in your best interests
NOT SURE WHAT CONDITIONS TO INCLUDE?
This is always a tough one to answer, but ultimately it comes down to your own preference and appetite for risk. You can effectively put anything you want as a condition, and you don’t have to proceed with the purchase if any of your conditions are not met satisfactorily. However, the more conditions you add in the less attractive your offer will be to the vendor, and the lower your chance of a successful purchase.
Common conditions used with an initial offer are as follows:
Registered Valuers Report (RVR)
Building Inspection - unless you are a qualified builder, or can bring one along with you, this would be a report I would highly recommend. Saving a few hundred dollars by not getting a report done may turn out to be a very expensive mistake if you buy a property that has ‘issues’ not immediately obvious to the untrained eye.
A Registered Valuer’s Report (RVR) is often a requirement of the lender, rather than a condition initiated by a purchaser. If you are borrowing over 80% of the property value then this will almost certainly be a condition of finance, and without the valuation report they will not approve funding.
Finance - if you don’t have finance approved by your bank then you need to include this clause. Buying a property without putting finance in place first is a very, very bad idea!...
Title check - your solicitor will do this for you. This is another ‘must have’. Making sure you are actually buying the land/property that you think you are is imperative!
LIM Report - a lot of people are unsure of the need for this. The LIM report covers off any relevant information the council has on a property. This includes consents, notices or orders affecting the land/property. Still not convinced? I recently had a client looking to purchase a property but thankfully discovered in the LIM that the building was never given its final Code of Compliance Certificate as the framework hadn’t been signed off by the council. A building inspection wouldn’t have picked this up and remedial work was estimated at $50k...They were very pleased they got the LIM!...
It is important that the wording of each of conditions states that the results be satisfactory to you, then only you can decide if the condition has been satisfied.
You may also have a house to sell as a condition of sale - this needs to be carefully worded in the conditions. This sort of condition usually includes a 'cash out' or 'escape' clause. These clauses allow the vendor to keep marketing the house until you go unconditional. If they get another offer before this happens the vendor gives you a specified amount of time (as per the clause) to go unconditional (usually around 3 working days) or your offer will be considered cancelled.
Another condition that can be used is 'due diligence'. This clause covers all the standard conditions and more, and can be used when you have unusual or sensitive conditions to cover off. Real estate agents are never keen on buyers with this clause as it is effectively a ‘get-out’ card and allows potential buyers to walk away from an offer at any point. However, from a buyer's’ perspective it provides considerable protection.
If you’re unsure which conditions to include then it’s best to discuss this with your solicitor. They can advise which clauses are necessary and which offer you the required level of protection.
Brian MacLean looks into tips, ideas and strategies you can use to get ahead financially..