Selling Residential Property
Kathy asked us if we knew an experienced and proven agent to sell her house in St Lucia. She was so pleased with the sale price and the service from our referral that she bought them a bottle of champagne after the sale.
Kathy appreciated our feedback when the price negotiations were taking place and was happy to sign the contractSets out everything the parties have agreed to when our reviewtook about five minutes over the telephone to check if the contract seemed balanced and reasonable confirmed that there were no uncertain or unusual terms. It was good that she sent the Discharge Authoritycritical bank form for owner to complete, sign and send to bank straight away to tell her bank to release the mortgage because the bank took just over two weeks to process it.
We confirmed that it wasn’t unusual that the buyer wanted two items attended to from the Building and Pest report and that they wanted a seven day extension for their Finance condition.
We talked through the settlement figures together when the contract was unconditional and Kathy had a good picture early on of how much she would end up with in her pocket at settlement.
We met with Kathy to formally identify her in the week before settlement. She was happy to settle through the PEXA electronic settlement portal and everything went smoothly on her settlement day. Once that step was completed the next step was to help both her and her partner George with their Wills.
Buying a House
Anna called Clearman Lawyers to ask how much a conveyancetransfer property from seller to buyer costs. I said that if she gave me some information about the property, including whether it was an apartment, a house, a country pub or a commercial warehouse for example, and also told me how she was fundinga bank or cash or a combination of the two the deal we could then talk about costs if that suited her.
She said she was buying a heavily renovated house in St Lucia and wanted to be sure that all council approvals were in place. It was the biggest purchase of her life and she wanted to make sure she got what she thought she was paying for. Anna was paying about $1,400,000, half in cash from an inheritance and had to find a finance brokerwe’re happy to share the amazing community of business professionals we know and trust for the rest of the funds.
Because she was happy with our fee estimate, Anna emailed us the draftunsigned contract while we were talkingwe reviewed it while we were talking on the phone. Based on her concerns for the renovationssome renovations without council approval can affect property values and ease of sale, we recommended a Due Diligence condition in addition to Building and Pest and Finance to check all council approvals / final inspection certificates were in place. The seller accepted Anna’s offer and we immediately carried out a search of the approvals position with Brisbane City Council.
Later that day Anna had a chat with our recommended broker and was surprised that the interest rate available was better than she could find herself. The seller agreed to a $935.00 Building and Pest adjustment because there were some cracked tiles on the roof.
Happily, the seller had done a good job on the renovations. All the final inspection certificates were in place and Anna knew that one day, when she came to sell, that would be good for the property’s value.
Once finance was confirmed we confirmed Anna was happy for us to carry out the conveyancing searches to make sure the seller didn’t owe any money to council, the Office of State Revenue or Queensland Urban UtilitiesBrisbane water company at settlement.
Clearman Lawyers helped Anna to make sure funds were in the right place at the right time in advance and that the electronic PEXA settlement went through smoothly.
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Building and Pest
1. Before we share Georgina’s story, let’s review some ground rules from the contract (below assumes standard REIQ contract), for the Building and Pest critical date:
(a) Narrow The Building and Pest condition is ‘narrower’more restrictive than some clients realise. Buyers can’t just say “Oh, I’ve changed my mind because I’ve seen a house I like more and I want to terminate this contract under the Building and Pest condition”. Buyers must act “reasonably”from an objective perspective and they must obtain a report from a licenced building and pest inspector (we can provide a great recommendation) to be able to terminate under this condition.
(i) The seller is a ‘passenger’ meaning they just have to wait passively for the buyer to confirm, negotiate or terminate under the Building and Pest condition from the contract datedate the last party signs the contract until 5:00pm on the Building and Pest date (after 5:00pm the seller is able to terminate).
(ii) If the buyer hasn’t confirmed Building and Pest OR formally agreed with the seller for an extension of time, reduction / rectification before 5:00pm on the Building and Pest date, the seller gains the rightwhereas before 5:00pm the seller is bound to the contract and has to just wait passively for the buyer to decide which option they want to choose to terminate the contract. The buyer can also still terminate (acting reasonably).
(c) Alternatives Buyers can instruct Clearman Lawyers to advise the seller that they:
(i) terminate the contract (if there are significant Building and Pest issues) or
(ii) confirm they are satisfied with Building and Pest (or waive the condition) or
(iii) negotiate with the seller to have defects rectified or reduce the price or
(iv) request an extension of the Building and Pest condition.
2. Georgina’s story Georgina was buying a nicely renovated house in Windsor with a seven dayGeorgina’s contract provides 7 days (from the contract date) to organise the inspection, get the results and approve the inspection OR reach agreement with the seller about any issues Building and Pest condition. She was paying top price and wanted to be sure that the property was sound. Georgina was very pleased with the Building and Pest inspector recommended by Clearman Lawyers because he was professional and approachable and the report was clear and thorough.
3. Inspection The Building and Pest inspector went to the property on day five, answered her questions about the report, gave her a basic idea of cost to repair some of the building defects and gave her the contact details of a plumber to get an estimate of other repair costs including the shower and some cracked roof tiles.
4. Communication To make sure communication channels were correct, Georgina sent the report directly to our office together with an email noting some items she hadn’t known about when she agreed on the price. There were still two days before the Building and Pest condition was due. To make sure she was well-informed and could make good decisions, we discussed the critical parts of the REIQ contract Building and Pest condition (see detail above).
