Bought property which is unable to settled

Discussion in 'Legal Issues' started by newinvestor07, 26th Aug, 2009.

  1. newinvestor07

    newinvestor07 Member

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    Hi experts,

    I have just bought a property via real estate agent, but unable to settled on time because of the problems of vendor's side. Apparently the vendor owes a great sum to bank and others relating renotation, and the sale price of the property is not enough to cover their debt.

    We are living this property now under another agreement for renting, but rent was weived. We have been living in almost 4 weeks, there is no signs of settlement. The vendor's bank came to evaluate the property last week. I don't know what it means to us. This property was not sold under value at the time. Is it possible the bank re-sale the property? My solicitor just advised us not to put any fund into the property before settlement take place.

    Is anyone know what is going to happen to us? What options do I have? I appreciate any advice.

    Cheers

    Vivian
     
  2. The Y-man

    The Y-man Member

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    Obviously don't put any money into your new purchase until settlement, as you solicitor advises.

    Worst case scenario, the deal might be called off... but you solicitor will be the best advisor in this regard as to your rights.

    Cheers,

    The Y-man
     
  3. Ausprop

    Ausprop Member

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    your solicitor will give you the best advice... you should at this point have a caveat lodged over the property reflecting your equitable interest. if you have paid a fair price I can't see the bank wanting to fight the sale.
     
  4. Peter_Tersteeg

    Peter_Tersteeg Finance broker/strategist

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    I'm willing to be the vendors bank has cross-collaterlalised your property with another property. There may not be enough equity in the other property for it to stand on its own, so the bank is unwilling to release the property you're buying.

    Your solicitors advice is good, don't spend any money on improvements yet and enjoy the rent free period. I don't know what your rights are to force completion of the sale.

    Chances are the vendors bank will get through their valuations (they'll be valuing everything in the vendors portfolio), the numbers will come out fine and the house will be released. The vendors bank will probably force them to use the surplus funds from the sale to reduce debt elsewhere (too bad if they had other plans for it).

    This is one of the best examples to avoid cross-collateralising if it's at all possible.
     
  5. newinvestor07

    newinvestor07 Member

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    Hi guys,

    Thanks for sharing your thoughts. I should enjoy the free period, but instead, I have been living in fears that we are going to be kicked out one day, then restart everything all over again, not mention losing money. I have been feeling very unluck and helpless recently. Sorry about nagging.

    I really appreciate your supports!:)

    Vivian
     
  6. boods99

    boods99 Trust me, Im a top bloke!

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    You mentioned that you were living in the house under a rental agreement. Have you signed a Lease?

    Boods
     
  7. markpatric

    markpatric Member

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    This is a very interesting question.
    I would imagine that this situation will occur more and more over the next couple of years where the sale price is less than what is owed on the mortgage, maybe a lot less!.
    The bank will not release the mortgage until it is paid in full or allow the sale of the house till then I would imagine.
    In which case they might threaten to take possession and send it to auction, up to the bank I would say if the seller cannot come up with the shortfall.
     
  8. travelbug

    travelbug Member

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    This happened on a property I was going to buy. We went to sign and then the agent told me about the large amount owing and said they needed to get the banks permission. We also said "it won't be a problem as it is market value for the property".
    We didn't sign but do know that the bank refused to settle with the purchaser.

    I later looked it up on RPdata and the vendor owed 50% more than the price I was paying.

    I have seen quite a lot of properties on the market with big (unreal) sale prices listed. It's weird. The always have "valuer general" after them. People selling to companies/trusts/themselves??? at a high price to get the money? Some of these are mortgagee sales so I'm guessing they started to get into trouble so shifted properties around to obtain cash.
     
  9. newinvestor07

    newinvestor07 Member

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    Yes, I did sign a licence agreement as we all thought the settlement was going to take place in 7 days. At the time we including solicitors did not know vendor had financial problem. We were informed that the reason was the vendor's solicitor had problems in locating the vendor, and eventually vendors were found and only a documents needed to be signed for the settlement. We already organise things to move at the time. So my solicitor sent the agreement (Lease) for us to sign after dicussing with vendor/vendors' solicitor. I had feeling I had done something wrong:mad::, hadn't I?

    Vivian
     
  10. marg4000

    marg4000 Member

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    Don't stress, Vivian. Just remember "possession is nine-tenths of the law". You have a solicitor so follow his/her advice. As said, sit tight and don't spend any money on the property.

    You are living there rent free by permission of the owner. To get you out he/she would have to go through legal processes which would mean you get plenty of notice. You do have legal rights so don't worry about coming home one day and finding your worldly possessions in a heap on the footpath.

    Right now, it is the vendor who has problems....
    Marg
     
  11. newinvestor07

    newinvestor07 Member

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    Hi Marg,

    Thanks for your reassurance and support. I really need them. Thankssssssssssssssss:D

    Viv
     
  12. boods99

    boods99 Trust me, Im a top bloke!

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    Newinvestor,
    It might be the case that you have signed a "prior possession" agreement. This is not a Lease, and therefore (in WA, anyway) does not offer the same protection of the Residential Tenancies Act.
    Check with your lawyer!!

    Boods
     
  13. Token Funder

    Token Funder Token Funder

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    You haven't bought anything until it settles...which it hasn't.
     
  14. pully

    pully Member

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    yes that was my thought when i read the first post.
    where does it leave the renter?
    has any money changed hands? in regards to the purchase?
    should the purchaser have been told about the inability to settle prior to agreeing to buy?
    sounds good to live rent free but who pays for things like insurance/utilities?
    or maintainance if something needs attention?
    it would be a bit like living in no mans land.
    any thoughts?
     
  15. newinvestor07

    newinvestor07 Member

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  16. markpatric

    markpatric Member

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    It would not be reasonable for you to expect to live rent free for whatever reason.
    Since the transaction did not settle you have every right to pull out and move on which might not turn out to be a bad option.
    I would say the bank can get you out quite quickly since no rent is being paid. Your solicitor needs to contact the bank and get answers.
    Situations like this can turn out to be very emotionally draining.
    If the vendor goes bankrupt which sounds like the case it could take a long while to sort out.
    Best case you might live there for quite some time rent free and the sale might go through.
    What if interest rates skyrocket or values decline in the meantime would you still be keen?, or alternatively if prices rise over the time this mess takes to sort out and it does not go ahead where are you then?
    Living rent free might not turn out to be such a blessing.
    You can be pretty sure if prices do rise the sale will not go ahead.
     
  17. newinvestor07

    newinvestor07 Member

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    Thanks for analyzing and suggesting. I will contact to my solicitor tomorrow.

    Vivian
     
  18. newinvestor07

    newinvestor07 Member

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    I spoke to my solicitor this morning. Sounded not much we can do if bank decide to re-sale the property. My solicitor was going to speak to the vendor's solicitor, to find out what the bank was up to. The vendor had already quited his job and did not leave new contact details to his solicitor. That's so far I have known. It seemed the vendor ran away and left his debt behind...

    Vivian
     
  19. newinvestor07

    newinvestor07 Member

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    :confused::confused:

    Now the bank is ready to release the title for settlement after revaluation, only one form need the vendor to sign. Sounds a lot better. However, the solicitor still is unable to locate the vendor. How weird it is!!!!!!!!!!

    Bank will take the option to resale the property if the vendor disappeared. I don't understand why the vendor is doing this. In this situation, any option do I have? Any thoughts? :confused::confused:
     
  20. markpatric

    markpatric Member

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    I guess you can either wait or pull out, sounds promising though.