When it's Too Good to be True

What happened:

• 12/3/2010: I saw the ad for a relatively new (still under warranty) two bedroom apartment in Rockdale on the internet. The pictures looked really nice and the asking price of $379k was affordable.

• 13/3: I inspected the property and liked it at first sight. It is on a quite street, is very bright throughout, and the size is okay too (101m² + car space). The living room faces North, there are big balconies on both sides of the living room and both bedrooms have built-ins. The apartment looked new (it is only 5 years old) and was reasonably well maintained. The location is good - 3 minutes to the train station and 1 minute to restaurant/cafes. It is not in a high rise building, the strata levy is reasonable and there is no pool or gym. The only thing I don’t like is that the bathroom is a bit small, but it has both a bath and shower. It has a good rental yield - the current rent of $410 per week has not been reviewed and the tenants are happy to stay. I had a feeling that the price for this unit is well below the market price as a similar unit in other buildings nearby would ask for $400k+.

• 14/3: I made an offer of $353k through email.

• 17/3: The real estate agent called to negotiate the price with me. I increased my offer to $360k in the end. The agent then called the owner and said that he verbally agreed to the price. I told the agent that I would have to wait for the strata report before I signed the contract.

• I obtained a copy of the suburb report for Rockdale and found that there were two transactions from that building last year with incredibly low prices ($290k), and suspected there were strata issues. However, the more recent transactions look normal and prices were around the offer I made.

• 19/3: The agent called to ask me to sign the contract, and explained to me that there were mortgagee sales last year because the owners couldn’t afford the mortgage. He told me that there was a buyer before me who signed the contract for $365k (he showed me the contract) and didn’t end up buying due to finance problems. He also said that the unit above mine, which has exactly the same plan, had just been sold for $370k. The agent showed me evidence of the sale of the unit above, so I decided to put down the 0.25% deposit and signed the contract (» read more).

• 22/3: The agent advised me that there was a higher offer and that he may have to take the higher offer if the other buyer manages to sign the contract by the end of the day. He asked me if I could increase my offer or waive the cooling-off period. I said no way.

• Late in the afternoon, the agent told me that the owner decided to accept my offer and was coming to sign the contract the next morning.

• 23/3: The owner signed the contract and my solicitor started to prepare the strata report.

• 24/3: I was curious and Googled the building. I found out from a forum that the strata levy for the building early last year was $2800 per quarter compared to $680 at the moment. People were saying that that building has a list of structural problems.

• 28/3: The strata report was ready and my solicitor explained the contents to me. There were a number of problems:

  1. There is significant conflict of interest between the apartment owners and the developer

  2. There is a list of structural problems that are likely to be permanent

  3. There is a list of outstanding items that need to be fixed in the building.

• 29/3: I rescinded contract and lost my $900 deposit.

• 30/3: The agent called to find out my reason for rescinding the contract. He seemed unaware of the strata problems.

• 8/4: The agent called to tell me that the owner wanted to have a copy of the strata report and was willing to pay $100 for it. I managed to negotiate it up to $200 to partially cover my cost ($250).