Hi,
I have a pretty complex situation (well, it is to me and my wife!)..we bought a unit off the plan, just before the “slump”..about 18 months ago, as we didnt want to miss out on good property gains..well, we now know we made the wrong decision. We have tried to get out of the purchase, but the contract is tight. The sunset date is end of June 05, but looks like it will complete in March/April 05 – again, no way out.
We have bought a 1 bed. unit in the Centennial apartments, N. Randwick, Sydney, for quite a price. It is top floor, east facing, and about 55sq. + 15 sq. balcony…its a nice apartment.
We used a deposit bond for the deposit, and have saved the deposit in the meantime (hold off the “why did you do that” comments etc…I know! I know! Young and stupid).
Anyway, if we buy the unit, we will get stamp duty exemption, and FHB grant (our first buy)..and live in it for 6 months, then maybe rent..? I dont know.
We cant onsell now, as we will lose our first home buyer privileges, and have to pay stamp duty.
I have put together a spreadsheet of what i think is our financial position, maybe I can send it to some of you..as I dont know if it is right..I need this to be correct before either rescinding and losing the deposit, or buying the unit. We think we may be buying a dud, as I think it has dropped in value since we bought (although i dont know this, and the agent said prices havent dropped, but havent increased either) – can you get valuations on off the plan buys before they are completed?
We really dont know what to do, either cut our losses and lose the deposit and start saving again – maybe buy something equivalent but cheaper down the track which will increase in value, or buy it …but if we do, I think we will have to hold on for it for a good few years before it comes back up in value.
If we could onsell wihthout being on the title, that too would be an option, but I dont know if that is possible. Its a great location, so hopefully that is a good point.
Anyway, please get in touch with any questions, help, advice etc…I’m thinking this may take a few posts to get to the bottom of. I just dont know where to turn for advice.
Thanks everyone,
Andrew
ok, complex one I know..
To put it simply, could anyone out there check out my spreadsheet to make sure it all works out ok? It’s fairly complex and I need to rely on it to make the final decision.
Thanks guys.
Hi Andrew,
I’m sorry to hear of your situation. You should definately seek professional advice as you have too much to lose by making the wrong decision. You might be lucky and only lose your deposit, but many contracts allow the developer to pursue for costs incurred in reselling an apartment (including any shortfall between final sale price and your contract price!). I hope your’s is not like this.
Talk to a professional.
In the meantime, I’d be happy to check over your spreadsheet. Email me.
Good luck,
F.Andrew
Randwick is a very good area, I am sure long term it will be a good investment. You can get a valuation for a property, even though it is completed, but banks probably will want to wait. It is better, probably, to get a few quotes from agents, tell them you want to onsell it and want an appraisal.
If you can send me your spreadsheet, I will have a look at it.
And even if construction is complete, it still may take a while – maybe months- before all the necessary approvals, and connections etc are obtained, so it could drag out over the sunset clause. This happened to me in Melbourne, but I was able to get out if the contract as it went over sunset clause and I received all of my deposit back.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
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I am not familiar with OTP investments but I presume the finance is approved and the contract is now unconditional.
Early congratulations on your first ever purchase, Andrew.
It sounds to me that despite the value slumping a little before settlement, that you have gotten yourself a really great buy. What a great asset base for your first one.Now, you need to really look to preserving your relationship with your partner. That is the biggest risk when holding a future high growth but presently absolutely negative geared investment. You will both need to steel yourselves now to cut your living and entertainment expenses to the bone. A big ‘do without’ now will show handsome dividends later, and may even bring you closer, as you’ve done it together. Best wishes to your financial future.
If you want to get out of a hole, first stop digging.
Hi Andy
SOme banks will lend you funds and use an on completion valuation which would mean you could use any growth in the property as the deposit, which would work well if you have growth. So I would suggest rather than worry about what might be, get a valuation from a licensed valuer who should be able to give you some guidance on what the property is worth at this point in time.It could be benefical talking to a local finance broker.
I work as a broker in Western Australia and I would be happy to help if you can’t find some one locallyKind regards
DavidHi Andrew
I do a lot of conveyancing and sometimes you may be able to get out of the contract(this means finding a good ground for termination) by asking your solicitor to review the contract thoroughly. Not all solicitors are diligent with their contract preparation and I’ve seen purchasers ask solicitors if there is any way out of a contract and sometimes there were. If you want to look at the contract your self see Conveyancing Regulations 53.
Andy,
It’s probably a good idea to get a valuation, and also to check what similar apartments in the area are selling for. Then you have a definite idea of how much the unit is worth, and whether it’s worthwhile ditching it and losing the deposit.
How long would it take you to save the deposit again if you had to back out and lose it? In that time, could the unit have regained some value such that you are not too far behind?
If you lived in it, can you afford to service the mortgage repayments? Given that you are getting FHOG, I’m assuming you don’t already own a property you are living in? Are you currently renting or living with parents etc
My brother got stung by a QLD apartment several years ago, bought off the plan and found that on completion it was way below the purchase price. Luckily he could afford to service the payments. He hung in there, and now he’s made his losses back and the property is now cashflow neutral.
Don’t give up yet. Get the valuation, see a solicitor, do the numbers.
eeshole
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