OFFERING OR ACCEPTING AN UNCONDITIONAL CONTRACT
Making an offer before an Auction? The agent will only accept an Unconditional Offer’ What does this mean and what are the risks
Making offers before the Auction is a solid strategy. Getting prepared to make the offer takes preparation and commitment. If you don’t take these precautions be careful what you commit to.
Before making any unconditional offer I review contracts, pest and building reports, and strata reports and made physical inspections. I will engage with the conveyancer/lawyer paying special attention to the ‘special Conditions’ of the contract.
Looking for classic things – land tax payable, deposit releasees, extended or shortened settlements, additional levies
A key thing to remember is that an auction contract is “as is where is” caveat emptor “ Buyer be aware”. This can de-risk the vendor in a total sense. There are no comebacks. The auction terms and conditions will state this, and that you have had time to research and make inquiries, you are buying eyes wide open. This does not have to be a threatening situation. In a hot market, Auctions will be 95% of sales. When the market eases off Auctions will start to fail, be passed in, withdrawn before or during the auction, or cancelled) and we see more properties listed post-auction or put on the market for private Treaty.
WHY DO VENDORS GO TO AUCTION
To get the best market price with competing interests (no doubt about the price) – Use emotion to drive a higher price.
They need to increase their chances of absolute closure and settlement. They want certainty as they have pre-committed or need to liquidate their property for other reasons (not always stressed).
They have issues with the property that may leave them exposed in a Private Treaty Contract or having to Disclose material Facts that would compromise a normal sale process (deceased estate, crime scene (drugs or violence etc), landslip, unauthorised building works, encroachment, legal disputes, caveats, mortgagee in possession etc)
De-Risk…When the contract is unconditional – For purchase pre-Auction, or at Auction – The sales are UNCONDITIONAL you have no claim on anything it is “As is” some people still struggle with this.
SOME SCENARIO’S
Alternatively, if there is some change in the property after exchanging it is not going to be delivered on settlement in the same condition then there is an issue for a claim, rectification or compensation by settlement 9 or compensation adjusted at settlement). The trick here is that you must record and have accurate records before the exchange that can be compared to the property (after the exchange) and before settlement. These records must be produced and then challenged with the Vendors solicitor. If you don’t have these records – you have no claim.
Recently a client bought a property at auction it was heritage listed. On the settlement date, they moved in and used the toilet only to find massive sewerage pipe breaks and tree root clogging. A $17,000 repair and pipe relining had to be done. The outcome is this – there is no claim against the vendor at all. The property sold at auction ‘as is’.
The other question raised – should this have been declared before the auction- potentially if they had known about it, but it was siblings selling their parent’s home (deceased) and they had known of the problem. Regardless the Auction contract covers this scenario. A proper inspection by a plumber may have identified this (invasive permission would be required).
A good buyer’s agent can help mitigate these risks, sometimes a building report will pick this up (but rarely). Inspections and reports are good but often generic and superficial… they are not invasive (as someone else owns the property and they must permit you for any invasive inspection (highly unlikely).
IN CONCLUSION
When making an offer before Auction or at any time and the offer is unconditional = you also accept the property and the terms ‘warts and all.
This is a very compelling strategy to get a cheaper price as a purchaser and shows absolute confidence in your intention and ability to conclude the transaction.
Using and structuring Offers around this process is a clear tactic I use in the strategy of “Frictionless Offers” that is because the only consideration a vendor has to make is about the price!
A good negotiation satisfies all the parties in a circumstance that they can live with or tolerate. When the buyer and seller can meet = the Sale
I cooperate professionally and cover your back with due diligence and oversight and coordination of other services and professionals involved – it is about forming a property team to maximise your chances.
This is a big purchasing decision so we provide depth of understanding, analysis of the property, contracts and price in the market and perhaps most importantly make sure you maximise your chances of executing all things that need to be done to acquire the property. It can get complex.
For a generalised overview of making offers see the Realestate.com.au article
For more information and FREE strategy session about your situation – contact Gary at Advanced Buyers Agents.
