cost them about $40k settlement on a $150k house as values dropped in that town.

It's a bit of a moot point as generally the deposit is paid when you go under contract.

When did the SAP go unconditional? The buyer cannot confirm finance. Not a cent is paid. The vendor takes him to court to investigate his finance. Waste of time and money for the vendor.

Exactly.

Sometimes I just sit and think. Other times I just sit.

eracode

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#1404733 13-Oct-2015 06:17

tdgeek:
joker97:
Handle9:
joker97:
Handle9: When you enter into a contract you are generally obligated to take all reasonable endeavours to satisfy the contract. This has been upheld a number of times by the courts. The article below is quite a good summary.

http://www.lawlink.co.nz/articles.php?articleid=110

With joker97s example above you would in all likelihood be up the creek without a paddle. You would have to prove why you didn't have the money and probably all your financial and email records would be discoverable.

So the judge rules one must buy the house. How is one going to buy the house? By paying $14,000? He can rule all he wants, the buyer can't afford the house.

If the purchaser doesn't complete an unconditional contract then they are responsible for compensating the vendor for their losses incurred under that contract. They don't have to buy the house but they will have to pay any costs incurred as a result of them not buying the house -eg the agents fees, interest lost, costs incurred in chasing the money, the price difference if the value of the house etc. We went through this when selling my grandmothers house in a rural town when the purchaser chose not to settle. It cost them about $40k settlement on a $150k house as values dropped in that town.

It's a bit of a moot point as generally the deposit is paid when you go under contract.

When did the SAP go unconditional? The buyer cannot confirm finance. Not a cent is paid. The vendor takes him to court to investigate his finance. Waste of time and money for the vendor.

The signing off the SAP is a contract, you pay the deposit then. Typically 10%

Word back from my agent. Sometimes the SAP is not the document, it may be a conditional offer. Or my wife misunderstood. Is there such a thing? She said (wife) that its an offer, with the finance condition, so that is not a contract its just the offer. Or wife got it wrong as she did mention its not an auction (which we had last week)just a normal sale. The idea of the offer is that I assume it ties the seller in? And allows short period of time for the buyer to secure guaranteed finance.

Googling tells me this is actually a SAP where the offer is made and subject to finance, but it is not accepted. Short term. Allowing finance to be approved. The vendor can later accept, or not accept, so the buyer doesnt get the house locked in, and the vendor, for a short investment in time, can erase what we have been discussing and lock in the sale 100% in the few days or a week. (Sunset Clause) A much cleaner way to go

Hmmm. In 99.999% of residential transactions, the document used is a standard Agreement for Sale and Purchase. Sometimes the doc may start as an unconditional offer. Usually it starts as a conditional offer (conditional on finance or any number of things - building inspection, etc) and then either goes unconditional or lapses. If it goes unconditional, the purchaser is bound to complete/settle on the purchase date. If it lapses, the vendor looks for another purchaser.

If you buy at an auction, you are deemed to have already done all of your due diligence prior to the auction because the sale is unconditional on the fall of the auctioneer's hammer. If you're the winning bidder, you're committed and on the hook. The 10% deposit is payable immediately.

Sometimes I just sit and think. Other times I just sit.

jmh

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#1404743 13-Oct-2015 07:36

LOL, of course you could ask a real estate agent.

tdgeek

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#1404749 13-Oct-2015 08:01

eracode:
tdgeek:
joker97:
Handle9:
joker97:
Handle9: When you enter into a contract you are generally obligated to take all reasonable endeavours to satisfy the contract. This has been upheld a number of times by the courts. The article below is quite a good summary.

http://www.lawlink.co.nz/articles.php?articleid=110

With joker97s example above you would in all likelihood be up the creek without a paddle. You would have to prove why you didn't have the money and probably all your financial and email records would be discoverable.

So the judge rules one must buy the house. How is one going to buy the house? By paying $14,000? He can rule all he wants, the buyer can't afford the house.

