Little or nothing down

Banks should pick this up during the assessment process. If they do then they will only lend against the $50k. This is an oversight of the bank and I would imagine that you would not be successful in getting this through every time (unless you are dealing with a very incompetent lender – there are a few going around).

Cheers

Stu

Property & Finance News
at http://www.prosolution.com.au

Kelly is this for commercial only or residential as well – and how do you find out more !?

Thanks,
Mel
[]

>>This sounds like they are being misled on the purchase price.<<

No it doesn’t SOUND like misleading the bank. It IS misleading the bank.

A much more preferable way would be to put some cash in, do the alterations and thence have the property revalued again and recover one’s cash input.

Some lenders are however prepared to re-assess the property the moment it is registered in your name.

Then again, this kind of thing (putting a false purchase price in the contract) is being done each and every day, a lot more than everyone thinks.

And, in a way, the lender has a valuer value the property as their protection and assurance.

I would have a lot more sympathy for the lenders if valuers were always putting a fair dinkum
valuation figure on a property when they value it rather than protecting their backside by automatically adopting the contract price (or else being ultra conservative).

I doubt that a bank would do anything more than withdraw the offer to lend if they were to find out (what actually amounts to fraud).

Pisces133

Hi Dan
I have made offers along those lines a few times, but without success. Having said that, though, mostly I was dealing with vendors who were owner occupiers with big mortgages. I did have one vendor where the husband was keen but the wife knocked it on the head.
I’m sure it can be done, it’s a question of finding a vendor who is willing to listen.

Keep smiling
Felicity

This is a good debate. It is also a debate amongst solicitors as well. Some will do it, some will not. The ones against believe it is fraud, the ones for, go on the fact if the property value’s up then there is equity there, and to be used.

There are different approach’s for it to work. I will mention though, it always comes down to the vendors participation or not. You must consider, the vendor will pay costs on the contract price.

I must also mention that generally these tactics are used to purchase a property when you have no deposit or costs, and also it is mainly done between friends and family. When it is disclosed to the lender (some lenders do, some don’t)they are generally fine with it. But my main point is that under no circumstances would I approach it in the manner of adding extra cash in your pocket, as done in the posting of FREE DEPOSITS. I don’t think the lender would agree to that, if they knew. That is an example where I would tend to lean to the side of, a case of fraud.

Anyway, to the strategies;

1st
Purchase Price (which must never be higher than the listing price, that is definately illegal)
$100000

You negotiate with the vendor to $90000
The $10000 difference can be used a non-refundable gift from the vendor to the buyer to assist in legal costs, small repairs and deposit.
This is disclosed to lenders. The other way is put the $10000 on contract as a paid deposit.

2nd
Same senario – instead of a non-refundable gift, the vendor loans you the $10000 at whatever interest rate (but you now must take this loan into your serviceability),goes on contract. This can now be left as is, 2nd mortgage or after settlement the vendor wipes the loan.

With a lot of lenders they do not care where the deposit comes from, as long as there is equity in the property for them to retreive there funds if needed.
It is disclosed to the lenders. On disclosure, How many wrap investors are disclosing that they are wrapping the mortgage to their lender. For Example, if you’ve got an ING,Suncorp,Macquarie,NAB and the list goes on, loan, you definately haven’t. There are only a couple of lenders who do accept wrap investors, I bet not everyone is with these 4-5 lenders.

The technics used above are used often. But you do have to find a vendor that will play ball. Also a solicitor and of course lender.

[email protected]

Peter

Stacking the contract isn’t illegal. It is up to you what you disclose to the bank. Solicitor doesn’t have anything to do with you disclosing.

Terryw
[email protected]

Hang on there! People seem to be freely bandying around the “fraud” word. Do you really understand what that means? Fraud as I understand it is to gain a benefit by making false representations.

If, as Shelley described, the entire transaction, including the cash-back deal, was in the contract, how can you say it’s fraud? The contract is given to the bank, who is a sophisticated and professional business. Not the village idiot. I think that it is reasonable to proceed on the basis that the bank has notice of the arrangement once you give them the contract. I personally guarantee that any bank who tries to claim that they didn’t read a contract properly, and should therefore be excused from honouring the loan agreement, will be laughed out of court. By analogy, if you signed the bank’s loan agreement, do you even think that you’re going to get off the hook by saying you didn’t read something in the contract? I don’t think so.

I’m sure Stuart is right. Maybe it’s a slip-up by the bank. But since when are borrowers under a duty to help the bank read a contract? Why are you second-guessing the bank?

And I can’t see how any competent solicitor who is presented with a deal like Shelley’s would even spend more than a passing thought on whether or not it’s illegal, because there’s no question of illegality at all.

Cheers
M

And don’t forget some banks actually ask you in writing to indicate if there is any sort of rebate or money back at settlement. Westpac does this! NAB too I have heard.

Terryw
[email protected]