Hi,
If an off the plan development is selling 10 units at, say, 100K (theoretically).
Person 1 buys a unit at 100k.
6 months later, tough market, the developer drops the remaining 9 unit prices to 80k.
Can person 1 do anything to get any sort of refund? Or is it tough luck?
Originally posted by andymitchell:Hi,
If an off the plan development is selling 10 units at, say, 100K (theoretically).
Person 1 buys a unit at 100k.
6 months later, tough market, the developer drops the remaining 9 unit prices to 80k.
Can person 1 do anything to get any sort of refund? Or is it tough luck?
You are right….It is tough luck and nothing they can do about it.
Currently lots of people who have bought off the plan a few years ago are finding that as they are coming up to settlement time the values don’t stack up when the banks send a valuer around, even though lots of others paid similar prices a few years ago.
Nothing they can do.
It gets even worse…
Some are trying to sell their apartments rather than settle and we are in a slump – a buyer’s market so they discount, they reduce their prices just to sell and get out. This of course devalues every one else’s units.
The lesson… in today’s market you can’t count on a property boom to cover up your buying mistakes.
Do your due dilligence carefully.
Michael Yardney
METROPOLE PROPERTIES
Author of Australia’s leading property e-magazine.
Join over 10,000 readers each month.
FREE subscription http://www.metropole.com.auHi, thanks for the advice.
Yes, that person is certainly an unlucky sod (it’s me if you havent guessed).
Ah well, you live and learn! Gor to remain postive.
Would your advice be to try to hold on to the unit, until the market picks up again? I’m thinking of renting the unit out in 6 months (as rents are looking to be quite solid going forward), and rent a unit myself. I will fix the mortgage for as long as possible and hope to ride the slump until values pick up again, it may be a few years, but as long as I can affor the mortgage, I think I will be ok.
No point in sitting about crying into my cornflakes, I just need some solid advice as to what to do longer term.
One piece of advice I picked up from a Rick Otton free intro seminar in order to sell properties like these is to:
1. Sell the property with you the vendor paying the stamp duty and legals.
2. Also tell the purchaser that you will finance the deposit providing they can qualify for an 80% plus bank loan and you yopurself have at least the remaining % as equity in the property.
3. Also offer to pay the purchaser’s moving costs and other related costs e.g. phone connection etc.You can either tack a little extra on the purchase price to cover some of this or simply be happy that you will get a quick sale.
What you are doing is giving the purchaser every reason to buy your unit over all the others on the market. There are plenty of people out there who want to own but don’t have a deposit.
Obviously check with your lawyer on what agreements need to be drawn up for the depoist you are financing. Make sure to mention all the extras in your marketing of the property.
Life is like a box of chocolates – you never know what you’re going to get!
Regarding holding this unit “until the market picks up” – don’t forget to factor in:
– The holding costs. There’s no point holding the unit for 5 years until it is worth “$100k” again if it costs you, say $5000 per year. You’d be $25k down as opposed to $20k if you sold it now.
– The possibility that the developer will drop his asking prices further / other purchasers who did not manage to get finance may sell their units at firesale prices.
Good Luck,
Foundation, [cowboy2]You say you are thinking about renting it out !! Was this intended to be your PPOR or an investment? As an investment you will be able to offset the Capital loss on sale (if you sell) against other capital gains. As a PPOR you have no way of recovering a loss on sale.
Maybe buy one of the cheaper ones also.
Mal
Getting out of your comfort zone, can help you become comfortable
Good lesson for us all, Andy, thanks for the posting.
I like your positive thoughts, thats the right way to deal with it.
All the best to you.
Hi andymitchell,
Shwing Posted – 29/11/2005 : 12:55:47
Maybe buy one of the cheaper ones also.Now this would be the way to go, IF you have the money! this way one unit is expensive but that is evened out by the lower costing unit (proce everaging – they do it in shares, I believe), subject to rents covering the mortgage you may have put yourselve in a very strong position when the market picks up again!
Just food for thought. Work out the numbers carefully on this idea first before jumping in!
Cheers
C@34Our greatest weakness lies in giving up. The most certain way to succeed is to always try something one more time.
– Thomas EdisonHi, thanks for the advice.
We do have enough to buy another proprty i.e. investment, but as you mentioned, the rent would have to cover the mortgage on this one, as we dont have enough flexibility financially (well, I dont believe so, I havent spoken to an accountant yet).
I would be interested in buying a cheap investment somewhere (not necessarily NSW) – which would be break even with rents..I know this is possible, but (and this is a very high level question) – which state is the best? Maybe a 150K-ish unit? (I just pulled that figure out of my ****), WA/QLD?? Maybe Darwin?
Anyway, wherever it is, are there bargains out there to be had which would offset the value drop on my current unit? There must be lots of juicy properties out there..and I think this may be the way to balance things out.
Any advice appreciated – good idea/bad idea?
Just remember the property market is not the share market and doesn’t move as fast. Just because you are sitting on a loss now doesn’t mean that in twelve months time you will be sitting on a profit.
I bought a unit in 1999 which was bought by the vendor in 1995 . He paid 20% more for it than I did 4 years later (ie, I paid 20% less!). Factor in his holding costs over that period, factor in inflation and you are looking at a 30% loss. This is a desirable unit in a good area.
Slumps caused by oversupply can last for years and years. If you have made a loss perhaps you should think about cutting it and looking to make the moeny back somewhere else. If you hang onto it, it will drain your confidence, your finances, your borrowing capacity and cloud your decision making.
If it is not costing you anything (ie positive cashflow) it’s value to you has nothing to do with the market price. The value to you is then the CCR that you get.
_____________________________
We all need somewhere to live – but do we all need a CBD apartment?
You must be logged in to reply to this topic. If you don't have an account, you can register here.
