Hello all wise property investors, I hope I can get some help with our problem.
My girlfriend and I wanted to get ourselves on the property investing business so we decided to buy a flat in a suburb near Melbourne CBD. The thing is that we didn't do the right thing and we didn't do the appropriate research and we didn't educate ourselves properly before getting it. As you might be expecting, we've got into a lot of trouble because of that. In brief, we went to a mortgage broker who said that we qualified for a loan up to 300,000, with 100% financing. We went ahead getting a flat for 250,000. We signed a contract with the real estate agent and then we went to a conveyancer to get legal advice about the contract. The conveyancer said that in the contract we had signed there wasn't a financial clause saying that the purchase is upon financing from the bank, so basically said that if we didn't buy it the vendor could sue us. We were committed to buy it so it wasn't a concern at that moment. The problem came when the valuation from the bank of the flat we wanted was 170,000. That was 80,000 difference that clearly we didn't have to make up the 250,000 and proceed with the purchase. Now guess what: the vendor wants a 10% of the value of the flat, otherwise will sue us.
We are really shattered and absolutely disappointed because the neither the real state agent nor the mortgage broker nor the conveyancer warned that the scenario we are in might be a possibility. I know that we are responsible for our situation in a great extent, but we thought that when buying the flat we were getting the right advice from the right people.
Can anyone give us some advice on how to face this problem? also, we would like to get the right legal advice from someone that really KNOWS about this matter. Can anyone suggest me a good lawyer in Melbourne that can help us?Thank in advance and sorry if I didn't write in good English. As a native Spanish speaker I'm always making efforts to improve my English.
Hola atapiap,
Yes, you will need to talk to an experienced solicitor, I can recommend mine, however I am based in Sydney.
Maybe there is still “hope” in getting out of the contract, however it will come down to the contract you signed. A contract needs to have certain things, that every contract should have (cover, section 149, etc, etc, etc), if any of this bits are missing you could pull out, so you need someone with experience to have a look at the FULL contract and see if there is anything missing and “counter attack” there.
Tu ingles es muy bueno, go and see a solicitor and buena suerte amigo
Hi atapiap!
I feel for you – what a horrid experience as your first foray into property. Yes, you should have been better educated, but I hope people won't go too heavy on that point because I know you're well aware of that, and it really doesn't help you now, does it? Your English seems excellent to me, incidentally.
I think you will certainly lose your deposit, which I hope was really minimal and that you can consider that forfeited money as an investment in your property education.
The "somewhat good news" is that I suspect that unless you have lots of cash sitting in the bank – which if you were after a 100% loan I'm guessing you don't – then the vendor is almost certainly "bluffing" about suing you. Presuming the contract is binding, and I really don't know what potential "outs" there are, then the vendor certainly could sue you, either for "specific performance" (ie forcing you to buy it anyway) or for their losses as a result of your breach.
BUT – having been in the vendor's shoes in the past, where somebody was unable to complete even though their contract was unconditional – the legal advice that I had was that it would cost me far more to pursue this through the courts than to just take the deposit and try and get the property back on the market as quickly as possible. This is particularly the case where the potential purchaser, ie you, doesn't have ready funds for the vendor to access. ie If they sued you, if you don't have the money to give them anyway, then they've wasted their time and more money on suing you.
I'm almost positive that the vendor will just cut their losses and get the property back on the market.
Next time, make sure you have "outs" – clauses relating to finance, building and pest, and one to cover any other contingency that is unexpected, if you can get it accepted, eg "subject to due diligence". Get legal advice BEFORE you sign the contract!
And for vendors, the lesson is to ensure that the deposit is large enough to cover your losses if the contract doesn't complete after going unconditional.
Best wishes on your journey,
Tracey in Brisbane
Hi atapiap,
Given the contract did not have finance clause, I am assuming it did not have any clauses about building/pest inspection or independent valuation either. If it did, may be you can try and use them to get out.
The other thing – have you tried getting it valued from different valuers. If the property is located close to Melbourne CBD, it appears to be undervalued at $170,000. Maybe the valuer was having a bad day.There is usually a 5 day cooling off period to allow you to undertake your investigations/arrange finance etc – if you pull out during this period you will only lose a small % of the purchase price – I have had sales fall over during this period (pest/building inspection, finance woes, any excuse). This doesn't apply when buying at auction (or within a couple of days of auction).
Is there any chance that the mortgage broker can arrange an alternative lender or seek a second mortgage to cover the balance required?
By your comments, the conveyancer did advise that there was no 'finance approval clause' and the consequences of it – what they may not have advised were the ways in which you could rescind the contract.
Losing 10% deposit may be better than buying a place $80,000 over value.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
trakka wrote:
I think you will certainly lose your deposit, which I hope was really minimal and that you can consider that forfeited money as an investment in your property education.The "somewhat good news" is that I suspect that unless you have lots of cash sitting in the bank – which if you were after a 100% loan I'm guessing you don't – then the vendor is almost certainly "bluffing" about suing you. Presuming the contract is binding, and I really don't know what potential "outs" there are, then the vendor certainly could sue you, either for "specific performance" (ie forcing you to buy it anyway) or for their losses as a result of your breach.
BUT – having been in the vendor's shoes in the past, where somebody was unable to complete even though their contract was unconditional – the legal advice that I had was that it would cost me far more to pursue this through the courts than to just take the deposit and try and get the property back on the market as quickly as possible. This is particularly the case where the potential purchaser, ie you, doesn't have ready funds for the vendor to access. ie If they sued you, if you don't have the money to give them anyway, then they've wasted their time and more money on suing you.
I'm almost positive that the vendor will just cut their losses and get the property back on the market.
Tracey in Brisbane
Tracey has some really good advice here. I'm fairly sure that the vendors will keep the deposit and put the house back on the market. If you give the impression that you haven't got much money in the bank, I doubt very much whether they will sue you.Let us know how things worked out/
Hi. I think there is hope.
They will not sue if they can't get anything out of you. Unless you own a significant portion of your own home, you are probably reasonably safe. The first question their lawyer will want to know is if you have any money. A lawyer will only press ahead with a lawsuit if there is a good chance that he will get paid.
I too suspect that the threat to sue you is a bluff, and part of the whole dodgy package. If they are pushing overpriced real estate to naiive buyers, then they will be relying on that naiivity to scare people into the deal.
Talk to a lawyer, and I hope things work out for you.
Out of interest, I assume that the conveyancer was not a solicitor?
Daedalus.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
