When lack of planning creates an emergency

I remember years ago, hearing a conveyancer say, “and I had to be firm. I told the caller that their lack of planning was not going to be my emergency.”

What was she talking about?

She had a prospective client decide to purchase at auction without a contract review, and it wasn’t until the contract landed on her desk, and her discovery began that she could shed light on the issues that this buyer was going to face. The title could have been a quirky one, (ie. Company Share, Stratum), or the outgoings for the Owner’s Corporation could have been extortionate. Whatever the issue was, her point was clear.

The purchaser hadn’t allowed her to do any due diligence prior to auction, and now their woes were threatening to plague the conveyancer’s morning.

I often give it thought, and while the outcome could have been horrendous for this particular client of hers, it does get me reflecting…

We work with purchasers and agents every single day, and there are plenty of situations we face where lack of planning can create stress and unnecessary issues for all concerned. I’ve penned some of the common ones, and it’s important to note those that could result in dire outcomes, whilst others that just cause irritation at worst.

The first and obvious one is the late, last minute call from a prospect who wants help with a negotiation or an auction. We have an internal policy now that requires all auctions that we assist with to have been confirmed by midday on Wednesday. The reasons for this are plentiful, but in short, we can’t thoroughly conduct our due diligence with the appropriate time buffers if the request lands on our desk on, (say) the Thursday or the Friday prior to the scheduled auction. We have a host of things to coordinate, including;

• a physical inspection of the property – easily arranged, but if the property is tenanted or if the vendor is strict about open times, we may not be able to facilitate inspecting,
• a building and pest inspection – risky to try to arrange at late notice, not only in relation to the builder’s availability, but for the above point also,
• a thorough legal contract review – some solicitors and conveyancers may be able to manage a same-day review, but even following the review, re-negotiating special conditions, ordering certificates, exploring missing certificates and declarations, talking to building surveyors, following up with council and other related tasks can take more than two days,
• coordination of all due diligence – including conversing with the Owner’s Corporation manager, talking to property managers, checking easements
• arrangement of deposit amount and payment method,
• negotiating any variations to the contract.

Rather than taking on the intensity and the risk of such a last minute request, we politely now decline the job if it rolls in after lunchtime on Wednesday.

A common lack of planning relates to finance and available cash on hand. Buyers who commence their search without finance approval in place, deposit funds on hand, and a clear understanding of timeframes required for settlement are potentially setting themselves up for dire emergency also.

This includes having funds in bank accounts that aren’t easily accessible, (ie term deposits, international accounts, accounts that need bank assistance to move/transfer money), and it also relates to buyers who assume that they don’t have maximum daily transfer limits. The number of times we’ve struck panic at auction when the agreed amount of deposit funds can’t be paid is numerous.

I don’t carry a blank cheque around for no reason.

It’s my emergency “not linked to an account, but affords the buyer an extra day to sort their deposit out” cheque, and it’s there in my wallet to avert panic when post-auction payment attempts strike a glitch.

Buyers who have a specific entity required for their purchase, yet don’t detail it correctly when signing the contract can create themselves more stress than they imagined, too. If a co-purchaser’s entity and/or percentage ownership is not documented thoroughly at the time of purchase, making changes is quite problematic and can be expensive. More so, in the case of an incorrect entity on the contract for self managed superfund purchases, the issues created can be highly costly.

Buyers with contradicting name spelling on identification documentation, (ie. anglicised names on one document and original given names on passports), or maiden name documentation that is yet to be formally updated can face issues closer to settlement when bank staff identify the conflicting ID. If this challenge appears within days, (or hours) to settlement, it will likely impact the borrower’s ability to settle on time and they could face hefty delay penalties.

Other serious planning fails relate to settlement and special condition acceptance. If a contract has been subject to an approval of something, the buyer needs to heed the time frame given and demonstrate that every attempt has been made to fulfil the condition.

Precedent cases do exist where buyers have been forced to settle on a property despite not fulfilling their finance clause, merely because they could not demonstrate that a clear effort was made to obtain the finance by the due date.

They left it to the last minute.

Assuming a vendor will agree to an extension request is naive.

Buyers also need to recognise that it is their responsibility to monitor and manage critical dates. We do so in our office as part of our commitment to our clients, but this is not something that every conveyancer or solicitor will do. If a critical date approaches and passes without the buyer confirming that they have satisfied a condition, (ie. they are satisfied with the building and pest report findings, or finance approval has been granted, etc), the contract will be deemed to be unconditional.

An unconditional contract means that the purchase is official. Deposit monies are not refundable.

The most significant risks arise when buyers purchase an asset that their lender does not support. Due diligence, legal reviews and effective communication with banks/brokers is absolutely required in order to mitigate this risk.

Rushing a significant purchase or taking short cuts is unthinkable.