Hi everyone,
I've found a property I believe is undervalued at $225,000 and can come up with a 10% and associated costs easily as I have equity in my PPOR and can take a loan to cover it. However I was considering adding $10,000 to the asking price and asking the sellers to pay my stamp duty which is about $8100. Then borrow 90% of $235,000 and just have to come up with 10% of that and any lawyer fees etc… I do know though in doing this that it is relying on the bank to value it at $235,000 but I don't see there being an issue with this. I have found a few properties I believe are undervalued and from past experiences know the bank won't value them higher than the asking price but will happily value them lower. So by increasing the asking price I am hoping to get it valued at that price.
What I did want to know is if this was legal and also if anyone else had done this before. I would rather utilise the equity I believe the property has upfront at purchase and thought this would be a way and would also reduce the amount of equity I have to utilise in my PPOR to purchase the property.
Rudra
Yes it is certaily legal as long as it is disclosed to your lender.
Normally a rebate such as this would form part of the Contract conditions and most valuers will adjust the valuation accordingly.
Had one only yesterday where the purchaser was doing just that and the valuer reduced the valuation back by more than the actual stamp duty (admitedly only rounded the valuation to the nearest $000). Of course the lender will only lend against purchase price or valuation whichever is the lower so in this case the Contract condition is being removed so that the purchaser pays slightly lower stamp duty.
Richard Taylor | Australia's leading private lender
Hi Richard,
Thanks for that and given what you said what do you think of these type of deals? Further on from that are there other methods in utilising equity at the time of purchase?
Rudra
Hi Rudra
Yes if the valuer will value the property inclusive of the SD then fine.
Other issue of course is the mortgage insurer knocks it back to purchase irrespective of the valuer and the valuation.Nothing else really available in the current climate at settlement. Nothing to stop equity being released afterwards.
Richard Taylor | Australia's leading private lender
In SA, the Stamp Duties Act doesn't specify which party is obliged to pay the Stamp Duty; it is just normal practice for the purchaser to pay it. Find out whether it is the same in your state. If it is, write in the contract that the Stamp Duty is to be paid by the vendor. In terms of disclosure to the bank I think that is all you would have to do. I don't think that there would be any obligation to specifically point the bank's attention to the fact that the vendor is paying the Stamp Duty. It is there in the contract. Chances are that the bank won't even notice it.
Of course, you couldn't then add Stamp Duty to the cost base of the property for CGT purposes as you didn't pay for it.
Cheers
K
Linar
Hate to disagree but i assure you the Bank's credit and the valuer would notice a special condition stating the Stamp Duty is to be paid by the Vendor.
This day and age they are looking extra closely when it comes to contract terms.
Richard Taylor | Australia's leading private lender
Hi Richard
You are probably right, especially at the moment. In the past I have put in special conditions that the bank didn't even look at. They then asked me questions later on down the track and I thought that if they had read the contract they wouldn't have needed to ask those questions. But that was a couple of years ago. You have far more experience than me with the banks and would know how particular they are at the moment.
My point was really that just putting it in the contract without specifically drawing the bank's attention to it would be sufficient disclosure.
Cheers
K
K
Yes i agree with that.
Richard Taylor | Australia's leading private lender
In fact, just last year I tried to get finance for a property using a hybrid unit trust. No lenders would touch it. They all wanted a copy of the Trust Deed and came back a couple of weeks later saying that they wouldn't lend.
How did I end up getting the loan? After receiving legal advice, I simply removed the word "hybrid" from the front page of the Trust Deed! Didn't change a single word in the actual deed. The first lender we reapproached gave us the loan.
Cheers
K
I had identified a second hand flat in Chennai and availing of 20 Lakhs loan from SBI. Is it mandatory that I need to register exactly the amount of the flat and pay stamp duty or can I register it for less amount and pay stamp duty for that amount ?…
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