03 Aug 2017

How to Use Special Conditions Like a Pro

Guest post by Trevor Dunkley.

For first-time property investors, the thought of adding special conditions to a standard REIWA contract may seem daunting.

Perhaps you’re not sure where to start, what to include, or how far you can go without reducing the appeal of your offer to sellers.

But there are ways to maximise the special conditions clauses without breaking any rules or diminishing your chances of securing a great property.

In fact, we encourage all home buyers and investors to learn how to use special conditions effectively – in property, the right clauses can mean the difference between success and failure.

 

Why Use Special Conditions?

While conditions vary, depending on the property and each investor, a few common purposes for special conditions include:

  1. Allow sufficient time for comprehensive due diligence
  2. Check for ‘hidden’ structural, electrical or building pest issues
  3. Confirm a development block may be subdivided as intended
  4. Confirm all electrical and plumbing equipment is working, and require the seller to remedy any issues
  5. Grant the buyer certain rights before settlement, such as allowing their property manager access so they can prepare to market the property for rent
  6. Confirm all structures on the property comply with council regulations
  7. Require the seller provides certification/documents, such as an electrical safety certificate or pool safety certificate
  8. Formalise verbal agreements between the buyer and seller

 

How Many Special Conditions Can I Get Away With?

This is a balancing act, which will largely depend on the state of the market. A seller will usually have no problem accepting a higher offer with special conditions as opposed to a lower offer with none – so long as the conditions are clear and reasonable.

*It’s important to make sure the seller understands why each condition is included – and you’re not simply looking for an open-ended exit strategy.

Just as we encourage buyers to make use of special conditions, we encourage sellers to discuss any concerns they have about the special conditions. The seller may ask for clarifications or amendments, but usually, the full list is signed off without comment if it is reasonable.

 

Set Specific and Realistic Time Frames

It’s important to clearly state when each condition or milestone is due – and the consequences if the milestone is not met. For instance, will the contract be terminated or will you have the right to give notice terminating the contract? After your offer is accepted, take prompt action to ensure all deadlines are met. For building, pest, survey or other reports, make sure the contractor agrees to deliver the report by a certain date (build in some time for contingency), and deal with any issues raised by the reports within the review period.

Not only do firm deadlines help all parties work towards a smooth settlement, they enhance your negotiating power. If the seller knows they risk losing the sale if an agreement is not met by a deadline, they are generally more motivated to act.

 

A Word on Wording…

Writing a watertight special condition is a fine art – and this article is not intended to be legal advice. Consult your buyer’s agent, settlement agent or property lawyer for special conditions advice appropriate for you.

 

Trevor Dunkley

Trevor Dunkley is a Director and Senior Wealth Strategist at Property Wizards, a multi-award-winning buyer’s agency in Perth, Western Australia. For more, visit: www.propertywizards.com.au

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