I'm looking to purchase a unit, and think a 90 day settlement (with early access f0r measuring) would be best so that i have as much time as i can to plan the renovations that will start from settlement (in hopefully a 6 week completion period). i'll look to rent the property after that. Is there any catches to a 90 day settlement….thought maybe you get less of a depreciation benefit 9does depreciation start from when you sign the contract?), or will my bank likely look down on the long settlement this week, when i look to confirm that they will lend me the funds?
thanks…..A 90 day settlement isn't usually going to present any dramas from the banks perspective.
I'd be more focused on the early access part of things. You should seek advice from your legal person in regards to getting something written into the contract.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Off the top of my head, small issues with a long settlement include:
1. May be necessary to get a legal document written up to gain early access. This comes with a fee of course.
2. If you are fixing your interest rate for the loan and do not pay a rate lock fee, the interest rate MAY increase and you'll be left paying a higher fixed rate at the point of settlement. This has happened once to me. Likewise, fixed rates CAN fall during this same period and you will be better off at settlement. The point is, are you a betting man?Death maybe another!!!
A vendor is more likely to die within 90 days then 30 days!
What effect will this have on the sale? any special conditions.
Insanity is another and so is bankruptcy and even divorce – what if the ex mistress lodges a caveat after your exchange?
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
Terryw wrote:Death maybe another!!!A vendor is more likely to die within 90 days then 30 days!
What effect will this have on the sale? any special conditions.
Insanity is another and so is bankruptcy and even divorce – what if the ex mistress lodges a caveat after your exchange?
Death shouldn't be an issue in this instance Terryw. The agent told me last thursday that she just died and the vendor would be happy now to consider up to a 90 day settlement. Then after the auction last saturday (unit was passed in), the agent told be she "just died" now, "she wanted to see the auction through" and advised me it was a good time to make an offer as they were "at a moment of weekness"……so with two deaths already under her belt, i'd safely say there shouldn't be any more!
Hang on – who died?
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
If it was the vendor then how is she going to sign the contract and the transfer?
If someone is taking over the estate, have they been appointed by a court? ie Probate/letters of administration been granted?
If not then they have no legal authority until their appointment. It doesn't matter what the will says because you won't know if it is the last will and is valid until probate/letters of administration.
These things can drag out for many months and even if you do have a valid contract there could be many reasons why the property cannot settle on time – or at all in some instances.
So seek legal advice if this is the case
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
tiger_ra wrote:Then after the auction last saturday (unit was passed in), the agent told be she "just died" now, "she wanted to see the auction through" and advised me it was a good time to make an offer as they were "at a moment of weekness"……What a scumbag REA. He should be working in the vendors best interest, not trying to take advantage of the terrible situation. It's REAs like this that give the industry a bad name.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
The old lady died, and her children who have power of attorney were the ones selling the property. My solicitor mentioned the word Probate to me and mentioned selling could be an issue, but she didn;t really get into it. Think she decided it wasn't such a big issue. i don't understand it. I'll call the REA tomorrow and see if it is "still on the market" and see what else the dear old fella can say in his attempt to pull the wool over my eyes..at the very least, its entertaining to hear him constantly contradict himself and slip up!
Powers of attorney cease operation at death!
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
Jamie M wrote:tiger_ra wrote:Then after the auction last saturday (unit was passed in), the agent told be she "just died" now, "she wanted to see the auction through" and advised me it was a good time to make an offer as they were "at a moment of weekness"……What a scumbag REA. He should be working in the vendors best interest, not trying to take advantage of the terrible situation. It's REAs like this that give the industry a bad name.
Cheers
Jamie
Classic Jamie
Tony Fleming | Triumphant Property Group
http://www.triumphantpropertygroup.com.au
Email MeNSW Buyer's Agent specialising in Western Sydney-Blue Mountains-Orange-Albury
Hi
What are the downfalls for a 90 day settlement? By co-incidence I'm in a similar position – I've made the 0.25% deposit on Monday, to be followed by a 10% next week, and the vendor has requested settlement is mid May.
I see an upside in that the property is slightly negative geared therefore I get any capital growth between now and mid May, whereas I don't have have the operating expense (negative gear) in owning the property for that period.
I guess one downside is that my 10% deposit is accruing interest for the vendor (in a trust account) over that period (when in theory it could be earning interest for me in my bank account).
Alternatively stated, if you have borrowed the deposit money then you are paying interest on it whereas there is no rent to offset the interest cost. In that case if it was a really long settlement period then it may be cheaper to use a bank bond.
But other than the valid points made by fWord and Terryw, I can't see any other downside.
Any other thoughts, please.
Many thanks
Tony
Check that your loan offer from the bank allows a 90 day settlement.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
tonyc00 wrote:HiWhat are the downfalls for a 90 day settlement? By co-incidence I'm in a similar position – I've made the 0.25% deposit on Monday, to be followed by a 10% next week, and the vendor has requested settlement is mid May.
I see an upside in that the property is slightly negative geared therefore I get any capital growth between now and mid May, whereas I don't have have the operating expense (negative gear) in owning the property for that period.
I guess one downside is that my 10% deposit is accruing interest for the vendor (in a trust account) over that period (when in theory it could be earning interest for me in my bank account).
Alternatively stated, if you have borrowed the deposit money then you are paying interest on it whereas there is no rent to offset the interest cost. In that case if it was a really long settlement period then it may be cheaper to use a bank bond.
But other than the valid points made by fWord and Terryw, I can't see any other downside.
Any other thoughts, please.
Many thanks
Tony
Doesn't the deposit money sit in a trust account and interest gets split 50/50 between the vendor and the purchaser?
JacM wrote:Check that your loan offer from the bank allows a 90 day settlement.Very good point – usually tey don't extend that far
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
I settled in January on an IP which had a 90 day settlement. I chose 90 days as the settlement period was going over Christmas/NY break and I was travelling overseas on my honeymoon. Figured why should I pay holding costs if no work would be getting done… In the contract I included a clause to allow unrestricted access for tradesmen to measure and quote and had the roof carpenter lined up to commence work day of settlement.
The bank did query my 90 day settlement, they just wanted an explanation. I think at first they were concerned I wanted the extra time to save $, but once I told them it was to give me time to plan the renovation without holding costs, and the travel I had planned so wanted to settle in the new year they said it was fine. Lender was concerned initially about submitting the loan documents as she said they expire after 90 days, however once we did the structural report and some further negotiations, had a bit of time up our sleeves.
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