Multiple Offers and the 48 hour clause

by Administrator 30. September 2013 19:06

Two of the more common questions REIWA agents get asked in relation to the buying and selling process are: what happens when there are multiple offers on a property and what is the 48 hour clause?

Let’s look at these separately.

First, when a seller finds themselves in the envious position of having more than one offer on their property for sale, there is no right or wrong procedure in terms of how they might respond to that.

There is no law around this and it’s up to the seller in consultation with their agent as to how to move forward.

In this context it is important to remember that it is always a seller’s right to assume that any offer received from a buyer is their best offer.

If the seller has several offers to consider then they will probably ask the agent to inform the potential buyers that there are multiple offers and that the buyers subsequently have until a specified time to reconsider and then present their best offer.

Alternatively, the seller might decide only to negotiate with one of the offers. That may not necessarily be the highest price as the decision by the seller might also be based upon the least complicated offer. For example, a higher offer that relies on the sale of another property may not interest a buyer who is keen to sell quickly.

The ‘48 hour clause’, now more properly known as the ‘Two Business Day Condition’ is a separate issue that buyers might come across.

This clause is normally inserted when the buyer wants to make an offer that is conditional upon the sale of the buyer’s existing property, but the seller wants to continue marketing their property in the hope of receiving an unconditional offer on better terms.

This clause gives the seller the right to continue advertising their property and to negotiate with a possible second buyer.

The second offer might be for a lesser amount but may provide greater certainty for the seller.

If the seller receives an alternative offer that they wish to accept, then they must serve a notice upon the first buyer.

From receipt of that notice the initial buyer then has two business days to secure an alternative source of finance or obtain a contract for the sale of their existing property.

If the first buyer does not waive the condition of selling their own home by the termination of two business days then the contract comes to an end and they get their deposit back.

The seller is then able to enter into the other contract with the alternative buyer.

REIWA provides a standard ‘Two Business Day’ clause for its members to use, however, buyers and sellers are strongly encouraged to fully understand its terms and conditions before agreeing to it.

This article was originally published on reiwa.com.

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Is it better to buy than rent ?

by Administrator 17. September 2013 21:49

REIWA has reported recently that housing affordability has improved over the last year and that median rents have climbed by 12 per cent.

So, for many people renting a question they are asking themselves is, “Would we be better off to buy?”

Current data show the median purchase price for first home buyers is around $420,000 while metropolitan rents are around $470 per week.

Not everyone is in a position to borrow and meet loan repayments, but for those singles and couples who can afford around $580 a week at current variable interest rates, a mortgage of $373,000 will buy a very suitable unit, villa or house with its own land.

(In this example I am assuming a deposit of $20,000 and eligibility for the $7,000 First Home Owners Grant, so the purchase price would be $400,000. However, there are many cheaper properties throughout WA including the metropolitan area. Some house and land packages are accessible at $300,000 or less and fixed rates can be more affordable than variable rates).

In other words, by paying around $100 more each week on a mortgage as opposed to paying rent, many tenants could transition to home ownership if that suited them and banks approved the loan.

Naturally, the bigger the deposit the smaller the loan and it’s important to keep in mind that renters don’t pay council rates, annual utility charges, building insurance and maintenance which home owners do. Buyers need to factor in about $50 per week to cover this.

The real cost of renting is not the fortnightly payments, but the loss in savings compared to accumulating equity in a home.

There are also good financial reasons to support ownership, but two key factors illustrate its benefit.

First, home ownership can be a stepping stone to increased wealth and long term financial security. Property is highly regarded by financial institutions as security for borrowing to fund a property investment, a business venture or a holiday.

It’s more difficult to borrow against other assets.

Second, home ownership opens up lifestyle opportunities. With your own place you can design and mature the garden, paint and decorate as you wish, have pets (with some strata exceptions), and generally create a home with the liberty and security that can bring.

Households which experience financial difficulty in retirement years are more likely to be living in rental properties, so investing in a home can be a better way to secure your retirement circumstances.

The early decisions you make around real estate can affect your long term outlook, but it’s strongly advisable that you discuss your plans with competent financial advisers, banks and lenders before making a decision and then approaching an agent.

This article was originally published on reiwa.com.

