buy land/ build - land not yet registered

[Breamster]

Hi,

Background:

I've put down 1000.00 holding deposit on a not yet registered block of land

I have 14 days to decide whether I put down the 5% - the balance to be paid at settlement / registration, registration is due not before February 2015.

The block is within a master planned estate being completed by one of the major developers (Mirvac). 80% of the estate is registered, and construction well and truly underway. Risks in relation to this developer are minimal.

I have the 5% in cash and I am good to pay deposit.

This block is sold by the developer, and the conditions with this particular block is that I MUST build one of the Mirvac homes. I am required to decide on the home, and general design and pay $5000 down when I put down my 5% on the land.

I have the 5% in cash and good to pay.

I can find the $5,000.

Concerning the balance at settlement:

1. I assume that a bank will NOT provide a pre approval for this deal, given that registration is so far off?

If not;

2. Am I best to speak with a broker to get a just 'indication' of my borrowing capacity and up front funds needed?

3. Essentially, am I required to simply make a calculated decision concerning the likelihood I will get bank approval come settlement time? I will looking at a 90-93% lend most likely on the entire project (404,000 for land, 310,000 for build)


4. Any other advice appreciated.


Thanks guys

 

[Corey Batt]

Sit down with a broker who can run serviceability, look at any potential issues which might arise in this particular deal before you are locked in.

The main issue which can arise with these situations is with valuations and whether they stack up.

Be mindful that it's in your best interests to try have the finance for land + construction at the same time, as a common snag for H&L is if the land settles prior to the build finance is due and then vals fall short on the land component.

 

[nhg]

So it's a house and land package.

Is this an investment or PPOR?

Use the search function to look up past threads on house and land packages.

 

[Mick C]

1. I assume that a bank will NOT provide a pre approval for this deal, given that registration is so far off?

The pre-approval will be pointless.

2. Am I best to speak with a broker to get a just 'indication' of my borrowing capacity and up front funds needed?

Personal choice, but yes that is one option.

3. Essentially, am I required to simply make a calculated decision concerning the likelihood I will get bank approval come settlement time? I will looking at a 90-93% lend most likely on the entire project (404,000 for land, 310,000 for build)


4. Any other advice appreciated.


Thanks guys

1. I will try to change the contract to state that you can get any builder to build and not to lock yourself with Mirvac only...
- what happens if your not happy with their price or design?
- Mass building can be a bit slower...imagine 50-60 project going off at the same time for diff site...

I had a couple of clients who had a House and land package in Oran park NSW ....they were stuck with that one developer and the price for the build ( after land settlement of course) was 10% more and they were extremely slow.

2. Make sure you have a 3% buffer incase the valuation falls short + there's a lot of unexpected cost when it comes to building a new home- design change, color selection, drive way, landscaping etc...

3. Getting approval for a >90% is not always easy so make sure your broker or banker knows that you want to get a high LVR loan.

4. Serviceability, you might be able to service the land loan..make sure you can service the building loan as well.


Cheers

 

[kamchatsky]

Is this The Avenue from Mirvac we are talking about? You must have bought the land marked for Mirvac building only. There are lands that can build with other builders but it is very hot over there and it is very hard to get. There is also Elizabeth Hills and Glenfield Estates but dunno about those.

 

[blackenator]

I was in a similar situation just recently with buying in a estate with stockland. Same scenario paid 1000 eoi payment then paid 10k after choosing the land. I really could do nothing until the land was marked out and pretty much registered then the bank valued the land. Stockland only gave me 2 weeks to settle once the land was registered and charge like a 70 dollar late payment fee per day. I didnt really have any issues besides cba being a bit slow with the valuations but as others has mentioned be best to sit and talk with broker to sort out finance etc

 

[Ausprop]

make sure you buy it in a special purpose entity so you can walk away if it all turns pear shaped

 

[Terry_w]

make sure you buy it in a special purpose entity so you can walk away if it all turns pear shaped

Mirvac would surely insist on a personal guarantee. But there are some asset protectionn strategies to minimise the risk

 

[Terry_w]

4. Any other advice appreciated.

Seek legal advice from a lawyer, not a conveyancer. Many issues with off the plan.

Amend your will, if necessary.

 

[Breamster]

Terry, as it turns out the contract for sale on the land says nothing about needing to build with Mirvac..the only reference was in the 'sales advice' that I signed when I put down my $1000 holding deposit under 'additional commments',it was noted 'mirvac build only'. However, there is no reference to this in the contract of sale of land - and Mirvac have exchanged with me.

My conveyancer explained that a developer usually would not exchange contracts until the buyer has entered into a building contract via deposit etc. But here they have exchanged, and I have not entered a building contract with anyone.

Thoughts? My conveyancer suggests I'm probably free to build with anyone given what has occurred. The 'other' builders provide much more value for money.. there is a huge difference.

Is it fairly clear cut in my favour that I can build with anyone?? OR should I obtain a detailed legal advising so Im covered if Mirvac feel Im wrong and want to go after me. A detailed advising would cost $$

Many thanks

 

[Terry_w]

Is it fairly clear cut in my favour that I can build with anyone?? OR should I obtain a detailed legal advising so Im covered if Mirvac feel Im wrong and want to go after me. A detailed advising would cost $$

Certainly not clear cut from what you have said. The other document may form part of the contract. Seek legal advice or run the risk.