>>I am a developer with stock to sell and would consider vendor terms. I too would be interested to know the exact ins and outs of it all – particularly with regards to a 2nd mortgage. I should think the debt would be suitable evidence to lodge a caveat over the property?<<
How come, Ausprop, that you say you are a developer and yet you need to find the answer to this question on this site ?
If you really don’t know, why haven’t you asked the question of your solicitor ?
Pisces
Pisces,
Im not sure what brought about the broad handed slap that my question was “merely a theoretical question”.
I have asked questions before and as a result have been able to implement these suggestions/ideas when buying property.
I thought this site was about the sharing of knowledge? I have read the sugestion both on this site, and in several publications about the possibility of vendors “leaving some in”, but have never heard of it actually done in practise.
Apologises if my question were of a basic nature, but by knowing the basics I will be able to start looking at these deals.
Cheers,
Battz
>>Im not sure what brought about the broad handed slap that my question was “merely a theoretical question”.<<
What … …. are you talking about Battz ????????
I started my post off with a quote from Comsol, not yours, Battz.
My post (the very one you appear to be complaining about) is in response to Comsol’s statement that his broker told him that the bank didn’t want to lend to him unless he had a deposit.
So where do you think that you come in in the conversation ????
Now, Battz, to answer your question as to a suitable book, here it is :
If you do a search for the words ‘Nothing down’ on the http://www.amazon.com website you will find some 108425 results which have these words in the title.
The best known one is probably ‘Nothing Down’ – A$49.95 by Robert Allen which you will be able to buy from Dymocks bookshop http://www.dymocks.com.au
There is also a thread somewhere on this website where there are some reviews of books. I suggest you also have a look there as well for books that appeal.
If you go back to the start of this thread you will find that, two posts before your first post in this thread, Melbear had already told you about this very same book !!!!!!
I note that Melbear in the second post in this thread gave a very good explanation of what ‘ Nothing down ’ means.
In fact Melbear posted several posts since about the subject (she is obviously much more patient than I am).
I am a little bit different as I get quite exasperated when the same question is being asked (or intricate details are sought which are really superfluous).
Pisces
melbear,
“10% interest over 3 years.”
6 and 5 years, and you’ve got a deal….
” …and need to come up with $25K to pay to me at the end of those 3 years.”
5, ok?
By then the market should have moved, I can refinance, pull the 25K out and pay out the vendor.I think with vendor finance the vendor has to agree to take the second mortgage, i.e. bank gets first mortgage.
And yes you have to use a solicitor who is au fait with what you are trying to do to draw it up.cheers-
miniThis is all a double edged sword, if the house does not increase in price, which is likely to be the case as the vendor is desperate to sell if he offers finance, where will you get the money to pay this loan, also he can foreclose on you as I understand it the minute you cannot stick to the contract.
Generally the vendor will not do this for free, they may in fact ask top price in return and you are in a vulnerable position.
Hopefully Aussie will not go the way of America if they foreclose they sell the house for what you owe and that`s it you get squat.
I`d find out if in fact a vendor can do this before I got excited.
If someone were to use this method in the current market it could backfire in a big way.
Anyone know the laws regarding this?.Pisces – the developments are unique because the syndication partners’ contributions are used to secure the properties unencumbered in their own names (as opposed to handing over a lump of cash to somebody and hoping to get more back at the end of it). The absolute security provided by this and the structure of it makes it a true partnership.
I have never thought of selling my personal properties on vendor finance and have never had anyone ask with any of the properties I have sold (be it my own or other peoples) – probably because it is messier than a clean sale. I don’t see why it is so surprising that I haven’t used it before. If I can turn more stock over by effectively waiting for the development margin to be paid back over a number of years I would be more than happy to do this on a few of them. It is not a vague question but relates specifically to stock that I personally have at the moment.
For stock of larger developers I doubt they would entertain the idea as they often have investors to repay.
Many of the mortgage brokers I have met would not know about vendor finance nor be interested in it, It would be good to know a little bit about it before going to a solicitor and starting to clock up fees whilst covering the basics. Thanks for the pointers on the books, will check it out.
Extensive list of new Perth property available for sale.Alternatively, become a joint venture partner in one of our property development partnerships – contact me to find out why our developments are unique. John – 0419 198 856
What a great topic!
I am currently negotiating one of these deals. The owners are divorcing/seperating and want out fast. At this stage they are firm on the price of $195. So I offered $15k at exchange. $135k at settlement and $45k in three years with interest only payments each month at 8%. I intend to get a loan for 80% LVR/$156K. This covers my 20% deposit and closing costs.
The vendors are keen the problem is with their conveyancer. My solicitor has spoken with him as has the principal of the RE agency. It is sad that he is delaying he sale for his clients, because of his lack of knowledge. My next offer was a normal sale at $188k.
So make sure you ask – you never know who will be interested. Actually the principal rang me about this deal after a similar proposal was knocked back by a different vendor just a few days earlier. Different people, different circumstances.
Another thing I have found is that dealing with the more senior RE agents in the office is the way to go. They are the ones meeting the clients and getting the listings – so they know the clients circumstances and if the client is likely to be interested in something like this.
I am not saying they will disclose the vendors motivation for selling. But they may well say “No these people need the cash. However, I have another house where the people…..”
Dealing with the agents lower in the office hierachy seems to add another person to the mix and can waste your time, create misunderstanding and the proverbial chinese whisper effect.
Gregg, if there is a loan involved I suggest that you better make sure, by talking to the broker, whether or ot the lender will lend if there is a vendor loan involved.