If the purchaser doesn't complete an unconditional contract then they are responsible for compensating the vendor for their losses incurred under that contract. They don't have to buy the house but they will have to pay any costs incurred as a result of them not buying the house -eg the agents fees, interest lost, costs incurred in chasing the money, the price difference if the value of the house etc. We went through this when selling my grandmothers house in a rural town when the purchaser chose not to settle. It cost them about $40k settlement on a $150k house as values dropped in that town.

It's a bit of a moot point as generally the deposit is paid when you go under contract.

When did the SAP go unconditional? The buyer cannot confirm finance. Not a cent is paid. The vendor takes him to court to investigate his finance. Waste of time and money for the vendor.

The signing off the SAP is a contract, you pay the deposit then. Typically 10%

Word back from my agent. Sometimes the SAP is not the document, it may be a conditional offer. Or my wife misunderstood. Is there such a thing? She said (wife) that its an offer, with the finance condition, so that is not a contract its just the offer. Or wife got it wrong as she did mention its not an auction (which we had last week)just a normal sale. The idea of the offer is that I assume it ties the seller in? And allows short period of time for the buyer to secure guaranteed finance.

Googling tells me this is actually a SAP where the offer is made and subject to finance, but it is not accepted. Short term. Allowing finance to be approved. The vendor can later accept, or not accept, so the buyer doesnt get the house locked in, and the vendor, for a short investment in time, can erase what we have been discussing and lock in the sale 100% in the few days or a week. (Sunset Clause) A much cleaner way to go

Hmmm. In 99.999% of residential transactions, the document used is a standard Agreement for Sale and Purchase. Sometimes the doc may start as an unconditional offer. Usually it starts as a conditional offer (conditional on finance or any number of things - building inspection, etc) and then either goes unconditional or lapses. If it goes unconditional, the purchaser is bound to complete/settle on the purchase date. If it lapses, the vendor looks for another purchaser.

If you buy at an auction, you are deemed to have already done all of your due diligence prior to the auction because the sale is unconditional on the fall of the auctioneer's hammer. If you're the winning bidder, you're committed and on the hook. The 10% deposit is payable immediately.

At that point its JUST an offer. The buyer can miss out as the seller might change his mind, and can do so for any reason. Another buyer can come along and snap it up.When the seller accepts, it is a contract and binding, so if the finance is s problem, after the fact, then its as discussed above, the buyer is locked into the sale, and if he cannot or won't, penalties for the breach. The moral is if you want to buy, have pre approved finance

Geese

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#1409588 20-Oct-2015 08:43

What happens in scenario where you buy house which is tenanted, wanting vacant possession, make offer subject to finance, it goes unconditional, pay 10% deposit... I presume at that point tenants are given 45 days notice? When is mortgage finalised? Do you go to bank once unconditional and its all finalised with possession date, or would it not be done until end of 45 days? What happens if during the 45 days one is made redundant? Could the bank back out and then one loses the 10% deposit?

Batman

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#1409637 20-Oct-2015 09:34

Tenants have nothing to do with the sale purchase agreement contract. Contract holds, tenants become your problem. Interesting whether you can give notice before taking possession ... Hmmm

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throbb

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#1409656 20-Oct-2015 09:39

Geese: What happens in scenario where you buy house which is tenanted, wanting vacant possession, make offer subject to finance, it goes unconditional, pay 10% deposit... I presume at that point tenants are given 45 days notice? When is mortgage finalised? Do you go to bank once unconditional and its all finalised with possession date, or would it not be done until end of 45 days? What happens if during the 45 days one is made redundant? Could the bank back out and then one loses the 10% deposit?

