Make Sure Your Professionals Are Working For You

Make Sure Your Professionals Are Working For You
21-Apr-2019 Mark Honeybone

 

What has been very disappointing for me to see many deals fall over due to the lack of communication between the purchaser and solicitor or the fact that the solicitor stops the deal due to the lack of their property investment knowledge.

It usually happens in the due diligence period when a fantastic deal or at least a deal that suited that client goes to another buyer/investor whose solicitor has more property investment knowledge.

In the past couple of years, I’ve noticed that besides “finance” one of the main reasons for property transactions not going unconditional is the lack of communication between the Purchaser and their Solicitor.

I am going to discuss this today and hopefully get you (especially if you are a new investor or buyer) to seriously understand the value of having the right people in your “team of experts”.

Solicitor

Solicitors are risk-averse. It is their job to show you the risks of buying a property. Of course, some risks may be too much, but you, not the solicitor should have the final say. Unfortunately I have seen solicitors simply telling purchasers not to buy a particular property.

When that happens, I know there are wrong reasons for not purchasing the property. Even though I may not know purchasers that well, I understand their goals and how certain opportunities could help their portfolio.

Purchaser

You must do your part. Sit down and tell your solicitor what your property investment plans are and what you’re trying to achieve. Your solicitor must know what you are trying to accomplish this year and in the next 5 or 10 years. They need to be on your team, work for you and hold your best interest at heart. So if your solicitor tells you not to buy a property, they should have a pretty good reason for that. Otherwise, a good solicitor will not stop you from closing a deal, but rather help.

Best Deal I’ve Seen

This is an example of the best deal I’ve seen in the past 5 years.

It looked complicated, but it wasn’t. The vendor had picked up a large development site at a Mortgagee Sale. There were 8 completed townhouses and another 40 were going to be built.

The developer offered 8 townhouses to our customers at incredibly discounted prices if they can settle these townhouses the same day the developer buys the development (so a double settlement on settlement date).

This developer held all the risk. Our buyers had a normal sale between them and the new developer. The situation was disclosed and the word ‘Mortgagee’ was in the contract.

I saw over 20 potential buyers bailing because their solicitor said it was too risky. I still don’t understand this. The new developer had to provide new townhouses to purchasers, end of story. Where is the risk?

Below were the figures for the four 2-bedroom townhouses:

PP $500,000

Rent $510-$550 a week

Registered Valuation done by Velocity $620,000.

Another townhouse since then had a valuation at the mid/high $6’s. People who went for the deal ended up with great properties at steel prices! Moral of the story? Don’t be among those who miss out.

Take Action

Get your solicitor to know what you are trying to achieve. Take them to lunch, become their friend/acquaintance, make sure they know who you are and understand your journey. They also need to have enough experience in the area of what you are trying to achieve.