Viewing 16 posts - 21 through 36 (of 36 total)
  • Profile photo of jenny111jenny111
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    @jenny111
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    Thanks, Terry.

    Profile photo of Paul DobsonPaul Dobson
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    Hi Jenny

    The level of regulation is quite extensive for the three most popular forms of vendor finance, i.e. Instalment Contracts, Deposit Finance and Lease/Options (Rent To Buy)

    Instalment Contracts and Deposit Finance are credit contracts and are regulated by the National Credit Code (create by the National Consumer Credit Protection Act 2009).  All credit contracts must be setup under all the requirements of the National Credit Code, including the Code's Responsible Lending requirements. All Australian Credit Licence holders and Authorised Credit Representatives must be members of either the Credit Ombudsman Service Ltd or the Financial Ombudsman Service and it would be one of these Ombudsman services that you would work with, if you have a problem with your Instalment Contract or Deposit Finance arrangement.

    Lease/Options (Rent To Owns).  The Lease part of a Lease/Option is regulated by the relevant State's Residential Tenancy Act.  There have been a number of Lease/Options that have been before various Residential Tenancy Tribunals and I can assure you these Tribunals do not hold back in their protection of the tenants involved.

    Cheers,  Paul

    Paul Dobson | Vendor Finance Institute
    http://www.vendorfinanceinstitute.com.au
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    An alternative way to finance your home.

    Profile photo of A5h13yA5h13y
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    Join Date: 2013
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    Does anyone have any links to or drafts of a basic vendor finance contract? Also how does one go about scrutinizing the buyers serviceability, is it simply a matter of asking to see pay slips, letters from the employers stating length of service etc?

    Profile photo of TerrywTerryw
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    A5h13y wrote:
    Does anyone have any links to or drafts of a basic vendor finance contract? Also how does one go about scrutinizing the buyers serviceability, is it simply a matter of asking to see pay slips, letters from the employers stating length of service etc?

    In NSW see the standard contract for the sale of land. There will be a few special conditions added

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
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    Profile photo of A5h13yA5h13y
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    Terryw wrote:

    In NSW see the standard contract for the sale of land. There will be a few special conditions added[/quote]

    In NSW? I have seen some you can purchase off legal websites..

    Profile photo of Richard TaylorRichard Taylor
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    Assuming you hold a Credit License or an Authorised Representative of someone else who does you need to comply with the NCCP legislation.

    You are required to provide the Buyer with a copy of your Credit Guide, Credit Propsal Disclosure and then have them sign the Preliminary Assessment you have prepared and ensure that you can justify the reasons why the loan is not unsuitable and how you got to that conclusion.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
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    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of Paul DobsonPaul Dobson
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    In all States a vendor finance Instalment Contract is based on that State's standard Contract for the Sale of Land (NSW name), usually with an Instalment Payment Schedule added, along with National Credit Code Disclosure Statement.

    There are specialist vendor finance solicitors in Australia and I suggest you get an example from one of these solicitors.  Many of them supply examples so you can become familiar with there content.  May I suggest however that you never try to establish one of these Contracts without good legal advice for you and independent legal advice for your buyer.  A list of vendor finance specialist solicitors is available at:  http://www.vendorfinancelawyer.com.au/vendor_finance_specialists.htm

    Exactly what paperwork you need when you're establishing an Instalment Contract depends on whether you are acting as the seller of a property you own or if you are helping someone else sell there property with an Instalment Contract.  If you are selling as the owner of the property, you are regarded as the Credit Provider.  If you are helping someone sell their property with an Instalment Contract you are acting as an Intermediary to the Credit Provider (and possibly providing Credit Assistance to the potential buyer).

    As I mentioned, where you stand in the transaction establishes what documentation you have to supply to the buyer.  To make it a lot easier to get your head around how to gather information from your potential buyers and how to verify that information, we've made up two small packs for vendor financiers, i.e. our Application Guide and Qualification Pack.  They're available at the VFI website mentioned in my signature below.

    One great qualifying tool is the Genworth Servicing Estimator.  It can be found at:

    http://www.genworth.com.au/lender-centre/tools-and-resources/servicing-estimator-australia/

    Cheers,  Paul

    Paul Dobson | Vendor Finance Institute
    http://www.vendorfinanceinstitute.com.au
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    An alternative way to finance your home.

    Profile photo of A5h13yA5h13y
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    Thanks for the info. Love this site!

    Profile photo of tom123tom123
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    Hi Terry,

    with baby sitting a loan, could i do this as a buy and hold stategy? also what are the disadvantages for the vendor by letting me do this with their loan?

    Profile photo of TerrywTerryw
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    tom123 wrote:
    Hi Terry,

    with baby sitting a loan, could i do this as a buy and hold stategy? also what are the disadvantages for the vendor by letting me do this with their loan?

    You possibly could. But this would be potentially dangerous for both parties so seek legal advice.

    Disadvantage for the vendor is that he/she is giving someone an interest in the property, creating legally complex issues surrounding priorities. What if the vendor as legal owner died and left the property via a will to his son, the loan babysister would have to take legal action pretty quick to stake their claim and this could lead to a costly case in the Supreme Court.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
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    Profile photo of tom123tom123
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    i see, cause my orginal idea was to go buy houses by baby sitting a loan strategy so i wouldn't need to pay stamp duty or a deposit. then rent it out as a buy and hold and just keep doing that. 

    would you say it's more of a short term strategy then?

    Cheers, Tom

    Profile photo of TerrywTerryw
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    tom123 wrote:
    i see, cause my orginal idea was to go buy houses by baby sitting a loan strategy so i wouldn't need to pay stamp duty or a deposit. then rent it out as a buy and hold and just keep doing that. 

    would you say it's more of a short term strategy then?

    Cheers, Tom

    Don’t really see it as a strategy at all!

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
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    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of tom123tom123
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    Profile photo of TerrywTerryw
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    @terryw
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    tom123 wrote:
    whys that?

    Too risky and too many complex legal issues so high potential for disputes and therefore litigation.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
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    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of SteevgSteevg
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    . . . .  I'd be very interested to hear how Dominique Grubisa approaches this situation. It looks very similar to buying "notes" in the USA.

    Have you contacted Dominique yet? If not, I'd find an email for her and drop her a line.

    Maybe she's also talking commercial and not residential ?

    Profile photo of Paul DobsonPaul Dobson
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    I believe Dominique is more involved in strategies to assume properties and loans.

    Also, mentioned above is the idea that you can do your own vendor finance legal paperwork.  You can but I strongly suggest you don't. Unlike the standard sale and conveyance of a property, that normally takes a few weeks to complete, a vendor finance sale is normally written up for between 5 to 30 years.  This leaves ample time for your buyer's situation to change, e.g. relationship breakdown and unemployment.

    In situations of financial hardship, the tactic of claiming they didn't understand the legal paperwork is often used by buyers.  As a result the vendor financier's expertise in drawing up and explaining legal paperwork will be closely questioned and challenged by the buyer's advisors.  As you can imagine, such questioning is going to leave you looking like an amateur.

    However, if a solicitor has drawn up the legal paperwork and your buyers have received independent legal advice from a solicitor, you can see that the vendor financier's position is much stronger.  It's unlikely that the buyer's solicitor is going to argue that s/he did not explain the Contract properly in the first place ;-)

    Cheers,  Paul

    Paul Dobson | Vendor Finance Institute
    http://www.vendorfinanceinstitute.com.au
    Email Me | Phone Me

    An alternative way to finance your home.

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