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Filling in 8th Edition S&P

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  • muppet
    replied
    Thanks for making it available to PT, Dean.

    I tried to copy during the weekend but wasn't able to reproduce all the extra bits.

    I was told to make a change to my settings and now what you see is what you get.

    Leave a comment:


  • muppet
    replied
    Sale and Purchase Agreements

    So here we go, how to fill out the latest S&P agreement.
    Note the world is a different place compared to when I did the 7th edition version of this so we must be more pedantic these days to ensure we are legally correct. There is a lot more suing going on than previously.
    So to begin at the beginning...
    Vendors Name

    Sadly today people are lying, a lot, about this. You need to know who the actual vendors are. Any good agent will check this for you but if in doubt get your lawyer to check the title and advise who the owners are.
    There is a definite strategy out there at the moment to leave 1 trustee off a trust when signing etc. to try and create loopholes for vendors.
    In the example below the vendors signed up as XYZ Trust and 1 person signed.
    I have "corrected" their oversight and told the agent to get the 2 other owners autographs


    Purchaser's name:

    Often we have trading trusts or even buy and hold entities that have names that indicate to vendors that we either have money or are professional investors. This is often not helpful, especially with an emotional vendor. Seeing your potential buyer listed as "My stinking rich trust" often doesn't give a vendor too many warm fuzzies.
    On the flip side the many changes to the tax and GST laws means we cannot use "or nominee" or our own name anymore either so you need to set up or change your entity names to not sound professional or property related. And in these increasingly litigious days exact wording is important.
    So in my example I am buying into a trading trust with a corporate trustee.
    Remember to put the exact name of the entity, and for asset protection reasons never buy property in your own name!
    Property details-Legal Description etc:

    Nothing to highlight here really. You should know the address and whether the property is freehold/leasehold etc. BEFORE you make an offer anyway. The legal description you may be able to obtain via the internet but the vendors agent or your solicitor can always get them for you. Example is freehold so everything else is crossed out

    Purchase Price:

    Well you put in whatever figure you like but remember your initial offer must be lower than your best price or you have no negotiation room. Typically you want your first offer to be a minimum of 10% below what you really want to pay. The other thing to remember is to cross out PLUS GST on the right hand side just to be clear, in case the vendor is registered for GST.


    Deposit:

    Always remember with deposits that they are OPTIONAL, and you want them to be as small as possible. I used to make all my deposits $5000, however these days I tend to make it 4% as in the example as this covers the agents fees and encourages him or her to work with me.
    Remember the deposit is dead money out of your account. If you can buy a property for $500 do it.

    IMPORTANT NOTE: Agents will often change deposit amounts and say that the vendor wanted a larger deposit. In my experience this is often an outright lie. The agent has changed the amount to make it cover their fees or look more attractive to the vendor. I make a big deal out of this if I suspect the agent has been the culprit. These days vendors are nrevous so may be wanting bigger deposits, however there are no buyers so they need to be flexible.
    The other critical point with deposits is to write next to the amount "payable on unconditional date".
    Never ever ever hand over money on an agreement that is conditional.
    Balance of Purchase Price and late interest rate:

    The late interest rate is typically pre filled in at around 14%. Some agents even tell yo uit is legal requirement. This completely untrue so just change the penalty interest rate to a fraction above your revolving credit interest rate. If you are buying a lot of property you may occasionally settle late so no point penalising yourself. I ALWAYS do this and NEVER have an issue from vendors. It has saved me a lot of money on some deals.
    The new form says the balance of purchase price is payable on settlement which is........
    There are countless ways to use this particular item as a negotiating and information gathering tool.
    If you want to discuss settlement terms with a vendor then use this:
    This is my "standard"settlement date and forces the agent to discuss things like long term settlement on my behalf.
    If you think the vendor may be in a spot of bother and may need rapid settlement then in conjunction with your very low offer use this:

    If the property is tenanted that is good because you know he has to give the tenants notice. So to ensure that is clearly understood use this:
    And lastly if you want to ask for long term settlement use days, even though the number is bigger psychologically the vendor prefers 180 days to 6 months, days somehow seems shorter :-)
    Possession:

    There is a lot of creativity possible here too, (come and get some mentoring if you'd like to learn the groovy stuff), but for standard agreements possession is going to equal settlement.



    Conditions:

    Cross them all out!! You want your offer to look as "unconditional" as possible so cross out all the conditions on the front. You can insert one clause in the back of the agreement that covers all these conditions.

