Making the most of a contract cooling-off period
There’s still plenty of room for price negotiation on a property even after a contract’s been signed when there’s a cooling-off period, according to the director of Smart Property Investment.
On a recent episode of What’s Making Headlines, hosts Phil Tarrant and Tom Panos were discussing the importance of obtaining a building inspection when you purchase a property.
Mr Panos queried whether Mr Tarrant, in his own investing experience, had ever bought a property without one.
“Never,” was the firm response.
The director of Smart Property Investment went on to comment that he will actually use a pest and building inspection as a “tool for negotiation” in some states.
“I think about Queensland, for example – you can essentially sign a contract, so you can control the property. You’ve got 14-odd days to pull out of it for essentially any reason you want,” he outlined.
“[It] might be a finance reason, or whatever! If I like a property and I don’t have much time, I’ll just secure it, sign the contract, and then I’ll do a pest and building inspection after that.”
While not a possible course of action for auctions, Mr Tarrant said that for private treaties “it gives time on my side”.
“I’ll typically find something wrong with it, which allows me to negotiate again on the price,” he divulged.
The admission led Mr Panos to query whether Mr Tarrant had had success with such a strategy; “Every time” was the response.
Calling the renegotiation “just part of the process”, Mr Tarrant said it’s a great opportunity for smart investors.
“If you’ve got smart investors operating in the market, they can control a property and say, yeah I’ll buy it. Give me the contract, sign the contract, 14-day cooling-off period,” he stated.
“Within that 14 days, I can make sure that I get my finance approved. If my finance isn’t approved for whatever reason, no worries, [I] don’t want it no more. Or, I do a pest and building report, and I will say, well Mr Agent, there’s termite damage here – that’s going to cost me $10 grand to fix. The roof’s leaking, there’s another $10 grand. The hot water system’s stuffed – there’s another $2 grand.
“Look, I’m happy to proceed with the sale, but I need $50,000 off the price, yes or no? And if they say no, you walk. If they say yes, you’ve got $50,000 off.”
From Mr Panos’ perspective, this presents a tough proposition for a vendor.
“You’ve got a vendor that’s spitting bricks, because they thought they got $950K, now they work out they’re getting $925K or $900K, or they’re scared of losing a sale. They’ve got a report, and they’re paranoid now [about] what’s going to happen subsequently if they reject this offer anyway,” he said.
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