All Topics / Help Needed! / PROPERTY OFF THE PLAN…….. SETTLEMENT = OVERVALUED!

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  • Profile photo of Michael_CaoMichael_Cao
    Participant
    @michael_cao
    Join Date: 2011
    Post Count: 4

    Hey Guys,

    Just going through a dilemma on my property OTP purchase. Over a year ago we bought a propert OTP for $380,000 and now after its built, its now valued at $60,000 LESS!

    I have already paid a deposit down of $25,000…… what are you thoughts on what I should do and what my options are (like negotiating with the developer?) !?? I cannot get a bank loan as they have a 90%LVR.

    Much appreciated…
    Michael

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    Hi Michael

    My initial thought is to arrange another valuation via another lender and hope that a different valuer picks up the job. You want to use a bank that allows valuations to be ordered upfront without an application being submitted.

    Which bank are you dealing with at present?

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
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    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of gibbo1gibbo1
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    @gibbo1
    Join Date: 2008
    Post Count: 152

    Hi,

    You will find most likely the developer wont negotiate. I bought my current PPOR as a OTP during the property boom in Perth. Some little event called GFC happened between me putting ink on paper and settlement. I would of been down around $50k at settlement and it did continue to fall. There were a number of people who bought a $600k apartment with a $5k deposit. Many had ideas of flipping the property or having value increase so they could get a decent LVR to secure finance. About 20% of people failed to settle due to difficulties in finance or life circumstance changed in the 18 months (marriage breakdowns etc). The developer resold all apartments and where their was a difference in value they took legal action to recover the difference plus additional selling costs. I did hear of one that ended up paying around $100k in costs and they never even got their name on the title.

    Depending on how many properties that are all ready for settlement at the same time and assuming the similar drop in value, the valuer may be aware more properties are going to be hitting the market, some with desperate owners wanting to offload their property. I would look at making contact with a broker to assess your borrowing ability and then make contact with the developer to see what options the can offer you, but as I mentioned don’t expect a price reduction. Best outcome maybe they defer settlement for 12 months and rent it to you during this time. Another issue that may come up under this proposal is stamp duty, depending where you are. In WA stamp duty is deferred until settlement or 2 years – which ever occurs first. If they did offer you a delayed settlement you may be hit up for stamp duty during that time.

    Regards

    Gibbo

    Profile photo of CatalystCatalyst
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    @catalyst
    Join Date: 2008
    Post Count: 1,404

    Sorry to say, but this is a common occurrence. And you'll find there are others n your position so there will no doubt be a few hitting the market.
    sorry I can't be of help.

    Profile photo of TaylorChangTaylorChang
    Participant
    @scha9799
    Join Date: 2009
    Post Count: 234

    NEVER BUY OFF PLAN PROPERTY !!

    off plan property involve a lot more due diligence and more skilled to make it profitable !

    especially  2 or 3 year settlement…….

    sorry to hear your story.
     
    if i were you, i would
    1) seek for other broker or lender for the finace. ( maybe call Jamie to have a chat)
    2) see if you can find someone bought the same development also have the same issue, then you can collectively figure out together such as negotiable with developer, developer vendor finance …..

    I hope this helps.

    let us know once everything settlement, good luck

    TaylorChang | Finance Broker
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    Home loan | Commercial loan | 0414 691 517

    Profile photo of aussieguy2000aussieguy2000
    Participant
    @aussieguy2000
    Join Date: 2010
    Post Count: 81

    I just want to point out one thing before you go ahead with anything… an obvious statement but I will clarify why I say it.

    CHECK THE CONTRACT!!!

    For one, you want to protect yourself and make sure the developer isn't going to sue you if you back out of it.

    Also, check if there is anything in the contract about finance, some contracts may allow you to bow out gracefully and even receive a full refund of your deposit if you cannot obtain finance. I know it is a bit late now, but I would never sign a contract if it did not let me out if I could not obtain finance. I pulled out of one many years ago as I was not able to get that guarantee, luckily I had only put down a $1000 refundable deposit at that stage.

    Finally if all has gone to poo, try to negotiate with the developer,  he may be in the same situation with most buyers, and does not want to have to resell an entire estate… he may give you a discount of some of the $60k .

    Though, I doubt he will give you any discount, he may let you purchase the property at the price you can get a loan for, and then "chase" you for the difference (as if he was selling to another buyer… only he doesn't have to find another buyer as he still has you at the lower rate… you will still be expected to pay back the rest of the money though…) If you were to negotiate a repayment plan after your property/mortgage was settled it would save him the time trying to sue you. Hinting bankruptcy and telling him you have no other assets or cash may be enough for him to do a deal as well, if he can't get anything out of you it may prompt him to rethink a deal that will get him some of it…

    Profile photo of gibbo1gibbo1
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    @gibbo1
    Join Date: 2008
    Post Count: 152

    Unfortunately most OTP contracts are pretty water tight and aren’t subject to finance approval.

    Profile photo of PropertyGutsPropertyGuts
    Participant
    @propertyguts
    Join Date: 2010
    Post Count: 57

    perhaps the developer will lend the difference, or the total to you? via Vendor finance

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    At this stage, you need to keep it simple – I'd start with consulting any of the decent brokers on this forum to see if anything can be done.

    Gibbo is right – the OTP contracts don't normally allow provisions for finance approval, it's certainly not in the developers interest to have this.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
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    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Hi Michael

    I feel sorry for you but hate to say it is a story i hear every day of the week and one from which i seem to field calls and emails from forum members just as regularly.

    As has been said you should be able to get your Broker to order a valuation upfront with comitting to a loan application so thats where i would be starting. At least that way you know if the valuation comes in and everything else is equal the loan will proceed.

    Course it will depend on how far you have got with your current lender as if the mortgage insurer has already seen the deal they may refuse to accept another valuation.

    As i say it will depend on a few factors but would say all is lost.

    Cheers

    Yours in Finance 

    Richard Taylor | Australia's leading private lender

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    first thingis to seek legal advice on if it is possible to terminate the contract or rescind. unlikely but it cold be possible. extremely unlikely that the would be finance clauses or other conditions which have not been met.
    econdly talk to a broker and see what you can do.t
    hen consider what will happenif yf
    ou cannot settle. you will lose your deposit and could be sued for much more.

    s

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of NadiaNadia
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    @nadiaj
    Join Date: 2015
    Post Count: 1

    Hi there,

    im in similar position as Michael. did anyone know what happened? my apartment in melbourne is looking this way and im unsure what choices i have, no extra cash and any moment will receive my notice to settle. finance prea-pproval is where i am at so we are ready for sttlement but struggling to get the value anywhere near contract price.

    Profile photo of harihari
    Participant
    @haribabu
    Join Date: 2015
    Post Count: 1

    Hi there,
    I am planning to built 5 townhouse in 1062 Sqm land front side 26ft lenght 43.3ft each town can built with area of 211 sqm each,is any body can advise what will cost for 5 townhouse construction ??and what will be each townhouse sq meter built up area??

    pls send me details
    regards
    hari
    mail id: [email protected]

    Profile photo of RedwoodRedwood
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    @redwood
    Join Date: 2013
    Post Count: 340

    Hari – what has your question got to do with this thread?

    Redwood | REDWOOD | SMSF | PROPERTY | FINANCE
    http://redwoodadvisory.com.au
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    SMSF - PROPERTY INVESTMENT - WEALTH CREATION AND FINANCE SOLUTIONS

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