Creative Low Money Down Technique: settlement cheq

Groms, I don’t believe you are telling the solicitor the whole story.

Did you tell them that your girlfriend could not get finance at the lower amount?

Did you tell them that your associated costs will be much less than the $10,000 you are over-inflating the price by?

I think the funniest thing will be that when a valuation on the property is done and it comes in at $108,000 or less again, you will have lost a stack of money that you spent trying to rort the system.

You do realise that if you were trying to borrow more than 80% LVR against the property and attempt to do so again, they could find out the last valuation don’t you? There are only two mortgage insurers and they speak to each other and you might even end up with the same one.

Robert Bou-Hamdan
Mortgage Adviser

http://www.mortgagepackaging.com.au

Investor Links

Hi All
Correct me if I am wrong?
Doesn’t buying a property from a mortgage lender require a property valuation? If you add $10000 or $20000 to a property and the valuation comes in at that price, then you can’t be breaking any laws.
How does anyone know that the $108000 is the true market value for that house, it could be undervalued by $10000?
If the valuation comes in lower that the asking price then the banks will probably ask for a bigger deposit or won’t approve the loan.
Can’t see any problem if the valuation comes in OK at the higher price.
Kerwyn.

Perhaps you don’t get it, Richard. No one has said anything about not disclosing the information.

When you apply for a loan, you fill out the paperwork and the bank evaluates that paperwork (to give them false information would be fraud, but no one is suggesting lying to the bank here).

They also do a valuation on the property, and decide whether the amount you are paying for it, vs the amount you are borrowing from them, gives them adequate security should you default.

Then they say ‘okay’ (or ‘no’) based on the information you’ve supplied – but they don’t give you any actual money until they have read the contract (in which the full details of the deal are DISCLOSED) and double checked that your info is correct.

If they are happy to okay that the property is worth $118,000, and are satisfied that you have the required $10,000 for associated costs (which is clearly being paid by the vendor), and that you are able to service the loan – that is their business decision.

Terry

I think we all now those lenders who will lend against valuation rather than purchase price.

It is luci uneducated comments we are referring to. The Vendor sets the purchase price with the aid of the selling agent. Certainly you have the opportunity of making an offer in excess of the purchase price with conditions that state you wish the Vendor to pay your legal fees etc on settlement to a given amount. This may or may not be accepted by the Vendor and his Solicitor.

The page would normally form an Annexure or Conditions page and the value of the cheque to be paid to you or rebate amount would be stated.

These pageswould form part of the standard contract and would need to be given to the lender.

No lender or his valuer is likely to add to the value of the property the cost of your legal fees.

As both Robert and I have maintained the cheques can be drawn however the Vendor or his mortgagee direct at settlement however the disclosure to the purchasers financier is another matter.

Cheers Richard
richard at castlewhite.com.au
Email me for details of our Qld wrap CD which gives you a full Installment Contract.

I am not getting bent anywhere.

I just get annoyed when people with no idea and obviously no experience start spurting on how to deceive banks and advocating non disclosure.

I thought the mortgage & investment industry was slowly weeding out the rotten apples but there appears to be new ones wanting to step into there place.

Cheers Richard
richard at castlewhite.com.au
Email me for details of our Qld wrap CD which gives you a full Installment Contract.

“Terry

I think we all now those lenders who will lend against valuation rather than purchase price.”

Wewll, I would just LOVE to know who these lenders are!!

If I have a sworn valuation at $250,000 and I can pick it up for $225,00, then that’s a good deal. Banks only want the purchase price because they want as much security as they can get.

Cash backs are NOT fraud, unless you deliberatly hide this info from ther lender. In my opinion,
if some of the cashback is also going back into the property to add value to it, banks should be very happy as the property has now increased in value and their risk is less!

Any lenders out there who lend by the ‘correct’ criteria, ie: what the sworn valuation is as opposed to the purchase price.. hello I have a lot of business for you!

thanks

John

Apostle

I thought I’d throw my two cent’s worth in and give you the definitive answer.

As a former prosecutor I can tell you that artificially inflating the purchase price of a property to get greater finance is, as has been pointed out, a fraudulent act by the purchaser upon the bank/financier. If the vendor is aware of the artificial inflation and assists by writing the cheque, he/she is a party to that fraud and could be prosecuted.

While not directly on point, there is an article in the latest API on what is called a ‘double contracting’ scam at page 38. You should have a read of this article because the legal ramifications are the same.

Karen

Rebates are commonly used by developers, particularly for presales, as they do not want the whole of the devlopment being valued at the price of a small percentage of the units.

There are lenders that realise this and will lend against the contract price, pre rebate.