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Getting your bond money back

by Administrator 16. September 2013 16:15

The purpose behind the bond is to provide the land owner with the means to cover any losses that might be caused by the tenants, including damage to the premises or a failure to pay the rent.

The bond must be paid by the tenant to the property manager or landlord, who in turn is required to promptly lodge it with the Bond Administrator, which is a specific government-managed trust account. There are severe penalties for landlords or agencies which fail to comply with this.

When your tenancy comes to an end or is terminated, then the owner or their property manager will inspect the property to ensure it has been left in the same state and condition it was at the commencement of the lease.

Naturally, they must take reasonable wear and tear into consideration.

Sometimes there might be a disagreement between the departing tenant and the owner in terms of what exactly constitutes ‘fair wear and tear’, and where this happens may result in a disagreement as to how the bond money is disbursed.

If, after a final bond inspection it is revealed, for example, that the tenant has damaged a bench top or failed to properly clean the carpets, then the tenant may be given the opportunity to address this but the owner is under no obligation to grant further access to the property.

Alternatively, the tenant may acknowledge those issues and simply leave them to the owner to address and is happy to have the costs of making those things made good deducted from their bond.

Occasionally, however, agreement cannot be reached over the manner in which the bond is disbursed and this results in a dispute.

In these situations the Property Condition Report (PCR), which had its contents agreed to by both the owner and the tenant at the start of the lease, is relied upon to determine whether any damage was caused during the tenancy.

It’s possible that some damage may have occurred prior to the tenancy, but if this is not correctly noted in the PCR, then it’s impossible for the tenant to disprove responsibility.

In the end, the Magistrate’s Court will decide on the allocation of bond monies where there is unresolved dispute.

To avoid this situation, it’s always best for tenants to ensure the PCR is accurate at the commencement of their lease and return the property to the owner in the best possible condition at the end of the tenancy. This should ensure a full refund of the bond.

This article was originally published on reiwa.com.

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Good properties attract and maintain good tenants

by Administrator 13. September 2013 18:07

Current investor activity in Perth’s residential sector is relatively weak. Despite interest rates being very low and rental yields being around 5 per cent, investors still find the entry costs to Perth property significant.

Particularly against the backdrop of a relaxed vacancy rate and its potential to soften median rents in coming months.

Investor activity in the market is important because around 80 per cent of rental accommodation is provided by the private sector. Governments simply cannot provide rental accommodation for everyone who needs it, so incentives to investors flows through to more choice in accommodation for tenants.

Most investors purchase multi-residential stock such as flats, units, apartments and villas. Partly because these are more affordable than houses but also because, depending on location, they tend to be easier to rent and more sought after by tenants.

Around half of all multi-residential property is owned by investors.

Property investors can spend a lot of time researching a suitable purchase but this is only half the skill of successful real estate investment. The other important factor is keeping the property in good condition.

Understandably, there is a tendency to minimise ongoing expenditure and to maximize returns, but experienced investors know that spending money to keep a property in good condition results in better performance, including more conscientious tenants, above average rents and fewer vacancies.

Ultimately, a well maintained property is likely to attract a better resale price.

Unless you have plenty of spare time and are familiar with the legal processes involved in renting property, it pays to ensure your investment is looked after properly by appointing a licensed property manager. Around 60 per cent of investment properties are professionally managed in WA.

Such properties are more likely to require less long term maintenance than those handled privately, simply because property managers conduct regular inspections and advise owners of any upkeep.

A good property manager will also advise owners of any up-coming major work identified during an inspection.

Having appointed a property manager you should conduct a thorough inspection of the property to determine any repair work.

If a rental property is in top condition when leased, it is much more likely that a tenant will keep it that way. It is important that owners set a high standard for the condition of their property at the start of the lease in order to maintain that standard from the tenants.

This is particularly relevant for investors who may have purchased older, possibly run-down properties.

For owners, it pays to spend money on quality locks, security screens, a fresh coat of paint, air-conditioning, floor coverings, window treatments, tap fittings, contemporary tiling and repairs to cupboards.

Better presented properties will attract more appreciative tenants and a better rental return.

This article was originally published on reiwa.com.

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SOCO Launches New Website

by Administrator 11. September 2013 17:21

We at SOCO Realty proudly launch our new website which celebrates living and working in South Perth and the beautiful family suburbs south of the river.

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