True Story - Pitfalls of Rushing into a Contract

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TRUE STORY:
Pitfalls of Rushing into a Contract

Hello and Welcome!

My name is Ann Janssen and I have been a Solicitor in Australia for over 11 years. During this time I have encountered some amazing cases in the Property area. In this section, I discuss some of the true stories that have come across my desk. Obviously the names and circumstances have been changed to keep parties anonymous. You’ll get some valuable insights from these true stories.

Note: the information below is designed specifically for buying and selling property in Queensland. While some information may be of use to property transactions outside of Queensland we recommend that you seek legal advice before relying on any information herein.

The Facts

A lady came to see me one day because she had seen a house that she really loved and wanted to buy it. She had two school aged children and was divorced. She had received the family home in the property settlement, but it was now too large for her, and she wanted to live closer to the children’s school and other facilities so that she could better juggle full time work, and child rearing, largely on her own.

She had wanted to sign a Contract with the Agent over the weekend to buy this property, but had decided to see a Solicitor first. We looked at the draft Contract and it all looked in order. Even the price seemed right. She was very keen, but I found out that outside of her own home, she had only enough savings to pay for a small deposit.

I told her that she could go ahead with the purchase, but she must make it subject to the sale of her own home. The standard clause I recommend is that the clause gives you 30 days to get a Contract on your own home, then a further 30 days to settle that Contract. If this doesn’t happen, then you can get out of the Contract to buy and get your deposit back. Although the Sellers don’t like the uncertainty of not knowing for 60 days whether they have a sale or not, they often understand that this is the only way of getting a sale (unless the Purchaser takes out bridging finance, which can be expensive and is risky).

I drafted the clause for her and she went away, happy and excited. A week later I was opening my mail, when I saw an envelope with that Real Estate’ Agents name on it. ‘Ah, I thought’ this is the Contract on that house - so she went ahead with it’. I opened it up and looked at the Contract. Yes it was the Contract we had looked at, but to my surprise (and bruised ego!) my special condition had been deleted! My client had signed a Contract to purchase the property and was completely unconditional! It gave my client a 60 day settlement period, I grant that, but on the 60th day she would have to cough up the money, whether she had sold her house or not.

My Advice

I rang my client at work and asked her what had happened. She told me that the Agent had said that the Sellers would not accept the clause, and that they wanted an unconditional contract. He had also said to her that he was certain to be able to sell her own home within 60 days, as it was a good home in a popular area. She had then agreed to sign the Contract to buy, and had listed her own home with the Agent to sell, all in one night. I explained that she was now ‘locked in’ and that if she could not sell her own home, she could be in trouble. She indicated to me that both her and the Agent thought that I was a bit of a panic merchant, and that everything would be alright.

What Happened?

My clients know how I hate to say ‘I told you so’ (!)

The Agent did try very hard to sell my clients property, but after 40 days it looked like it just wasn’t going to happen, at least within the 60 day time frame. My client started to panic – she was a single Mum, her income was ok but nothing too great, and the Sellers were not going to let her out. She had put down all of her savings as a deposit, and she now stood to lose it all for breach of Contract (if she couldn’t go ahead) plus be sued for damages.

When you are buying a property you should carefully consider the Contract terms BEFORE you sign. After you sign it is too late to change anything, and although there is now a cooling off period in force in Qld, you only have a 5 day period in which to get out, and there are penalties for doing so. You should resist the ‘push’ by an Agent to sign now. If you are doing your conveyancing through Legalmart, then we provide you with a Contract checklist of things to look out for and you can get a Lawyer to look over the Contract and give you advice as part of the price for the service. This can be done quickly, so that you are not holding up the Seller. The small risk of losing the property in that time needs to be weighed up against the risks that are faced by going into a deal ‘blind’.

She had no relatives that had enough money to lend her, and she sure wasn’t going to get a loan from the Agent! So, I started to ring around the banks to see if anyone would provide bridging finance based on the collateral in her own home, and a good track record of employment. I will say that it was quite difficult to get a bank to lend money to a single women, despite this good record. Things are changing now in the banking industry, but old prejudices die hard….

Anyway, we did it, but my client had to pay quite a bit in application fees and extra interest. She bought the house within the time limit and moved in. A few months later she sold her other home (funnily enough through a different Agent) and paid out her bridging finance. So, ‘alls well that ends well’ as the saying goes – but I think there were some shattered nerves along the way!

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