A question that I get asked a lot by fellow investors is, ‘do you visit every property before you buy?’ This is a valid question, so here’s my strategy on how I’ve done this when I was buying properties in Queensland.
The answer is no I don’t, I only fly up and visit when I have the property under contract. Otherwise it’s a waste of my time and money.
Site unseen — contract process
Different to NSW, Queensland's buying process actually protects the buyer, here is how it works – once a contract is signed and exchanged, buyer will be protected by:
1. Standard five-day cooling off period
2. Standard seven to 14-day building and pest clause
3. Standard seven to 14-day finance clause
Until all three points are passed and satisfied by the buyer, then and only then, the contract goes unconditional.
In other words, B&P and finance are two additional clauses that allow a buyer to terminate the contract under reasonable basis, which is awesome news for investors buying up in Queensland.
So how does this help you buy site unseen?
Prior to contract exchange – inspections and submitting offer
The two key milestones prior to contract exchange are arranging inspections and submitting offers.
For inspections, the trick is you get someone to act as your eye on the ground. This can be your mate, your property manager or even your builder, if you have one. Discuss with them whether they offer pre-purchase inspection as part of their service offering, some of them are open to do this for you for free while others may want a small fee. In the past I’ve used my PM for pre-purchase inspections.
I will then be able to paint a picture on whether the property is worth pursuing or not. By working out how much additional reno cost I need to put aside, I can then work backwards to determine my offer price and evaluate the yield.
Once I have my offer price, I can then submit the offer to agent. If it’s accepted then I’ll visit the property.
Post contract exchange – B&P and finance
Finance is usually the one that is most risky in terms of going over the standard 14-day period. So the first step should be inform your mortgage broker ASAP so they can start putting the application together for finance approval, banks do take their time!
Once you’ve initiated finance approval the next step is B&P. Previously I have booked the B&P service first, then book the ticket to fly up for the inspection. That way you get to see the B&P result first hand, and at the same time you get to inspect the IP yourself, killing two birds with one stone.
Use the opportunity to run through with a B&P inspector to get a feel for what the B&P issues are, and how serious they are… a great opportunity to understanding the property you’re buying into in depth
At that time if you found there are serious B&P issues (such as structural problems), you can also use this opportunity to ask your solicitor to request for a discount on the purchase price (depending on severity of the issue) based on the B&P report or ask the vendor to fix some of the items. They are not legally obligated to do so, but it doesn’t hurt to try!
In the extreme case of structural issues or severe termite damage you can discuss with the solicitor based on the B&P report in order to terminate the contract based on a B&P clause. But if they are small defects then you are most likely unable to. For more details on how you can terminate the contract based on the B&P clause, seek specific legal advice.
By the time you got your B&P report you would probably have heard back from your broker about finance approval too. If day 14 is fast approaching, and you and your broker feel there is a risk you will not get finance approval within the time limit, ask your solicitor to request a vendor’s solicitor for a seven-day extension on the finance clause. It’s somewhat common in Queensland that finance can take 14 to 21 days to approve so most of the time vendors should be able to accept this extension on good grounds.
In summary, my strategy for buying site unseen:
1. Contact a PM or builder who you trust to inspect the property and report back based on your guidelines
2. Work out any cost required to tidy up the IP, determine the offer price
3. Review (or request solicitor to review), sign the contract and submit the offer
4. If contract is exchanged, then
– Organise finance with broker
– Organise B&P date and time
– Organise flight ticket to meet the B&P inspector on the agreed date and time to go through the B&P results in person and inspect the property at same time
5. Negotiate with vendor on purchase price based on the B&P report
6. Instruct your solicitor to request a finance extension with the vendor if the finance approval is struggling to meet the standard 14-day deadline
7. Once finance and B&P are approved, then congratulations – the contract now goes unconditional! Get ready for settlement.
About the Blogger
David Shih is a Sydney-based investor who have built and amassed a property portfolio across NSW and QLD. David has a real passion in helping others with property investing, personal development and believes having the right mindset and optimism is absolute paramount to the success of everything in life. David is sharing all his tips, lessons and experiences in his blog which can be found at mypropertystories.wordpress.com. He is happy to talk property anytime via Facebook, Google+, Twitter (@diyshih) or via the blog.