Best Due Dilligence Clause

[olly_pilchard]

Hi guys. Id love to know your views on the best dd clause, and what the best disguised legally validated clause would be !

Here goes (by the way this is totally transparent but got the wording direct from the solicitors ie has been used recently in a contract).

"This agreement is conditional on the purchasers being entirely satisfactory with the outcome of a due and dilligent investigation of all aspects of the property on or before ..........from the date of this agreement"

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Olly_Pilchard

[Monid]

Hi Olly

This topic has had several bashes at it before, I suggest you search either for clauses or for due dilligence clauses.

I should inform you however that some of us don't think that due dilligence clauses are worth the paper they are written on... They are a good way to ward off potential sellers.

David

[olly_pilchard]

Hi Monid can you please expand

playing the devils advocate

how could a vendor possibly object to a purchasers condition. Why should I pay $400000 without a thorough inspection of the property ??

Cats Rule
Olly_Pilchard

[Monid]

Sure,
There are two problems:

1. If they, their agent or their lawyer are in any way savvy they will realise that the due dilligence clause is just an attempt to have your cake and eat it to, ie to present a a contract that looks 'clean' and hassle free for them while still giving you the ability to walk away at will.

2. Therefore they will realise that you are an investor, and that in a sense you are trying to pull a fast one:

what the best disguised legally validated clause would be

In my experience neither of these factors is likely to aid in a negotiation.

Personally I simply either do my due dilligence before making an offer, or I make the contract subject to finance, building inspection, lim etc as standard. This way the seller can see exactly what issues you might have, and knows where you are coming from.

David

[Don and Liz]

when you see how most finance and building clauses are written these days it is amusing that agents and vendors baulk at due dilligence - alot of clauses read "in the purchasers sole discretion" or "to the satisfaction of the purchaser". Whether you stick building or finance in front of those phrases does not really make much difference. Although, having said that you have to work with what you have - if a due dilligence clause will spoil your deal use something else .

how could a vendor possibly object to a purchasers condition. Why should I pay $400000 without a thorough inspection of the property ??

this raises a good point - when you get agents coming to you saying that a vendor will only take a "clean offer"
it is usually as good as saying that the property has a hidden defect that will be revealed during the due dilligence.

[RentMaster]

The due dilligence clause is more likely to get refused by sellers if the buyer is also offering a low price. If they are offering a higher price, then they are more likely to take the risk and accept the offer with the DD clause in place. But a low offer with a DD clause is less likely to be accepted. Especially if someone else puts in an offer without the DD clause.

Apparently though, if you choose to just use the finance clause or building report clause, then dont apply for finance or a building report to get out of the deal, the seller can challenge that. The clause you use is specifically for finance or building report, and the buyer has to make an effort to achieve those. But not many sellers would challenge it because of the hassle.

[whitt]

A good agent will see a DD clause a mile away. If any good they should grill you on what you actually want to check.
Then re write the clause to that effect.
eg building inspection , weather tightness report etc.

Remember the dangers of using a "subject to solicitor approval "clause though. They can only be used with respect to there profession.
eg you can not pull out if the yeilds dont stack up. However you could if there are title issues.

[cube]

I think that most vendors would love this clause:

This agreement is conditional on the purchasers being entirely satisfactory

as they wouldn't like to see their home going to some scumbag investor!

Maybe 'satisfied' would be a better word?



cube