In a real bind and need advice.

[dollarbill]

Things have gone pear shaped and we need to sell our only property.
It is currently our home and we would like to keep it that way ( as tennants after selling ).
Current valuation $250,000
Amount owing $196,000
Plan A.
Sell to our oldest daughter.
The catch...she has no available cash.
We would sell to her at say $200,000
Is there any way she can borrow to buy us out WITHOUT having
any upfront cash ( for LMI, Stamp Duty and all other fees and charges ) ???
Plan B.
Let the wolves tear us to pieces.

 

[DaveM]

With a low loan amount of 196k would the rent you would have to pay to stay be more than the mortgage?

 

[Rolf Latham]

Things have gone pear shaped and we need to sell our only property.
It is currently our home and we would like to keep it that way ( as tennants after selling ).
Current valuation $250,000
Amount owing $196,000
Plan A.
Sell to our oldest daughter.
The catch...she has no available cash.
We would sell to her at say $200,000
Is there any way she can borrow to buy us out WITHOUT having
any upfront cash ( for LMI, Stamp Duty and all other fees and charges ) ???
Plan B.
Let the wolves tear us to pieces.

Hi DB

if daughter has ok credit , ok income and not much debt, if you sell to her for 200, AND the property is actually valued at 250k, AND the banks valuer agrees, then many lenders will allow her to borrow since the 50 k difference in the "favourable sale" is the deposit you have left in the deal

We do a bunch of these.

its important that you use a lender that

1. Recognises favourable sales
2. will allow a val before loan submission

ta

rolf

 

[china]

Some suggestions:

1. Negotiate with your creditors to allow extended payments
2. Sell for 250k - why take a loss by selling at 200k and then rent elswhere - financially this is better
3. Take out a reverse mortgage with the bank: so that money comes to you and then the bank owns the house till you pass away
4. Ask your children to help you out
5. Your daughter can borrow 100% as she is buying well below valuation

 

[Peter_Tersteeg]

You could sell it to her for the loan amount as a favourable purchase. With a little luck the banks will recognise the value of the property as $250k, hence your daughter will have an 80% LVR. Your daughter will still have to find a way to come up with the stamp duty on $250k. The real trick however will be getting the bank to value the property at $250k.

If thinks have gone pear shaped, will selling the property to your daughter really help you? If you can't pay the mortgage, then you probably also can't afford the rent required to cover that same mortgage; your daughter will need to make up the shortfall. If this is the case, then perhaps she can help you out until you get back on your feet? This could also save on the stamp duty and save your house.

There might be a plan C available. Sometimes though, if things are really that bad, the best thing to do is to let the wolves in, survive as best you can then start over once it's done. Not the easiest decision to make however.

 

[dollarbill]

Thanks good people.

The ongoing rent would be less than our current mortgage repayment.
If we HAD to we could cruise through on the government pension.
Not the most favoured option of course but will at least provide some breathing space.
Rolf..
I know I can find this type of ( non-related ) investor but security of tenure might become a real issue.
Thank you guys so much for providing some light at the end of this first time tunnel.

 

[dollarbill]

I haven't mentioned a combined credit card bill ( accrued while trying to prop up a now closed business ) of $65,000
We can't lose our home due to mortgagee action because our ( small )Superannuation fund will come to the rescue but we are almost certain that the banks CAN force a sale through court order even though credit card debt is unsecured.
We would much rather sell to our daughter, become asset poor and be in a better bargaining position to come to an arrangement with the bank.

 

[DaveM]

The ongoing rent would be less than our current mortgage repayment.

Is that with your daughter as your landlord or Joe Investor as your landlord? The mortgage on 192k would probably be less than a standalone investor wanting their 7-8% on a 250k buy.

Try and keep it in the family or look at some other options as suggested above such as reverse mortgage.

Just noted your extra post, for 65k could you take out a line of credit against your 68k in equity (less some % for the LVR), pay out most of the CC debt and you will still have your home and the remaining CC debt at a reduced interest rate to make it far more managable.

 

[Rolf Latham]

but we are almost certain that the banks CAN force a sale through court order even though credit card debt is unsecured.

I expect you are right

unsecured just means takes a little longer to get an enorceable judgement

Might be worth the time to talk with an insolvency co .........?

ta
rolf

 

[alexlee]

We can't lose our home due to mortgagee action because our ( small )Superannuation fund will come to the rescue

How does that work? Claim financial hardship?

but we are almost certain that the banks CAN force a sale through court order even though credit card debt is unsecured.

Unsecured just means the debt isn't secured against a specific asset. All your assets are still up for grabs.

We would much rather sell to our daughter, become asset poor and be in a better bargaining position to come to an arrangement with the bank.

I still can't see how that helps you. Even if you could do it, and your daughter could make the payments, the bank would still want its 65k. This sort of sale to evade creditors would be rescinded.

 

[dollarbill]

I still can't see how that helps you. Even if you could do it, and your daughter could make the payments, the bank would still want its 65k. This sort of sale to evade creditors would be rescinded.
Fair enough if we were to sell and then soon after make an application for voluntary bankruptcy. We are not wishing to avoid our debt but simply place ourselves in a better bargaining position.
We could, after all, just sell the home, have a lovely ( very well earned ) holiday, rent elsewhere and just wait for the s to hit the fan.

