Private sale for home with vendor finance?

Hi bscotty

Yes you can come to a private arrangement.  This would normally be done with paperwork called an Installment Contract.  If you let me know what State you're in, I should be able to direct you towards a vendor finance specialist solicitor.  Our solicitor charges us $980 to draw up these contracts.

If your Instalment Contract is say, drawn up as a principal and interest loan, over thirty years, your uncles will be receiving a weekly (or fortnightly or monthly) payment that will be made up of some principal repayment and some interest.  It would be best for them to go along to their accountant to check out the effect of these payments.

Cheers,  Paul

Hi Shelley

I'd suggest you use;
Lewis O’Brien
Lewis O’Brien & Associates
Commercial Lawyers
Suite 4
310 Whitehorse Road
BALWYN VIC 3103
Phone: (03) 9888 6388
Fax: (03) 9888 6366
to draw up the Instalment Contract (IC).  Lewis is a very experienced vendor finance specialist.

You can make the term of the loan 25 years.  In fact you can make it whatever you and your Uncles agree on.

One suggestion that might make it easier for your Uncles, is to set the term of the loan at 5 years but amortise the payments as if it were a 25 year loan.  This would give you 25 year payments and give your Uncles the confidence that this won't drag out to 25 years.

Your solicitor would simply structure the IC so it has a 5 year term, amortised over 25 years, with a balloon payment of the remainder owing at the end of the term, i.e. 5 years.

Regarding the interest rate, ask your Uncles what they feel is fair.  If they're unsure, possibly suggest that the interest rate will be locked at one of the big 4's standard variable rate.  Once again, it is up to you and your Uncles to agree on a suitable rate.  And again, I'd strongly suggest that they talk with their accountant(s) regarding how this proposal will effect their individual positions.

Cheers,  Paul

Hi Shelley

Greg brings up an interesting point about Stamp Duty.  Unlike NSW, in Victoria Stamp Duty is not payable until the sale is completed, i.e. in the case of an Instalment Contract, the term of the loan or whenever the loan is paid out.  Also, in Victoria, the state government pay the FHOG on exchange on contracts.

The ATO has a ruling about Instalment Contracts of the type we're talking about.  Their ruling, ATO ID 2004/407, indicates that CGT is only payable on an emerging profits basis.

Cheers,  Paul

Hi Jason

In Victoria I'd suggest you use;
Lewis O’Brien
Lewis O’Brien & Associates
Commercial Lawyers
Suite 4
310 Whitehorse Road
BALWYN VIC 3103
Phone: (03) 9888 6388
Fax: (03) 9888 6366
to draw up the Instalment Contract (IC).  Lewis is a very experienced vendor finance specialist.

Just to cover all bases, ave you worked out if you need Australian Credit Licence coverage for the transaction you're considering?
 
Cheers,  Paul

Hi sonyasal

If you inherit a house that was the PPOR of the deceased, you are deemed to own the asset as of the date or the deceased death.  At that point, it would be CGT to the uncles.  If they sold it immediately, it's unlikely they would pay CGT.

If they planned to keep the asset, not as their PPOR, they would be advised to get a licenced valuers valuation, back dated to the date of death.  From the date of the deceased death, it would then be their asset and CGT would start to accrue.

The ATO say:
"Since 21 August 1996, if you inherit a house that was the ‘main residence’ of the person you inherited it from, you may be able to claim a full CGT exemption for it."

Cheers,  Paul