Use the off-plan property contract to avoid an expensive embarrassment
I recently read a story from my home turf, Australia. It detailed the story of a couple of property investors who had agreed to buy a property for almost $4.5 million. They had second thoughts and sent an email to the agent requesting a pull-out before the end of the cooling-off period. A day later, they were told they couldn’t back out. They hadn’t posted their retraction correctly, and the seller was holding them to the contract.
Within weeks the seller had sold the property to another buyer at a lower price. The original couple sued for their deposit of $350,000. The seller countersued, claiming the $400,000 loss from the original sale price, and a bunch of costs. In court, the seller won. That one mistake – lodging the back-out incorrectly – cost the couple almost $1 million.
Here I detail the things to do to make sure you never get into a similar situation.
Don’t put yourself in the hole in the first place
The Melbourne investors, Eng Kiat Tan and Cheng Lo, stated in their email requesting a withdrawal from the purchase that “after due and further reconsideration by the entire investment syndicate regarding this property, we have decided to exercise the three clear business days’ cooling off period with immediate effect.”
I’m sorry, but perhaps these investors should have known better: they clearly weren’t beginners in the property. Always do all of your due diligence first. Whatever your investment amount, make sure that you’ve carried out your due diligence and research early: it’s the closest to a guarantee of investment success that you’ll get.
We’ve got an 89-point due diligence checklist, which we use with clients to ensure that the property is everything it promises. It runs to around 30 pages, with only a handful of images. Compare that to the four or six-page sales leaflet you’ll receive from a sales agent. To find out just how comprehensive our approach is.
When you’re buying off-plan property, for the first time or the hundredth time, always try to get a get-out clause included in the contract. It will provide the allowable reasons for withdrawal and the time limit on when you can back out. It will also detail how the request to withdraw must be made.
When you purchase property through Gladfish, we always insist that you sleep on the agreement for 24 hours before signing. It gives you an opportunity to discuss the deal in more private surroundings and fully consider your off-plan purchase. Things can look very different in the morning when that initial euphoria has died away.
If you’re going to cancel, do it fast
With a cooling-off period in place, don’t prevaricate if you’ve changed your mind. Make the call immediately, liaise with your solicitor, and follow the method of withdrawal as stipulated in the contract.
See our investment blog “What does a solicitor do when you buy off-plan property?” for more information about why it’s best to use a solicitor with off-plan investment experience.
Take drastic action and forego your deposit
Finally, if you do decide that the investment isn’t for you, the only course open to you may be to wave goodbye to your deposit. I’d argue that this would be financial suicide. Unless there is some reason that forces you to pull out, you will probably find that the discount you negotiated (or that was negotiated for you) provides a suitable buffer. You may also be able to sell the property before completion.
If there are cash flow reasons for pulling out, you may be able to renegotiate your mortgage deal (one of the benefits of using a buy-to-let mortgage broker is that yours is unlikely to be a unique situation).
Use a sales progression team to ease your buyer’s workflow
Here at Gladfish, every client has access to a dedicated sales progression manager. Whether you’re an experienced investor or making your first foray into buy-to-let, you’ll have a team working on your behalf to make sure that all the boxes are ticked.
Your sales progression manager will be available to talk you through any concerns you may have. You’ll be kept up to date and informed of how your property investment is progressing, removing the day-to-day strain and stress of investing in property.
For more information, contact the team at Gladfish on +44 (0) 207 923 6100. Our priority is your property investment.
Live with passion,