Can someone give me some ideas on how you actually include vendor finance into a contract?
To give you an idea on one possible scenario to use as an example. I was thinking of using a No-Doc loan to raise 70% of the purchase price. Then use Vendor finance for the remaining 30%, offering the vendor a balloon payment in 12mths time.
My question here is, do I write a “subject to vendor finance” in the special conditions section of the contract (I am in QLD by the way) or do I just have a “subject to finance suitable to buyer.. etc in the finance section? Or something else?
If I write subject to finance in the finance section, then would that mean that when they sign the contract I then approach the Vendor to strike a finance deal? If someone can offer me some advice here I would be most appreciative.
If anyone has done it this way please let me know, or if there are better ways, then please advise. I am not interested in taking over existing loans in this particular case.
Thanks in advance.
Hi Junoo
Ok your in Qld that saves me asking which State you are referring to.
Personally on all the deals i have done this way I would structure it as follows:
1) Finance Clause on the second page of the REIQ Contract – Subject to Finance satisfactory to the purchaser.
2) Special Conditions – Usually make the clause an Annexure to the Contract and would read something along the lines of.The Vendor agrees to accept an amount equal to 70% of the purchase price on settlement with the balance being repaid over a period of xxxx.
The Vendor will charge the purchaser interest at a variable rate of XYZ on a monthly rest and calculated on a daily basis. Interest to be paid in arrears on the 30th of each month with the principal amount being repaid in full 12 months from the date of settlement.
The Vendor acknowledges that such loan will be a second mortgage and rank behind the purchasers initial mortgage.
Another thing to make sure that the 1st Mortgagee does not require you to provide evidence of sufficient funds to settle the transaction as some will not like the fact that your arranging Vendor financing.
Hope this helps.
Cheers
Richard Taylor
Residential & Commercial Finance Broker
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Thanks Richard that is very helpful!
Cheers.
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