Hello,
I have Rick Otton’s lease option pack and I thought I’d try and be creative and use the written offer sheet on a property my girlfriend couldn’t finance.
I asked the seller for a cheque of $10,000 to be drawn from the seller’s settlement proceeds in my solicitor’s name. I increased the purchase price by $10k to cover this. The seller was happy to do it, but his solicitor doesn’t want to touch it. Is it legal to do this in QLD?
I have spoken to a solicitor, but he didn’t seem very creative.
I’d be happy to go through with this deal. The original offer was $108,000, and I am offering $118,000 with the cheque. Personally it looks like I have negotiated a better deal.
Thanks for your input.
Josh
Sounds like you are asking for a rebate. As far as I know this is legal to do, though many solicitors do not like it.
You may be going into a grey area if you were to tell a lender you are paying a higher price for the property and then obtain finance on this higher price.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
What you are doing is commonly known as FRAUD.
There are people going to jail for doing this as we speak.
Robert Bou-Hamdan
Mortgage AdviserHi Josh
It is perfectly legal to have the vendor rebate some or all of your costs at completion/settlement, eg. your stamp duty and legal costs.
While I live in NSW and haven’t used this firm, I know Deacons law firm have supplied some Qld specific contracts for some of Rick’s courses. They should be able to help you structure your offer in this way. A contact there is John Hodgkinson on 07 3309 0610.
I hope this helps.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Thanks for the contact Paul. It really gives me somewhere to go with this.
I actually got in contact with the firm that ‘we buy houses’ uses. Just waiting for a call back.
I’ll keep people posted on what I find out.
I am amazed that you guys can condone a practice whereby an agreement is made with a vendor to over-inflate the purchase price so that the purchaser can rort the lender and get finance at a higher level.
This is not about getting a rebate. This is deception and fraud. The purchase price is $108,000 and not $118,000 as seems is required to obtain a suitable loan.
I would be very surprised if Deacons gets involved with this knowing the circumstances. I would be further surprised if any solicitor or honest mortgage adviser / broker touches it.
‘Creativity’ does not equate to ‘fraud’!
Robert Bou-Hamdan
Mortgage AdviserHello Robert,
Thank you for your views on this matter. It is good to get different perspectives.
As for some a bit more practical. The seller is willing to do this, but your view is that it is illegal. Can you give any alternative suggestions to get a property with low money down with this seller?
Josh
Of course the seller is willing to do this as they will be getting a good price for a property they want to sell. They will not be prosecuted if the lender finds out.
Why not ask the vendor to vendor finance the deposit to you instead of inflating the price to rort a lender? Take the maximum you can from the lender on the ‘real’ price with an interest only loan and ask the lender to let you pay of the balance to them at a favourable interest rate over a short period.
Many people here can provide alternatives to fraud for low money down deals. Family and friends are always a good source of assistance. It is not like you are asking for a whole lot of money.
If you cannot source a legal solution, walk away and come back another day. Do not commit fraud!
Robert Bou-Hamdan
Mortgage AdviserI am with Robert on this one.
To undertake the practice of having a rebate may not be ilegal however not to disclose it to your financier would certainly be an act of mortgage fraud.
As Robert mentions why not boorow 90% and disclose to the lender that your Vendor is offering 10% vendor finance.
As long as you can show income to service the total indebtedness then you would have no problem.
Whilst the practise is common in Qld i cannot beleive that a respectful firm like Deacons would assit you in drawing up the clause knowing it was not going to be fully disclosed.
Cheers Richard
richard at castlewhite.com.au
Email me for details of our Qld wrap CD which gives you a full Installment Contract.Richard Taylor | Australia's leading private lender
There are perfectly good reasons that someone might want to offer a rebate.
eg. repairs to be completed before settlement or $X comes off the price.
eg. must settle by XXX or $xx comes off the price.
etc
How can these be illegal?
Not informing the lender, MAY be a different matter.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terry, this clearly has the sole purpose of increasing the amount that can be borrowed against the property as outlined in the initial post.
Of course there are legitimate reasons. Unfortunately, this is not one of them.
Robert Bou-Hamdan
Mortgage AdviserThe quotes from the book are using it in this manner:
“…Also, I need a cheque made payable to my solicitor for $5,000 at settlement to help offset my costs.”
“In this approach, instead of offering $5,000 less or requesting a deeper discount for the property, you’re asking the vendor’s solicitor to pass $5,000 at settlement to your solicitor to offset your cost of purchase.”
I contacted Rick Otton’s company and asked them if they were familiar with the information. They said yes, and they assured me it was legal. They gave me a solicitor in QLD to call to discuss it.
I will see how it goes today.
The problem here seems to be – what’s the purpose of the money? From what Rick has said in the past, if the money is being used to PAY for something, such as legal costs, stamp duty, repairs, etc etc, then it’s legal to do this. However if the money is going into your own pocket – no, it’s not. I have to say that asking for $10,000 to go to your lawyer smells fishy to me – since when does it cost $10k to look after a property transaction? It gives rise to the thought that the money will pass through the solicitor’s account and into the purchaser’s pocket.
Keep smiling
Felicity
The problem here is that you already told us the increased offer is to get a larger loan. Tell Rick this and I would be very interested in hearing his response. I doubt he will tell you that this is legal.
Robert Bou-Hamdan
Mortgage AdviserI have heard Rick respond to this question, Robert, and you’re correct.
Keep smiling
FelicityThat is good to hear Felicity. Although I do not know his teachings, I have heard he has a very strong following which I doubt would exist if he took part in fraudulent activity.
Groms, if you are so keen to buy this property, why don’t you just go get a credit card for the shortfall? We are talking a maximum of $8,000. The higher interest is a small price to pay to avoid getting involved with fraud.
Robert Bou-Hamdan
Mortgage AdviserThis topic is surely being over done.
Robert has quiet righly pointed out to all of us and I agree with him totally to increase the price of a property on paper (whether the cheque is made payable to you, your solicitors or your neighbours dog) and then receive a rebate or kickback or call it whatever you will without informing the lender is a simple act of mortgage fraud.
NO Solicitor who wants to retain his license and avoid prosecution would assist you in the preparation of such document.
Can we just leave it at that. Fraud is Fraud and why become a party to is unless you are looking to spend time at her majesty’s pleasure.
Cheers Richard
richard at castlewhite.com.au
Email me for details of our Qld wrap CD which gives you a full Installment Contract.Richard Taylor | Australia's leading private lender
Okay, I have spoken to the solicitor as refered to me by Rick Otton’s company. He assures me it is quite legal and has done many of these types of things in the past. His opinion is that solicitors that say it is illegal are quite ignorant.
It is fraud if you do not disclose the information to the bank and also what you intend to do with the funds [as other haves replied]. Now I mean to pay my stamp duty, legal fees, etc with it, so there is no problem.
It is the responsibility of the bank to check the contract.
The seller’s solicitor will speak to mine and I’ll see what comes of it.
Groms
I never said it was illegal in Qld all i said it was fraud not to advise the Bank.
It is not the Bank’s responsibility to find out it is your responsibilty to disclose when you apply for the loan. I assume that you will be offering the Bank a complete copy of the Sale Contract and relevant Annexures and not ommitting a page or 2.
Cheers Richard
richard at castlewhite.com.au
Email me for details of our Qld wrap CD which gives you a full Installment Contract.Richard Taylor | Australia's leading private lender
You must be logged in to reply to this topic. If you don't have an account, you can register here.
