Advice needed on the buying process

[Hypnotic Cat]

Hi forum members,

I'm not experienced in property buying and selling by any means - quite the contrary - which is why I'm seeking some advice from those much more experienced in this field than I am.

I'll preface this thread by saying I realise I'll likely just have to put this one down to experience, but I would be interested to hear your comments to help me avoid a repeat of the experience.

Anyway, here's my scenario.

I recently sold my owned outright PPOR. So I have a decent deposit from the sale proceeds as well as some savings. I'll only have to borrow about 25% for my next PPOR.

2 weeks ago I found a place I really liked so I made 2 offers on the property.

The first offer was $15k under the $590k asking price and a second offer 7 days later at $583k. I called the agent last Friday and he asked me if that was my best and final offer? I replied that I had a little room to negotiate if there was a genuine offer higher than mine and that I would like to be kept informed before the vendors sign a contract. The agent also said the vendors would have a final open inspection this weekend and they would make a decision after that. So my plan was to submit my best and final offer at the $590k asking price immediately after the final open inspection this weekend.

However, a couple of hours before the open inspection the agent called and said the vendors had accepted another buyer's offer. I was disappointed of course as I really liked the place.

So my questions:
Does this kind of thing happen a lot?

Is it legal if they agreed verbally that they would contact potential purchaser (i.e. me) before contracts are signed? Or is it one of those 'grey areas'.

What do you think of the idea of using a buyer's agent to avoid this kind of thing?

Any other advice appreciated!


thanks in advance

 

[Colin Rice]

I recently sold my owned outright PPOR. So I have a decent deposit from the sale proceeds as well as some savings. I'll only have to borrow about 25% for my next PPOR.

Borrow 80% (subject to serviceability) not 25% and link an offset account to new PPOR loan and put the difference in the offset. Has the same net effect but you control your cash.

 

[Hypnotic Cat]

Thanks Colin,
I hadn't really considered that scenario. I'm not on a high income at present so serviceability at 80% LVR may be an issue, but I'll look into it.
Thank you and regards
HC

 

[Colin Rice]

Your welcome, just go as high as you can then. Its about controling the finance so stay in control where possible.

PS. love the name.

 

[Spades]

Hiya HC,
Don't get emotionally involved,treat it as a transaction that there's always another,i know it's a ppor but you have to start somewhere.Payoff comes to those who wait.
Buy what you can afford and offer be it 5-10% deposit + costs if that's to cut the lunch.
You maybe not playing poker but it's the same deal.
Cheers Spades.

 

[Colin Rice]

Also forgot to mention go interest only with an offset and dont pay down the principal. That way if you want to rent it out in the future you are good to go as an IP. Aim to have the equivalent saved in the offset and you effectively have no mortgage payments but still control the finances.

 

[Hypnotic Cat]

Aim to have the equivalent saved in the offset and you effectively have no mortgage payments but still control the finances.

Hi Colin,
Thanks again for your advice, it's helping me to take a different perspective on purchasing a new PPOR.

To help me understand your quote above a little better, what would the numbers in that scenario look like?

For example, if I have currently say $480k cash on hand and buy a PPOR at $640k (including all purchase costs) what would the loan and cash ratio look like? (hope that makes sense)


Spades,
good advice there, but I definitely got emotionally involved in the place, it was a bit hard not to! being a PPOR

Not quite sure what you meant by "+ costs if that's to cut the lunch."

thanks to you both for your responses
HC

 

[Colin Rice]

For example, if I have currently say $480k cash on hand and buy a PPOR at $640k (including all purchase costs) what would the loan and cash ratio look like? (hope that makes sense)

*LVR of 80% based on purchase price of 600k + 40k costs:

600,000 x 80% = **480,000 required loan amount.

600,000 - 480,000 = 120,000 20% deposit + 40k costs from 480k cash required to complete purchase
480,000 - 160,000 = 320,000 cash remaining to be placed in offset
480,000 - 320,000 = 160,000 outstanding balance on interest only payments

*Above figures are for illistrative purposes only.

**If you cant service an 80% loan of 480,000 then adjust LVR accordingly by contributing more from 480k cash reserve.

If you could accumulate another 160,000 (160,000 + 320,000) in the offset you would have a loan limit of 480,000 and an offset balance of 480,000 with no payments required but still retain control of your cash plus the borrowed funds.