Hi Guys,
I had this thought last night and I’m struggling to find a reason why it wouldn’t work and thought I’d see what the community thinks.
I’m moving closer to the city early in the new year and while we were intending to rent I also was considering buying a place instead.
I am loathed to pay the deposit because I would have to save up all that money just to pay it into the property. I decided to try think outside the box and the idea I came up with was to put in an offer with the clause of the vendor pays the 5% deposit at settlement. So I would offer asking price but the vendor would pay the deposit at settlement thereby paying themselves but we still only borrow 95%. They lose only 5% off the asking price which is what we probably would have negotiated off it anyway and we get the property without having to pay the deposit along with 5% equity. We of course would have to pay the stamp duty + costs etc. Assuming the property met the valuation at asking price I can’t see why this wouldn’t work but thought I’d see what everyone else thinks.
I’ve done the numbers and we’d have no problem servicing the debt and also have a property already although the equity in it is fairly low at this stage and probably won’t be enough to use as a deposit.
What do you reckon guys? Have I thought too far outside the box?
Hank
It’s called Vendor financing,. Google it.
What is the incentive for the vendor to give you a 5% discount and no recourse if you back out of the deal? Because you’ve paid no deposit.
Banks usually require proof of savings also.
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