HI Folks
I’m new to this forum – I’ve to say its very informative and a friendly bunch!!
Now to the question:
I’m selling my IP with 10% vendor finance –
Do you guys/gals have any processes that you have followed?
Do I need to credit checks, pay slips, etc?
Which is better – 2nd mortgage or is there anyother cost effective way?Thanks for your advice!
Regards
Ananda
Hi Ananda
Try talking to Paul Dobson. He is a regular contributor to the forum and has a lot of experience with vendor finance.
Good luck.
Janet
Have a lawyer write up a contract as part of the sale. You could place a caveat over the title similar to a wrap scenario. Maybe ask for the 10% to be repaid in 2 years. You could word the contract so that it is paid out of a redraw on the equity that has grown in property. or have regular repayments of P+I like a personal loan.
If possible, I would try to keep title in your name until the final payment is received from the buyer AKA a wrap.
This is a lot of mucking around, so you should charge extra for this.
A lot of finance companies will lend the buyers up to 105% of the property these days. This would be better for you in terms of time and energy. Just refer potential buyers to good broker (many on this forum!)
Can I ask why you want to throw in 10% vendor finance?
Live, Learn and GrowLifexperience
Having been involved in providing Vendor Finance and Wrap arrangements to clients in Qld since 1996 have done one or two.
Firstly as mentioned why do you think you need to offer the 10% Vendor Terms. Lenders now subject to the location of the property will advance upto 106% of the purchase price with 100% being available to investors.
Should you have been approached by buyer and you wish to sell at that price and feel that they are only able to obtain 90% LVR financing then maybe that is a different story.
I would strongly recommend that you protect your investment by getting your lawyer to draw up a simple of our paragraphs setting out the details of the arrangement and then you get the buyer to cover all of your costs i.e stamp duty, registration, legals etc etc. These can always be added into the loan if acceptable to you.
To ensure the buyer can service the loan you may wish to verify their income and confirm details of their employment. Then ensure that the lender the approach for the 1st mortgage will be happy that the balance of the funds are being raised by way of Vendor Terms.
Time can be lost and selling opportunities wasted when you have completed such basic steps. Some lenders and LMI will not allow the deposit to be raised in such a manner so check first.
To protect yourself consider registering a mortgage or lien against the property and also make sure that the terms offered to your buyer are reasonable and fair.
There is no point in requiring the loan to be repaid in full in say 24 months when you know there is little chance of this happening. Look at extending the term upfront and you can always agree to waive a charge or a months interest if payment is made prior to the end of the term.
Vendor Financing can and always will be a valuable tool in selling property. With interest rates having risen many buyers will find themselves unable to qualify for non conforming style finance. Stick to the basics of lending and you will reap the benefits.
Richard Taylor
Residential & Commercial Finance Broker
**NODOC loans from 6.89%**
Licensed Financial Planner
http://www.yourstatefinance.com
[email protected]
Ph: 07-3720 1888Richard Taylor | Australia's leading private lender
The information given is fantastic!!
Thank you so much!
The main reason I went the 10% vendor finance way so that I will get the price I wanted –
The story behind it:
The Property was listed with an Agent and I had the rights to sell it on my own as well (Sole Agency V Exclusive Agency)
Property listed at $279,000 – after having it on the market for 2 weeks the agent started asking me to bring the price down – as the market was slow – 3 reductions & 2 months later – the listed price was down to $259,000 – and she was bringing offers around $240,000!The vendor finance is still happening at $279,000 – so even after keeping 10% into the deal I am still better off this way – rather than go via the agent – and then pay her $10,000 as an agents commission.
Saying that – she’s fantastic at what she does, ie. selling – however possible..
So I will do the following:
1) get a quote from my lawyer to do the lien / 2nd mortgage –
2) Do credit and employment checks
3) Give the buyer with options on paying the balance back in 12 months to 24 months – the longer the term the higher the interest rates
4) Advice him of the cost (lawyers, stamp duty, etc)
5) If this is a bit too high – ask him to take on a personal loan to pay my side off – I think HSBC is giving unsecured debt at 9.95% over 5 years- which is definitely cheaper than my 15% over 18 months.
PS: he is working in the mines and his apparent income is around $2,500 pw. – Most of them spent on ‘doodads’ (from Rich Dad) – nice cars, plasma tvs, etc. etc.Any views on that?
Thanks
Ananda
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