This newsletter will explain how your client can submit a signed offer whilst receiving full protection in case the deal falls over.
We’ve all received this email/text/call over a weekend:
“Hi Angus. Agent says we need to make an offer by the end of today otherwise they will sell to someone else. Can you take a quick look at it?"
“Can you take a quick look at it?” is a paradox for a lawyer. How can we provide a detailed review in under 5 minutes?
With that being said, we have a solution.
For every deal, it is critical to weigh up the importance of getting the deal under contract quickly vs. the consequences of not receiving adequate protections (conditions) in the agreement.
If your client gets this wrong, they could lose their deposit and (amongst other things) get sued by the seller for specific performance to complete their purchase - This means the seller could apply to the High Court to force your client to purchase the property.
Often, a real estate agent will persuade our clients into signing an agreement subject to 10 working days:
1. finance;
2. LIM report; and/or
Overall, these three conditions provide some protection but follow an objective and structured approach to cancel the agreement. If you later find out there’s a large development going up next door or your future neighbour is crazy, you will not be able to cancel the agreement.
Warning: Lawyer’s approval clauses are dangerous and should be avoided because they provide a narrow and objective scope for the purchaser’s lawyer to cancel the agreement. Often, they have been drafted and inserted into the agreement by non-lawyers - this means they often do not work.
We have created a template for your client to complete and to send to the real estate agent:
How to submit an offer conditional on 10 working days of due diligence.
Our template makes sure each client inserts all their key details and also alerts them to consider how they will pay their deposit i.e. some via bank transfer and the remainder when their KiwiSaver has been withdrawn.
Unlike the other standard conditions, this due diligence clause is subjective and allows your client to cancel the agreement without being required to disclose their reasons.
Following our process, your client can submit their offer over the weekend without seeing a lawyer whilst receiving full protection under the agreement.
Letter of Introduction: There’s no guarantee this will work, but we always recommend clients submit a letter of introduction with their offer (template link here) - this provides an opportunity to stand out from the competition.
Deadline: Put a deadline on the offer. This deadline approach compels the seller to make a decision within [X] working days giving you more control of the sales process. Normally, we suggest by 4pm Friday so they have to make a decision before their next round of open homes.