It would go unconditional(once the bank has approved your mortgage and the seller agrees to the settlement date) the settlement date would be set after the date the tenants would move out.
The mortgage is approved by you bank before settlement, so I assume if you are made redundant before settlement, it wouldn't matter as it has already been approved.

graemeh

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#1409657 20-Oct-2015 09:39

joker97: Tenants have nothing to do with the sale purchase agreement contract. Contract holds, tenants become your problem. Interesting whether you can give notice before taking possession ... Hmmm

If contract is subject to vacant possession then it is up to the seller to give notice to the tenant and have them out by settlement, this can only be done if they are on a periodic tenancy and the seller has to give 42 days notice. Fixed term tenancy can't be terminated without agreement from the tenant.

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#1409741 20-Oct-2015 11:32

Hmm good point that will become catch 22 with vacant possession.

On settlement date if it's not vacant and buyer doesn't want to settle his deposit will be held by the agents until he does. The buyer loses out. Of course you can go to court, the lawyers win, and still there's still the tenants there because they are bound by a different law.

graemeh

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#1409745 20-Oct-2015 11:38

joker97: Hmm good point that will become catch 22 with vacant possession.

On settlement date if it's not vacant and buyer doesn't want to settle his deposit will be held by the agents until he does. The buyer loses out. Of course you can go to court, the lawyers win, and still there's still the tenants there because they are bound by a different law.

It is not catch 22.

If you read the standard sale and purchase agreement there are clauses that outline the penalties to be applied when one party is ready and willing to settle but the other is not.

You do not need to go to court immediately. It is not common but it does happen occasionally that settlement is delayed for some reason, normally it is not a big deal.

SheriffNZ

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#1409746 20-Oct-2015 11:39

joker97: Hmm good point that will become catch 22 with vacant possession.

On settlement date if it's not vacant and buyer doesn't want to settle his deposit will be held by the agents until he does. The buyer loses out. Of course you can go to court, the lawyers win, and still there's still the tenants there because they are bound by a different law.

Surely if the agreement is subject to vacant possession, and the seller can't provide that, the purchaser has the right to either cancel the contract (with damages) or the interest clauses in the contract kick in for late settlement which the seller then pays?

Linuxluver

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#1411700 23-Oct-2015 11:11

SheriffNZ:
joker97: Hmm good point that will become catch 22 with vacant possession.

On settlement date if it's not vacant and buyer doesn't want to settle his deposit will be held by the agents until he does. The buyer loses out. Of course you can go to court, the lawyers win, and still there's still the tenants there because they are bound by a different law.

Surely if the agreement is subject to vacant possession, and the seller can't provide that, the purchaser has the right to either cancel the contract (with damages) or the interest clauses in the contract kick in for late settlement which the seller then pays?

Read those interest clauses carefully. It seemed plain enough to me that if the vendor wasn't able to settle, they could be liable for interest charges. But I found myself in a situation where the vendor could not settle because the house was owned by a company that he had allowed to lapse for lack of reporting annually to the companies office. As the company was no longer able to dispose of any assets, he could not settle the purchase on the day. I called our lawyer and had several extended discussions during which she assured me over and over the vendor was NOT liable for interest due to non-settlement as a punitive measure. There are very limited circumstances in which these clauses kick in. I argued with her for some time and she was getting pretty testy with me. It seemed obvious enough he wasn't able to settle.....so he owed penalties. But there is another clause in there that very much limits exposure to such penalties in reality. Looks like the thing was written to fool the unwary into thinking they had more protection in the event of default than they actually have.

It took the guy about two weeks to get the company lapse sorted out and then the sale went through.

Update: Found it. Auckland law Society Agreement for Sale and Purchase of Real Estate (2012) Clause 3.13(2)(a)

Basically you're entitled to compensation for reasonable costs during the VENDOR default OR the interest payable on the default amount. I think the lesser of the two is what would happen in reality. In our case, we weren't out of pocket at all - just delayed and there was some inconvenience. Interestingly, if you have a pile of cash in a bank / trust account waiting for the purchase to go through, you must pay the interest to the vendor. You can deduct fees and admin costs. They, in turn have to pay you any rents you've missed out on. For most purchases the amounts here would be so trivial as to be not work bothering about.

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