    Tenancies: Now listen up here. Vendors lie. Never assume that existing tenants are good. Any vendor will say they are fantastic because they want to sell their property.
    So ALWAYS put "vacant possession" next to tenancies. Now if you want the tenants to stay you can get your property manager to interview them and if your manager thinks they're OK then you can sign them up onto new tenancy agreements. Trust me, if you don't do this you can inherit all kinds of dramas.

    Now sometimes vendors are in love with their tenants and won't sell with vacant possession. In this case you need to explain to the agent/vendor that you would like to put the tenants onto your own tenancy agreements and get them to give you permission to talk to the tenants before you go unconditional. You do not want to inherit bad tenants. I sometimes use the bit in brackets below to appease tenant friendly vendors.

    Sale By:

    This panel will normally be filled in by the agent where they put their details. If you are dealing with a private vendor then you insert "Private Treaty" as per example.


    So page 1 should look something like......




    Page 2

    Clauses Page:

    It is impossible here to discuss all the possible clauses that you can use in a sale and purchase agreement. However there are a couple of clauses you can use in virtually every agreement that will keep you safe and give you an exit from a deal if you want/need one.
    Due diligence is an all encompassing clause that basically says that you can walk away from this agreement for any reason whatsoever.
    I carry a huge range of clauses freely available for you on my web site including a bunch of new ones recently drafted by my solicitor to create more protection for us in the current climate. Copy and paste them anytime from my clauses page HERE.
    I have used the latest one hot off the pen of my solicitor below. WORDING IS IMPORTANT, don't let a vendor or agent change one word.
    If you use the clause below you are under no obligation to go unconditional, so you can sleep knowing you can't be forced to buy it.



    (This agreement is in all respects conditional upon the Purchaser being satisfied that the property is suitable for the Purchasers requirements following the Purchaser carrying out a due diligence verification of the property.
    The date for fulfilment of this due diligence condition is XX working days after the date of this agreement. The parties acknowledge that this due diligence condition is inserted for the sole benefit of the Purchaser and may at any time prior to this agreement being voided be waived by the Purchaser giving written notice of the waiver to the vendor.

    If this condition is not fulfilled the Purchaser shall not be obliged to state any reason for the Purchaser’s lack of satisfaction.)
    And if you want to specifically ensure you can get access to the property during your due diligence use this variation.
    (The Vendor agrees to provide the Purchaser (and/or it’s invitees) access to the property as many times as necessary in order to carry out it’s due diligence investigation.)

    Chattels:

    Only one thing to watch out with chattels really and that is to make sure that anything you particularly want is listed there. The other thing to be aware of, (I know because it happened once to me), is to either specify the chattels or take pictures of them. What do I mean? Well I bought a property and one of the chattels was a dishwasher. The dishwasher in the kitchen was a new F&P dishdrawer. Come settlement day the dishwasher had turned into a 20 year old boat anchor. So if there are good quality chattels in a property you are trying to buy specify them under chattels. Also note if you don't cross out stove then the vendor must provide a stove, same with everything else preprinted there.
    My solicitor recently had to supply curtains to one of my buyers because he forgot to cross out curtains in the S&P he prepared for me :-)


    Then sign it!!

    So your finished page 2 should look something like.......
    Page 3

    The vendor will fill his details and the agent theirs so we are only concerned with the middle panel. Now understand this info is to facilitate communication. The legal entities etc. are on Page 1 so this is to enable the various parties to contact each other. So just put your name and mobile or any relevant phone or fax numbers to enable the agent or vendor to contact you.
    And give your lawyers name phone and fax no.

    And that's it Bob.
    You can download a Word version of the S&P HERE and preformat it with all your standard things and practise.
    These days most agents will insist on rewriting the agreement on their own contracts and that's fine, JUST MAKE SURE THEY HAVE COPIED WORD FOR WORD AND LINE FOR LINE WHAT YOU GAVE THEM!!
    Use a font that looks like handwriting and always fill in at least part of the agreement by hand so it doesn't look "churned out". Remember the less professional you look the better.

    Leave a comment:


  • Dean@Massiveaction
    started a topic Filling in 8th Edition S&P

    Filling in 8th Edition S&P

    I recently did a step by step on filling out the latest S&P's in my newsletter and was asked to make it available in the library.
    You can read it all HERE

    You can get sort of info for free every month by subscribing to my newsletter HERE
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