Negotiating in the conditional period
With the market heating up at the moment, it is timely to remember that if a buyer seeks to amend the contract (eg. seek a price reduction or works to be completed under the building and pest condition, or an extension to the finance condition) they need to be careful that their request is not construed as a counteroffer, giving the Seller a right to terminate the Contract.
If a buyer seeks a price reduction in order for the buyer to be satisfied on a condition, the buyer is technically renegotiating an essential term of the contract which potentially provides the seller with one of three options below:
- Agree to the reduction
- Counter the price reduction; or
- Terminate the contract.
As such, a buyer may be putting the purchase of the property at risk. Generally, a seller would either counter the price reduction or refuse a reduction, in which case, the buyer could then decide whether they want to proceed. However, when the market is heated, normally triggered when there is a greater demand for properties than supply, a seller may have received back up offers which may be more favourable than the current contract – giving the seller the opportunity to terminate the contract and accept the back up offer. This may also be triggered where a buyer is seeking an extension of time for a condition.
WE RECCOMMEND THE FOLLOW:
- Try and negotiate any amendments via the agent – if everyone is agreement, this can be formalised by the solicitors
- Ensure that you are aware of the condition due dates and do everything in your power to meet your contractual obligations by returning information promptly to your broker/banker
- Ensure your solicitor requests any amendments in such a way that your rights are reserved and the request is not construed as a counter-offer; and
- Understand the risks of seeking amendments, and consider carefully if this is something you want to do.