Based on years of real estate experience dealing with hundreds of cases, this article sums up the 3 major risks of nomination sale that maybe you are not told by your agent.
First of all, unlike traditional real estate sales where the agent can receive a fixed percentage of commission.
Due to the high intensity and relatively low success rate of the real estate sales, real estate agents generally prefer to sell off-the-plan projects of developers rather than nomination properties, which do not offer a fixed commission. Generally, the commission of properties for nomination. sale comes from the negotiated percentage of the original buyer’ deposit or the service fees paid by the new buyer. Therefore there is no standard procedure for how much the agent will charge for the commission, which makes the nomination sale more ‘mysterious’.
Secondly, there is no existing standards or policies to follow during nomination sale, and even the regulations for nomination sale in Australia varies in different states or cities. For example, agents deal with nomination sale in Melbourne and Sydney through very different methods. Another main difference between nomination sale and traditional off-the-plan sale is that the new buyer does not need to re-sign the contract with the developer, but directly signs a nomination agreement with the original buyer to obtain the right to take over the corresponding property. How to transfer the 10% deposit to the original buyer counts on mutual trust between channel agent, which also increases the complexity and risk of nomination sale.
Finally, if the property cannot be nominated smoothly, the original buyer may face legal liability. Here comes the huge risk for them!
Check out a real case of a off-plan property with a contract price of AUD 700,000 that failed to be delivered in July 2017 in Queensland. The developer confiscated the buyer’s 10% deposit, and then asked the buyer for the following compensation in the form of a lawyer’s letter, stating all expenses that the buyer should have paid, including land tax, water fee, property management fee and insurance; overdue interest arising from delayed delivery; marketing fees, agent commission and related legal fees for resale. In total, over AUD 98,000! More costs will happen if the resale fails.
In addition, the developer will also have the right to reserve the right to further litigation. It can be seen that when the buyer is in a weak legal position, not only does he/she have to take responsibility of contract breach, but also very likely to pay more reconciliation fees.
However the reality is that the developers (vendors) often expect the buyer to settle smoothly, saving them time and resale costs. But if the buyer is unable to settle and the two parties still fail to obtain a settlement agreement through reasonable extension of the delivery date, the developers (vendors) usually have the right to forfeit at least the deposit (usually 10% of the contract price) and can even continue to request the buyer to pay the price difference if the property is resold at a lower price.
Without nomination sale experience, the traditional real estate agencies usually choose to avoid all these risks and troublesome of dealing with nomination sale and only focus on second-hand or off-the-plan property sales. As a result, many original buyers, especially overseas buyers, actually aware that some people would like to take over their property through nomination sale, but they were unable to find a suitable new buyer by working with a trustworthy agent, and may eventually lead to loss of money and risk of damage to their own credit history.
In order to help these desperate buyers who cannot settle their properties, the professional and efficient nomination experts will assist you learn about and avoid all the nomination sale’s risks, Smart Listing means to be your best choice for nomination sale. Contact us now and discuss about your nomination property with our experts for free!
