Hi all,
This is a bit of an urgent matter, so please bear with me. My sister recently signed a contract to purchase a fully furnished hotel apartment on Collins St, Melbourne. She signed the contract months ago and is yet to go unconditional. I believe the apartments are due for completion next year. The contract is still conditional on finance, which has been difficult to source. The marketing company selling the apartments is in the process of finding finance for her. They have already been knocked back from 4 of the banks and are trying another one. They say that finance should be approved some time this week. We’ll see.
Anyway, I know what you are all going to say… why on earth would you buy a hotel apartment? This is the worst possible investment anyone can make! Well yeah yeah, I agree with you there! I have been telling her from the start that she is making a big mistake. The marketing company is promoting these apartments as being positive geared, and their projected capital growth over the next 10-15 years is ridiculous. I think maybe they forgot to put a –ve in front of the growth figures [biggrin] The rental guarantees are also just a gimmick.
The apartments is $167,000 and lenders will only lend up to 60% LVR I believe. My sister is starting to see some sense in what I’ve been telling her and is having second thoughts now. I was just wondering what she can do to break the contract. The contract is subject to finance, but they already have her financial details, so they know she can cough up the 40% down payment. Is there anyway she can break the contract and not lose the 10% deposit she has already paid? If she says her financial circumstances have changed and will not be able to provide the 40%, will she need to give proof?
Also, not to long ago someone told me a few lenders out there are lending up to 95% LVR on inner-city apartments. Is this true, or did I hear wrong? I’d appreciate any feedback from the mortgage brokers on this board and also others who have had similar issues.
Kind regards,
OziHi again,
Just to add to my post, it turns out the apartments are completed and settlement was meant to be last week, not next year as previously stated.
Regards,
OziHi Ozi,
How high is the building? If it is under 10 floors we can do it at 95% with a good rate. If its over that, the max we can do is 70% and the rate will be up around 8.7%. We would also need to know the size of the apartment to see if it is viable.
Kind Regards,
Cameron Perry
Finance Consultant
F.R. Perry & Associates
Level 13, 30 Collins St
Melbourne VIC 3000
Ph (03) 9662 1999
Fax (03) 9662 2044Hi Cameron,
Thanks for responding. I will need to check how many floors the building is. I am not sure the exact size of the apartment, but know it is less than 50sq. I will find out tonight.
What is the interest rate on the 95% LVR? What other criteria must be met in order to obtain such a high LVR?
Regards,
OziNo problems Ozi,
I have sent you a private message.
Regards,
Cameron Perry
Finance Consultant
F.R. Perry & Associates
Level 13, 30 Collins St
Melbourne VIC 3000
Ph (03) 9662 1999
Fax (03) 9662 2044Ozi,
I think you should stick to your instincts and encourage your sister to walk away from this purchase citing her finance clause.
It is not something I would be happy with my sister buying.
Having said that I am not a Financial Advisor and have not considered anything but my own opinion here.[blush2]
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Thanks for the PM Cameron.
Simon, I agree with you totally! I just hope she can walk away without losing the deposit. Any tips on how she should approach this? I know that the solicitor will be who she needs to speak to, and she will be doing this. But from your experiences, are you able to just say that you no longer have the finances necessary to meet the required down payment? Will they need proof? Is this a good enough reason? I’m guessing it isn’t.
Regards,
OziShe needs to say that she cannot obtain suitable finance.
Her solicitor can help with the exact wording.
The lenders she has approached or her broker should be able to give a letter stating that they couldn’t help.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Not sure about Victoria but in Qld it is finance on acceptable to terms to the purchaser.
If I arranged her finance at 11% and then turned around and said well you have finance that would be unreasonable.
Cheers Richard
Ph: 07 3720 1888
[email protected]
http://www.yourstatefinance.comSpecialising in US & IP finance.
Richard Taylor | Australia's leading private lender
Thanks for the comments everyone. I will pass this information on to her and hopefully she can get out of this mess without too much trouble.
I hope she has a good solicitor.
Regards,
OziHi all,
Just to keep you updated, my sister is still battling it out with the developer trying to break the contract. She has spoken to her solicitor and he says there is not much he can do. The solicitor told her she will need to sort it out with the developer.
Anyway, the developer is yet to find her suitable finance. Settlement was meant to be 1 months ago.
Does anyone have any ideas on breaking the contract without losing the deposit? I was thinking she could:
a) transfer all of her money into another family member’s bank account and say she no longer has the deposit. No deposit, no finance = no deal [biggrin] Will this work?
b) Put all of her money into a term deposit for say a 6 month term. She can then say her money is tied up in other investments, so she can’t come up with the deposit.
c) Buy a house. Although this would tie up her money elsewhere, I don’t think she has enough time to do this.
Does anyone know if the above options are feasible? I know they are a bit cheeky, but I’m really out of ideas.
Any help would be greatly appreciated.
Kind regards,
OziIf the solicitor cant do anything, get a new solicitor.
I have used finance clauses before to exit deals, it just took a letter (or e-mail in my case) saying that I could not obtain suitable finance. She does not HAVE to use a 60% LVR and the funds that she has in her account are not the concern of the developer. All she has to say is that the deposit was what she could afford at the time, and she cannot secure suitable finance at a competitive rate with a 90% LVR and that is what she wanted. IF the product is SO GOOD like they have been saying, they should have no problem finding another buyer unless they have been dishonest???
If the property was meant to settle and did not settle your sister should be able to recind the contract on those grounds (after notice to complete has been issued) Dont be scared to involve Dept of Fair trading, your developer should back off pretty quickly.Hi jenwren,
Thank you for your input. I think my sister may just need to find a new solicitor. I will get her to act on your feedback. Hopefully all goes well.
Kind regards,
OziOzi,
I totally agree with Jenwren, Re: Solicitor, by chance did she go to this solicitor through recommendation of the developer?
There is no need for your sister to even approach this person.
New solicitor for a start.
Read the exact wording regarding the finance, what a developer trying to source her finances? hmm maybe he can go guarantor too
Do not start transferring money around accounts. ( to me this looks like guilt.)
I agree with Mortgage broker, wouldnt touch inner Melb @ the moment, and particularly that size.like others this is just my opinion.
Good luck with it.
Originally posted by ozi:Hi all,
The marketing company selling the apartments is in the process of finding finance for her. They have already been knocked back from 4 of the banks and are trying another one. They say that finance should be approved some time this week.
Hey Ozi,
It seems the solicitor was asleep at the wheel all along.
The subject to finance clause (assuming there was one included) needed to be worded more tightly than it apparently has. If four banks have said no I believe your sister has enought evidence to say I have not been able to secure finance and I am out of here.
Derek
[email protected]
http://www.pis.theinvestorsclub.com.au
0409 882 958Hi All
The wording of a finance clause needs to be very specific. If you just say subject to finance the seller can find you finance. With the finance clause is there a date by which the finance must be sourced?In the case of your sister this sounds like it is an open ended clause which may be hard to get out of. The best way to use a finance clause is to be specific with a particular bank even a particular branch ideally the one you plan on using. This gives you a good out if they want lend to you, if you havent specified a particular bank wait until just before 5pm on the last day of the finance clause to tell them you cant get finance. I think you need to really read the finance clause and get your solicitor to tell you exactly what it says and how you can get out of it.After all you are paying the solicitor.
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