Some people handle this by having the second mortgage (from the vendor) treated as an unregistered mortgage so as to hide from the lender the existence of the unregistered second mortgage.
After the mortgage from the main lender has been registered on the title then, and only then, can the vendor lodge a caveat on the title to obtain a measure of security.
I can understand however that the vendor’s solicitor has some reservations as a caveat doesn’t give the same protection as a registered mortgage.
Then again, the worse that can happen is that the vendors get their house back and you lose your $ 15K deposit which you paid out of your own pocket.
BTW your proposed loan amount is near enough at a level that you may be able to get a non recourse loan from your main lender.
Pisces
Hi Battz
I just happen to be in this situation.
We have purchased a new PPOR where the purchase price is just over our heads but we loved the house so much (all emotional) so we submitted an offer that said we would pay full asking price with $X00k on settlement @ xx/xx/04 and $35k on xx/xx/05 at x.xx% (currently 1 year fixed rate with NAB)
The vendors solicitor is redoing the contract so the vendor will carry a second mortgage and the bank will provide finance for the rest less the cash deposit we are also putting in.
The bank was fine with it as our LVR was even better and the vendor was fine with it, although the agent was very proactive in making sure that the vendor understood the offer and added there strong recommendation. We had discussed this prospect with the agent prior to submitting the offer to sound them out, gave them the full true of th ematter and they were great in halping it happen.
Hope that helps.
Cheer
Leigh K[
]Investment unit for sale – includes a rental guarentee.
Thanks Leigh,
Its great to hear stories of actual deals. I will certainly be looking at this option in the future as it looks like a great way to expand your property portfolio with limited cash – provided you can service the debts.
I can see this becoming even for effective in a “down” market where vendors are more motivated an would be more receptive to creative offers. I’ve heard its a little for common with commercial deals, but not so much with residential.
To coin a “McKnight phrase” it can sertain create “win-win” situation.
Thanks to those whom have responded –
Cheers,
battzPisces, I had a search on the internet and am not familiar with non recourse mortgages. Could you give a brief overveiw of what these are and the associated benefits/disadvantages?
And, I can’t understand how the vendor would get there house back and I would lose my $15k deposit. Sorry if this turns out to be an obvious answer.
At what point would this happen (no contracts have been signed yet). I was not going to buy this as a vendor terms contract but instead a standard contract, with a seperate mortgage given to the vendor with the right to lodge a caveat on title.
I think the vendors legal representatives concerns stem more from a lack of understanding rather than a concern over security. He is a conveyancer rather than a solicitor and very much a middle of the road type of guy.
You have to wonder if using a conveyancer is really cheaper than a solicitor. Did they save $200 or will it cost them $10,000 or more?
>>a non recourse mortgages<<
A non recourse mortgage is a loan whereby, in the event you default and the lender sells you up they will not be able to look to you for making up the shortfall.
So the lender carries a bit more risk but, then again, the LVR is likely to be more like 65 % and the lender is likely to charge a higher rate of interest.
Speak to your broker or lender.>>I can’t understand how the vendor would get there house back and I would lose my $15k deposit.<<
That would only happen if you were to default. You could use this statement (‘You (the vendor) aren’t really at risk as the worst that can happen is that you get the house back and I lose the money I’ve sunk into it.) to remove any fear held by the vendor.
The above isn’t really strictly true as, in order to get their money in the event you defaulted the second mortgagee would have to either take over the first mortgagee’s interest or, in the event the first mortgagee sold you out, there would have to be a surplus sufficient large enough to repay the second mortgage.
Pisces
Hi Condoo,
Im also new but do alot of research and reading on new topics. I think the easiest explanation is what Devine Homes do – you can call them up for further info. and Steve talks about this in his book (I can’t remember whether it was wraps or lease options)
In a nutshell, Devine Homes would give you 100% finance but here is the catch – they increase the interest by about 1 or 2 percent – that’s where they make their money – in the interest rate margin. Steve has done something similar and been very successful at it – if you don’t have his book, I strongly suggest you get it.
Kind Regards,
George. []apologies Condoo – you do have his book – well done
George.
Originally posted by markpatric:
This is all a double edged sword, if the house does not increase in price, which is likely to be the case as the vendor is desperate to sell if he offers financeNot always true as I think Leigh’s story attests. There are many reasons for vendors being desperate to sell – how about their marriage is falling apart, their is a need for funds for surgery, it’s a deceased estate and the kids all hate each other, people are overextended and can’t afford to pay the loan anymore etc. etc. etc.
where will you get the money to pay this loan, also he can foreclose on you as I understand it the minute you cannot stick to the contract.If you are buying properties, you should seriously have your plan, and your backup plan in place for what to do when the payment is due. DO NOT go in blind, hoping that Cap Growth will cover it.
Hopefully Aussie will not go the way of America if they foreclose they sell the house for what you owe and that`s it you get squat.Our laws in regard to consumer protection are way different to the US. I believe it’s so much harder for a second mortgagee to take the property back tan in the States. Would need legal advice for sure to check our where you stand – as either party. Our laws require the banks/mortgagee in possession sales to go to auction as that is seen as attempting to achieve the highest price possible – and also has to be a fair price, so no bargains as in the states.
Mini, you’re kidding me right? [
] 6% for 5 years. No way.[:o)]Cheers
Mel
]
] 6% for 5 years. No way.[:o)]You must be logged in to reply to this topic. If you don't have an account, you can register here.
