[eh]Hi,
After months of searching I have found a property that fits my criteria and isn’t too far off my budget. I am going to be looking at the propoerty on Saturday morning (20th August) and would love some advice on how to approach the situation (if needed) to ask the Vendor to assist with the extra finance.
Currently I have a very small deposit, so would be (reluctantly) looking at applying for a 100% loan and using my savings to cover legals etc. I am worried however, that I may not be able to reach the asking price for the property (unless I manage to do some fantastic negotiating!)so I was looking into the prospect of vendor finance to bridge the difference (if there will be any). I am expecting the difference to be around $10 000-$20 000.
I know this is a fairly vague sort of question – but if anyone could walk me through what sort of steps I would take in order to arrange such a deal with the Vendor it would be greatly appreciated. This will be my first purchase so I am a little ignorant on a few things!
Cheers.
Asking the Vendor to leave money on the table isnt that difficult and i guess if it is going to be attractive this market is ideal.
Couple of things you need to bear in mind:
1) If the Vendor is having to wait for a period of time to receive the full amount of his asking price then your power to negotiate is diminished. There is nothing that gets a Vendor hungry than a clean cash contract or one with limited conditions.
2) Whilst, the Vendor maybe happy to leave some money in the deal his financial situation may not allow it. If the Bank hold the property as security (and you may wish to do a title search to find out in advance) then he maybe required to repay all of the indebtedness prior to being given clear title.The ideal situation is to make it attractive for him in slow market. You will probably need to offer him a commerical rate of interest and allow him to register a second charge or caveat aginst the property to protect his interest. You will normally be liable for his stamp duty, mortgage registration etc and legals.
Assume the property was for sale for $100,000 you might say to him would he be happy to accept $90K on settlement and a further $10K repayable in 24 months (ideally longer the better). You agree to repay to him interest at say 7% with the principal repayable at the end of 24 months.
If he were to receive the money he would merely get circa 5% in a money market account but if he needs the funds to support his next mortgage his required rate of interest will be higher.
On the savings front you will certainly benefit with a reduction in mortgage insurance being charged by the lender even if you do have a second set of legal costs.
The other thing to bear in mind is if you were to borrow the full 100% would you be able to obtain a considerably better price for the property with a subject to finance clause only.
The other thing to bear in mind is that whilst there lenders that accept a 90/10 application where the 10% deposit can come from any source this is not the case with every institution.
Make sure you get good advise from a independant mortgage broker someone who has done many deals like this before.
If you want to take this post offline feel free to email me and i can give you some ideas as well as suggested contract wording.
Cheers Richard
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hi InvestorInTraining
not sure of your state or the type of property.
I take it this is not a new property or the seller would have offered vender finance usually.
to understand it go to a new unit development site see one of the agents and ask about vender finance he will explain what it is and the terms and conditions.
Then talk to a broker theres a couple floating around here (not me) he will tell you how much and how you can lend. then talk to the vendor I am a vendor and I do do vendor finance put only on our own product (new) and on a deal by deal basis.
It is relatively easy as long as you both agree.here to help
Thank you for your replies!
[biggrin]
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