Additional conditions for an offer on a property.

[mattnzz]

I am thinking of putting in an offer on a house that is for sale by negotiation. The house has heaps of problems (eg leaks (over 50 years old), no consents for additions and electrical/plumbing, needs recladding , has asbestos cladding and flooring, water leaking through blockwork retaining walls inside etc). It also has complex access of a shared driveway and easements. It has been on the market for a year, and has only had one previous offer but it fell through. I am therefore wanting to put in a low offer, as it needs about 100k spending on it for repairs. The offer amount was going to deduct the repairs from the RV, so it is highly likely it won't be accepted. I don't want to go to the expense of a lawyer at this stage until I know they will accept the offer, otherwise it will be a waste of money. I haven't yet had a building inspector look at it for the same reason. However once they agree to the price I am willing to pay, I would employ the services of both.
I do want to get the wording in the offer right. Is there anywhere that has standard wording for those types of conditions that can be added to a standard sale and purchase contract, that will allow me to get out of the contract if I discover any other problems. The extra conditions I have got are below, but I am sure that there are some others.

Conditional of legal scrutiny of the property title by a lawyer.
Conditional on a satisfactory building inspection report, to my satisfaction.
Conditional on a satisfactory LIM and BIM report

Ideally, I don't really want to sign the offer(Sale and purchase agreement), until we have agreed on a price, then I can take the offer document to the lawyer to check everything, to then sign off.

TIA

[AMR]

Speak to a lawyer about the exact wording. But this bit also stood out.

The offer amount was going to deduct the repairs from the RV, so it is highly likely it won't be accepted

What's the point of taking on all this risk if you are simply going to end up with something at RV? (I take it by RV you mean rating or council valuation)

[mattnzz]

Speak to a lawyer about the exact wording. But this bit also stood out.



What's the point of taking on all this risk if you are simply going to end up with something at RV? (I take it by RV you mean rating or council valuation)

Thanks. I was told by the agent that they would accept the RV (The councils Ratable valuation done by QV), as they were elderly and just want to move on. If it was all well maintained and upto date, I would have offered close to the RV.
That is a good point about why do all the work if all I am going to end up with is something at RV. But I would be getting people in to do most of it, so either they can get all the work done, and then I pay close to RV, or I get someone in and perhaps save a bit by shopping around on the work or even do some of it myself. Whatever you buy (unless you build from new) you usually have to do a certain amount of work on it anyway. The thing is the land value on this property is very high, so deducting 100k from the RV for repairs almost makes the house worth nothing, as that would take it almost down to the land value, when it would probably cost more than 300k to build what is currently there. I have definitely got mixed feelings on the property, but I do like it, as it is a house to live in, not a rental. It is also in a top location. eg the worst house in a good street.

[CJ]

Conditional on a satisfactory building inspection report, to my satisfaction.

my issue is with this. You are offering $100k less due to building issues. Why would they sign at that price for you to get a report with $100k of issues.

[toby]

"This agreement is conditional upon the purchaser being satisfied with the subject property in all respects including but not limited to " " within 10 days of acceptance."

[mattnzz]

my issue is with this. You are offering $100k less due to building issues. Why would they sign at that price for you to get a report with $100k of issues.

I see your point, although I have already provided them with my own building report on the property, identifiying problems I have seen when visiting it. I have a construction background so can pick up a lot of the problems, and estimate the cost of remedy. I would also get my own building inspector in to double check things, and make sure they don't find any other issues, and to make sure they don't think it is going to cost more to remedy. It is very difficlut to estimate the cost of repair, until you actually open up the walls to see the extent of the problem. Noone would usually go to the extent of paying for a building inspector, before they make an offer. You usually negiote on the price afterwards, if the building inspector finds issues. I am trying to skip this step somewhat by reporting on the issues I have found, but there are possibily others too that can only be found with an inspector.

[CJ]

Matt - I guess my point is you would need to make clear (just verbally) what building repairs are included in the $100k discount or that the price offered includes the first $100k of defects per the building report.

More a communication issue to get them to sign rather than a roadblock.

[Ivan McIntosh]

.......

......The thing is the land value on this property is very high, so deducting 100k from the RV for repairs almost makes the house worth nothing, as that would take it almost down to the land value, when it would probably cost more than 300k to build what is currently there. I have definitely got mixed feelings on the property, but I do like it, as it is a house to live in, not a rental. It is also in a top location. eg the worst house in a good street.

Was interesting to hear you say that, as I was thinking after reading the opening post that you should really think of it as a bare land section in terms of value, albeit one with services connected.

It would be no big deal for us to put in those conditions; doubt we would charge any more for the privilege. Just let the lawyers do it once you know the offer will be accepted and save yourself some grief. Sure I'm baised in favour of my profession, but I'm also possessed of a long memory that well remembers the atrocious drafting attempts the odd client has attempted and brought to us to try and fix

[Ivan McIntosh]

In fact, email me and I'll send you some. No charge.

[WGN ex-property manager]

With a complex run down house, your $100K estimate will likely blow out past $150K before you know it. Factor this into the price.

[NovInvestor]

No point buying a house at a discount, then spend reno equivalent to the discount to get the house back to market value, and leave no equity for yourself.

Make sure the after renovation value of the property is much much more than 1) what you paid the property for, plus 2) reno cost you have to put in, ie 20-30% more.

Quote from above: "This agreement is conditional upon the purchaser being satisfied with the subject property in all respects including but not limited to " " within 10 days of acceptance."

Just use the safest get out of jail clause, and if they dont like it, then keep on bargaining. Most of the time it's the agent that you need to work on, not the vendor.

It hasn't been sold for a year already, so a few month negotiating is not a big deal is it?

Don't let other's liability becoming yours, unless you profit massively from it!

[WGN ex-property manager]

Yup, couldn't agree more.

For you to take a $150K risk you need to get a reward to make it worth your while. If there is no profit margin between your purchase price + costs + contingency and the final fair market value of the end result then you are taking a risk for no reward.

This is a traditional and well know way to loose money.

[mattnzz]

Thanks everyone. I will take all that into consideration, as there are some good points.