When to walk away from a property purchase?

There are many reasons why you should consider walking away from a prospective property purchase. Building faults. Pest damage. Finance troubles. The valuation comes in under. Surprises in the title search. DIY upgrades completed without a permit. Any of these things, and a whole host more, might cause you to rethink your next property purchase.

It is the role of your conveyancing expert to caution you, ensuring that you have a really good look at the contract before signing it. Getting a legal professional to look over the contract will ensure you have the option to withdraw if needed, this is very important.

Property contracts put the onus on a purchaser to have made all of their own enquiries prior to the purchase. Where possible a prospective purchaser will need to try and do as much as possible prior to signing anything.

If the prospective purchaser hasn’t formally committed to a purchase then it’s far easier to walk away. If you come across some of the issues mentioned in this article, you will want to be able to walk away with the deposit intact and without any deductions.

Low valuation

If the valuation of the property comes in less than the contract price, this can have a detrimental affect on your financing capability and ability to get the loan approved to the amount that you require to complete the property settlement. This common situation also highlights the fact that you might have offered to pay more than the property is really worth. This might mean you need to pull out of the contract if you can’t meet the shortfall, or possibly renegotiate your offer to a lower amount.

Finance troubles

With lenders tightening their lending belts at the moment, getting finance for a home is not a given. If you’re buying at auction you don’t have a finance clause available to you and the contract is deemed to be unconditional, so make sure you’ve got yourself a finance pre-approval and have had all of your inspections done to your satisfaction before you bid at auction.

For those buying via a private sale, having a finance clause and whichever other special conditions are required, such as pest and building reports allows you the option of pulling out of the sale. If you can’t get funding, or the property is not structurally sound – then you certainly don’t want to lose your deposit and you want to be in a position of power where you can walk away without financial loss to you.

Title search surprises

A title search tells you who owns the land, whether there are any easements, such as areas reserved to council or a water authority for services or right of way, covenants or restrictions on the land, caveats or mortgages against the property.

You might discover a covenant that dictates how many buildings can be on the land, this is a problem if you’re looking to develop when there is a covenant that restricts the land to a single dwelling or dictates what type of building materials you have to use.

The person trying to sell the property might have a caveat or co-owner that’s not mentioned in the contract, you definitely don’t want to rush things in that instance, as it can prove to be problematic in terms of settlement deadlines.

Building faults

It could be anything from major structural damage, subsidence, asbestos, poor ventilation, roof issues and electrical or plumbing issues. The cost of removing or repairing any of these concerns can be very expensive. Having done your due diligence, it is possible for you to negotiate a lower sale price, in others situations it just makes sense to walk away. From a contract perspective, make sure the building fault clause allows you to pull out of the contract for any building fault, not just major building faults.

Pest damage

If there is a substantial pest and termite damage then it’s going to cost you a lot of money. As with building faults mentioned above, make sure the pest infestation clause allows you to pull out of the contract for any pest damage, not just major damage. There may no longer be live pests at the property, but those that have been and gone may have left some major issues that have not been adequately dealt with.

Before signing a property contract, make sure your rights and deposit are protected! Speak to your qualified and trusted conveyancing professional today.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.