 

[Happiness]

Try Consumer Credit legal Centre Govt funded they deal with this type of matter at no cost I think.

 

[alexlee]

Fair enough if we were to sell and then soon after make an application for voluntary bankruptcy. We are not wishing to avoid our debt but simply place ourselves in a better bargaining position.

Selling the property to your daughter does that how? Exactly how does not having the asset anymore help you with paying the debt?

We could, after all, just sell the home, have a lovely ( very well earned ) holiday, rent elsewhere and just wait for the s to hit the fan.

Which invalidates your statement that you're not wishing to avoid your debt.

 

[china]

I just wonder whether there is an avenue for private investors to be able to profit or engage in a win/win situation for all concerned in this scenario. I suspect that the scenario you have described must happen a fair bit.

Lets say that a private individual has 200k sitting in the bank earning 4% interest. This means that this 200k will be generating about 150 dollars/week pre-tax with no prospect of capital growth.

Now what if this private individual was to give you 200k for your house, with a valuation of 250k. This would come with an agreement for you to stay there for say five years at an agreed rental of say 170 dollars/week, indexed to inflation - below market rental rates. The agreement would also say that you would be responsible for all property outgoings.

This way, the private individual would earn a better return for his cash and have a chance at capital growth.

You, the distressed homeowner would be able to stay on in your house and pay off the immediate credit card debt.

For both parties, the costs of going through the banks for finance would be totally avoided not to mention the paperwork in applications etc.

This should be a win/win situation.

Would this work? Generally, for businesses, there are angel investors/venture capitalists who come to arrangements with entrepeneurs looking for cash. Similarly, I wonder whether private investors can come to arrangements with homeowners looking for cash.

 

[alexlee]

Now what if this private individual was to give you 200k for your house, with a valuation of 250k. This would come with an agreement for you to stay there for say five years at an agreed rental of say 170 dollars/week, indexed to inflation - below market rental rates. The agreement would also say that you would be responsible for all property outgoings.

The OP's mortgage is 196k. Selling for 200k leaves him with nothing. And still have the 65k outstanding. How does this help the OP?

This way, the private individual would earn a better return for his cash and have a chance at capital growth.

And the risk that the sale is rescinded when the seller goes bankrupt. The chances of that being increased by the fact that your plan means they lose the 50k equity they have and still have the 65k debt. The 50k supposed equity to the buyer wouldn't pay for the lawyers.

You, the distressed homeowner would be able to stay on in your house and pay off the immediate credit card debt.

Based on his numbers, the only way that could happen is if he sold the place for above market value (at least 265k, probably more with costs).

Would this work? Generally, for businesses, there are angel investors/venture capitalists who come to arrangements with entrepeneurs looking for cash. Similarly, I wonder whether private investors can come to arrangements with homeowners looking for cash.

This only works if the issue is just a short term cash shortage, and the underlying asset (e.g. a business) is valuable (or has potential) but illiquid. In this case, there just aren't enough assets to make this work. If there was, the OP would just sell enough to pay off the debt.

While this doesn't help the OP, I wonder whether the business could have been structured better in the first place. Or whether different steps could have been taken earlier on. At this point, you either need lender generosity or a deus ex machina event.

 

[Rolf Latham]

For both parties, the costs of going through the banks for finance would be totally avoided not to mention the paperwork in applications etc.

private funding usually has REAMS more paperwork................

ta
rolf

 

[Rolf Latham]

Generally, for businesses, there are angel investors/venture capitalists who come to arrangements with entrepeneurs looking for cash. .

In australia, the concept of Venture capital is next to non existent, and angels usually dont want half your company

We are very risk averse compared to other similar based cultures and this can be a blessing or a millstone depending on which side of the fence you sit on

ta



rolf

 

[china]

Ok I was just thinking out loud. So I guess the 200k purchase by the OP's daughter is not really going to work out either.

Lets say that we sold the OP's house on the market for 250k, this would also leave the OP with nothing after paying the card debt and mortgage. Declaring bankruptcy may also achieve the same result.

What is really needed is some form of settlement agreement for the 65k credit card debt, allowing time for the OP to work out of trouble. The 196k mortgage needs to be assumed by the daughter for while.

 

[dollarbill]

Alexlee...
the scenario you have painted ( debt 'avoidance' ) is not applicable.
In a case of a post sale application for voluntary bankruptcy...yes.
My aim is to have security of tenure during which we can 'breathe'.

Your point about 'rescinding' a sale is interesting.
Would not all investors be at risk of loss if vendors made application
for voluntary bankruptcy after a sale ????

 

[kathryn d]

Since we don't really know who you are...I will ask these questions anyway (up to you whether you want to answer)

How much are you short each month in making the minimum payments to the credit cards.

Have you considered cutting back in other areas of your budget, such as entertainment, grocery,travel?

Have you considered running a "bed and breakfast", or taking in boarders, even for a few months each year?

Have you asked the credit card company if they are willing to forgo interest or reduce the interest on the card.
Can you get another card with 0% and transfer some of the balance and concentrate on the higher card for a while?

Have you considered renting out your home, and renting somewhere cheaper, or housesitting for awhile ?