5. We said that the Building and Pest condition is ‘narrower’ than some clients realise. There is often room for negotiation for unknown defects, but it’s not usually an open invitation to renegotiate price. Georgina’s concerns were “reasonable” and the defects were significant so that ticked the first box. She had already obtained a Building and Pest report which ticked the second box.
6. Timing Then we talked about timing. I said that the seller was like a “passenger” until 5:00pm on the critical date. After that time, the seller can gains the right to terminate if the buyer hasn’t confirmed Building and Pest before 5:00pm on the critical date. We said that her rights don’t change so she could still terminate for serious issues after that date (if negotiations were continuing for example).
7. Georgina understood that we are lawyers and not builders. We helped by giving her an idea of what is normal and usual in building and pest reports and negotiations. We asked if she still really wanted the property whether or not the seller agreed to rectify defects or make a less adjustment at settlement. She said that they weren’t ‘dealbreakers’.
8. Quotes We recommended that she obtain quotes for the plumbing items and avoid arbitrary round numbers eg $2,000.00 in the price reduction request.
9. Result On Georgina’s instructions we sent an email to the seller saying that she would be happy with the Building and Pest condition IF they either rectified several issues or agreed to a less adjustment at settlement. Because her requests were reasonable and she provided quotes, the seller agreed to a reduction at settlement of $990.00 and Georgina was satisfied with the Building and Pest condition. Then we sent an email to the seller agreeing to those terms and CCed the selling agent so they knew what had been agreed.
Buying an Off-The-Plan Apartment
Andrew is a great client with a good business. He and his wife had decided to by an apartment off-the-plan to celebrate a business milestone. The plans looked great but the builders were only pouring the concrete for the car park level when Andrew first discovered the development.
Andrew and Leigh sent the agent the completed Expression of Interest form and paid a $1,000.00 deposit because they wanted the developer to hold the top floor apartment for them. The agent sent the 145 page draft contract and disclosure statement to Clearman Lawyers to review. The contract included a disclosure statement, plans, finishes and all of the legal conditions for the purchase.
We reviewed the contract, drafted some recommended special conditions and answered Andrew and Leigh’s questions. They know that the stage they were buying probably wouldn’t be ready to settle before two years had passed and because the developer agreed to their special conditions, decided to sign the contract.
Once we received the fully signed contract we sent Andrew and Leigh an email noting important dates and the next steps for them to take.
They spoke with the broker recommended by Clearman Lawyers and understood that although the finance condition was 21 days, most lenders’ finance offer expires after 90 days. After discussing the finance condition in detail with us and the broker, they were comfortable enough with their financial position to confirm finance.
Then 20 months went by quickly and we received a notice from the seller that the apartment was built and ready to settle in 21 days. The broker helped them to make an updated application for finance and we helped them to make sure that funds were ready from their bank and their own contribution to settle.
Buying Vacant Residential Land
Chris and Patricia had been talking about building their own home in Cannon Hill for their growing family for more than six months. As Chris was driving to work one morning he saw three lots for sale right near their local shops. They called the agent that evening and then called Clearman Lawyers when the agent asked them to complete an Expression of Interest form and pay some money.
They then asked the agent to send through the draft contract so we could help them review it. We strongly recommended a soil test special condition to make sure they were in control of the process just in case engineering works were needed because of unstable soil.
Patricia was pleased with the choices that our recommended broker provided because they needed a flexible package to work well with their other investment properties.
Once the soil test came back we helped them with the negotiations with the seller to make sure everyone got a fair deal. 30 days later they were the owners of the land and were talking to an excellent builder recommended by our business network.
Buying Off-The-Plan Land
Adrienne is buying an ‘off-the-plan’Land is still part of a larger, ‘parent’ lot and doesn’t exist as a separate lot until formally registered with the Titles Office block of land to build on. It’s expected to ‘register’‘Registration’ happens after the local council and the Titles Office confirm that the individual ‘child’ lots of land can be separated from the developer’s ‘parent’ lot and transferred to a buyer in about six months and that’s when Adrienne can settle the purchase and get started with the build. Every off-the-plan contract is different but the seller generally has only about 18 months to get the land registered.
Once we received the draft 85 page contract we sent her a review of the critical items together with some recommended special conditions. The most important ones are generally to cap or reduce her liability for land tax and also make sure she can talk to her builder, recommended by Clearman Lawyers, to arrange a soil test. The soil test is critical to make sure she doesn’t buy a block of land and then have to spend up to tens of thousands of dollars on unexpected engineering and building expenses.
When Adrienne was satisfied with the terms, she signed the contract and sent it to the agent. The seller accepted her offer and dated the contract. When Clearman Lawyers received the contract, we prepared our first critical information letter and sent it to Adrienne for her careful review. She had 21 days to arrange the soil test and to arrange conditional finance through the broker Clearman Lawyers recommended to her.
The soil test result came back as Category “M” which meant that her builder was happy to confirm that there would be no extra engineering costs for the foundations.
We carefully discussed that offers of finance generally expire after 90 days and that there was of course a risk that when she reapplied just before settlement, the bank wouldn’t renew their finance offer. Because Adrienne was very confident in her financial position, she was prepared to take that risk and instructed us to confirm finance with the seller.
Then, after about eight months, we received notice that the land had registered and settlement would take place in 21 days. Adrienne made sure that her finances were in place and we took care of the settlement for her.
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This page is not intended to provide legal advice and does not create a client-lawyer relationship. This post is provided for general information purposes and should not be relied upon as a substitute for legal advice. If you need help with legal advice for your particular situation, please contact our office (details below or on ‘Contact’ page) and we’ll be happy to assist you.