- What if the property does not sell for a suitable price?
For example…
What if the wrappee spent 10-20k on the property and the market dipped and they would not receive anything according to the market valuation?
Technically the caveat could remain as they spent 10-20k on the property and would be entitled to this amount at the very least if there is no added equity.
Also, do you require submissions to be made to you for all renovations for approval?
Hi Robert
As far as I know, when a traditional lender undertakes a Mortgagee Auction they definitely don’t take into account whether they get a “suitable price” or not. They allow the market to dictate the price and no allowance in made for the state of the market at the time or whether the mortgagees have made improvements to the property. It’s my opinion that Wrappers should not be asked to do more than traditional lenders do, faced with the same circumstances.
With regard to your second questions re submissions for approval for renovations, this is simply required because the Wrapper is still on the title and local councils require the title holder’s written permission. We have recently signed two local council applications for our wrappees. We let our wrappees know that they can do anything to the house without our approval that doesn’t require council approval and for them to send us the council documentation when it does.
Merry Xmas, Paul
Paul Dobson | Vendor Finance Institute
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Paul,
Wrapping is totally different to what lenders do. With lenders, title passes to the borrower and they hold a mortgage. With wraps, title does not pass and the wrappee can lodge a caveat which can not be done by an owner (because they own the property).
Lenders sell without regard for loss to minimise potential further losses and as they will still chase the borrower to recover shortfalls. If mortgage insurance is used, they incur no loss but the mortgage insurer does and they will chase.
Robert Bou-Hamdan
Mortgage Adviser0414 347 771
[email protected]
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Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdQuote:Originally posted by The Mortgage Adviser:Merry Christmas Felicity…
What if the property does not sell for a suitable price?
For example…
What if the wrappee spent 10-20k on the property and the market dipped and they would not receive anything according to the market valuation?
Technically the caveat could remain as they spent 10-20k on the property and would be entitled to this amount at the very least if there is no added equity.
Also, do you require submissions to be made to you for all renovations for approval?
Robert Bou-Hamdan
Mortgage AdviserHi Rob
Well, I think the wrap buyer is in the same situation as anyone who buys a house, spends money on it and finds the market drop out from underneath them – if the bank sells them up, they’ve lost the money. That’s a risk anybody takes when they do up their house.
Once they default on the contract, I have the right to remove the caveat. I personally wouldn’t do that until the contract has been rescinded, too much time and expense to remove it only to have them catch up on the default amount and continue on! But once the contract has been rescinded and they’ve moved on, they only have a right to any equity they’ve built in the property. If there’s no equity because of market conditions, that’s life. And if the market drops so much that a $20k reno hasn’t added any value, it’s quite possible that the house isn’t going to be worth more than I bought it for either. So it’s possible that I wouldn’t be able to refinance and find any money to pay them anyway. I’ve heard Steve McKnight talk about capital gain a lot, and as he says, it’s gambling. You don’t know what the market is going to do, and you can’t make decisions and plans on something you don’t know. Anyone who buys a house “hopes” it’s going to go up, but you have to be prepared for the fact that it might not, or might even drop a bit sometimes.
As for renovations, I don’t want to know about repainting, flooring, stuff like that – cosmetics, I guess. But I do ask to be told of any major structural work (ie replacing a window with a set of french doors) and I definitely need to be involved if a permit is required for something.Keep smiling
Felicity
I am impressed that all that information is included in the wrap contract. I was not aware that you could contract to remove a caveat that has not even been established yet. I think I definately need to use your solicitor.
Robert Bou-Hamdan
Mortgage Adviser0414 347 771
[email protected]
http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter – Click Here
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltdregarding the UCCC, I think, from memory, the UCCC allows for (maybe even requires) lenders to do whatever possible to help the borrowers in tourble out by temporarily reduce the repayment amount, extending the loan term etc. ie they cannot just kick people out of their homes very easily.
(Incidently, this is why many private lenders will only lend to people if they sign a declaration advising the loan is for business purposes).
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
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Hi Terry,
You are referring to Section 66 – Changes on grounds of hardship http://www.austlii.edu.au/au/legis/qld/consol_act/ccc176/s66.html
Regards
Michael GThanks Michael
I see they actually have to apply to the lender and “This section and sections 67 to 69 do not apply to a credit contract under which the maximum amount of credit that is or may be provided is more than $125 000 (or such other amount as may be prescribed by the regulations).”
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
Click below to email meTerryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Terry,
Actually I’ve read that this threshold has been raised – I can’t remember the exact figure at the moment, but I think is has been approximately doubled.
Regards
Michael G
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