Insight: Safe as Houses?
- Thread starter Davidr
- Start date
B
brains
Guest
Great post Kristine which seems to have been ignored. My sentiments exactly on wrapping - its not property investment - its a pseudo business exercise.
Vendor finance is a joke, wrapping is a joke. Tell me all the pro wrappers what will happen to wrapees when the property market is dead flat or going backwards. The claim made that wrapees benefit by increased equity just doesnt hold up anymore and in general im with Jenman on his assertion that it is preying on the disadvantaged of society.
Vendor finance is a joke, wrapping is a joke. Tell me all the pro wrappers what will happen to wrapees when the property market is dead flat or going backwards. The claim made that wrapees benefit by increased equity just doesnt hold up anymore and in general im with Jenman on his assertion that it is preying on the disadvantaged of society.
Cor Brains,
You really know how to generate controversy
Aren't wrapees in the same situation as any home owner when the property market stalls/goes backwards?
Aren't they in the same situation 10 years later when the market has recovered?
I agree that wrapping is a business exercise, but I see property investing as a business as well - they're just different strategies involving property as the stock.
I think renting products from Radio Rentals is a business, just like lease-options through them, as is buying the product from a retailer. All businesses with white goods (and other products) as the stock.
Cheers,
Aceyducey
Kristine is right in that wrapping should be considered a business, rather than an investing technique. After all, your profit is worked out upfront and your payments each week are the same. All the capital growth has been accounted for, and any remaining belongs to the wrappee. I have always maintained that I don't view it as investing.
Brains, as you point out, yes, there is a real danger of negative equity becoming an issue, particularly for those clients who wish to refinance after a year or two, only to find that they can no longer do so, due to a flat period of growth and their house only being worth what they paid for it or, even worse, less.
I've often pondered this and I'm sure more wrappers will encounter problems as buyers become "trapped" with the wrapper and higher rates. Fixing is also an option, however, so that the low growth period can be ridden out.
However, I still disagree with Jenman that the disadvantaged are being "preyed" upon. Wrapping is simply another business tool and has had bad press lately. Don't forget that there are many "good" stories out there too. The media just conveniently forget about those, as they are simply not as newsworthy.
Brains, as you point out, yes, there is a real danger of negative equity becoming an issue, particularly for those clients who wish to refinance after a year or two, only to find that they can no longer do so, due to a flat period of growth and their house only being worth what they paid for it or, even worse, less.
I've often pondered this and I'm sure more wrappers will encounter problems as buyers become "trapped" with the wrapper and higher rates. Fixing is also an option, however, so that the low growth period can be ridden out.
However, I still disagree with Jenman that the disadvantaged are being "preyed" upon. Wrapping is simply another business tool and has had bad press lately. Don't forget that there are many "good" stories out there too. The media just conveniently forget about those, as they are simply not as newsworthy.
B
brains
Guest
Acey & Jacque,
You are both correct in the fact the the media dont acheive ratings with good (boring) stories and the SBS Insight show did seem a little uninformed but i retain the view that wrapping has a bad rep and deservedly so.
Beside the negative equity trap theres also the risk that the wrapper does not make their interest payments for whatever reason. In this case the where the wrapee has done everything right they can be booted out at no fault of their own. I realise its an unlikely scenario but im sure its happened and will again in the future.
You are both correct in the fact the the media dont acheive ratings with good (boring) stories and the SBS Insight show did seem a little uninformed but i retain the view that wrapping has a bad rep and deservedly so.
Beside the negative equity trap theres also the risk that the wrapper does not make their interest payments for whatever reason. In this case the where the wrapee has done everything right they can be booted out at no fault of their own. I realise its an unlikely scenario but im sure its happened and will again in the future.
Brains,
I agree with you on that one. There does need to be consumer protection written into the sales contract for this very issue. I'm sure that more attention will be given to it, after the programme.
MichaelG,
If you're reading this, are there steps being taken about this in the Vendor Finance Assoc? It would seem a very real risk (small, but nevertheless present) that buyers take on. What is the sentiment amongst wrappers?
I agree with you on that one. There does need to be consumer protection written into the sales contract for this very issue. I'm sure that more attention will be given to it, after the programme.
MichaelG,
If you're reading this, are there steps being taken about this in the Vendor Finance Assoc? It would seem a very real risk (small, but nevertheless present) that buyers take on. What is the sentiment amongst wrappers?
Hi,
Yes wrapping is a business, and requires a business plan to implement. Anything else is just speculation. Michael Gerber got it right with his book E-Myth and I would recommend it to any potential business owner.
There are a number of ways to reduce your business risk, and these suggestions have been taken from personal, learned, professional advise or read of situations;
- register with Baycorp - you will learn about your obligations under the privacy act, and you will learn to access the credit worthiness of your clients. From this you can determine which clients may be suitable, you may even be able to work out systems that will improve their credit situation (by taking the time to work with them - there are times, when given the right motivation - ie the potential to own a home, that clients have gone away fixed up their debt levels and have come back with better servicability - because someone said "we will help you" - a flat out no from some lenders have stop them dead in hoping to own a house, others who said their are better off renting, have not allowed them to consider an alternative livestyle and therefore they haven't bothered to change).
- understand the consumer credit code (specific to installment contracts, not lease options) this will show you what info you need to prepare in your contracts (to inform the clients of the fees, obligations and repayments upfront). Again working within their means will mitigate risk of default.
- systemise arrears tracking - again read up on the consumer credit code on your obligations of reporting and notifying updates on the changes the occur.
- independant legal advice - also have a system that stops the suspends the process until they obtain independant legal advice (also check they are getting qualified legal advice from someone who understands the contract)
- offer them a copy of the building inspection report (allow them to assess the condition of the property (this also includes matching the client to the property - ie single mum would not be suitable to a "renovators dream", but a tradie could build up "sweat equity")
- if rates rise - have a system where the length of the loan can be increased to reduce the repayment amount - this would be a helpful short-term anti-default system.
- ask your clients to obtain income protection or some other form of insurance (life cover ?)
- provide an info kit with a checklist of things they need to know as a home buyer (as opposed to a renter).
- fully disclose the purpose of your loan (protect the client's interest)
- always use proper insurance (one's that recognise the right of the client)
- use a structure that seperates the assets from your personal liabilities
- use a transaction account system that locks the clients payments with the the mortgage payments (ie tamper proof) (joint accounts, etc)
All these problems are solvable - and mostly common sense, this is what we discuss at our Vendor Finance Association membership meetings. The association is developing a Code of Conduct with the assistance of the State governments, we have key speakers from Government Consumer Advocates instruct our members on best practice and we speakers keep us up todate on relevant policies.
The number of bad cases reported to use from the various Government departments are few. For example, there was 1 in Western Australia, where a fine was issued because their didnt have a credit providers license, that was paid for, licenses are easy to obtain and the client did refinance later and got their own home. There have been some cases in Victoria where there have been some bad practices and I'll be the first to say to throw the book at them.
I'm not going to deny there are people abusing the system, but I'll be the first to say there are more good operators out there than bad. And all the members of the Vendor Finance Association are dedicated to learning how to become the best and most Consumer focused operators out there.
In summary, what is the Association doing about this? Working with the Government to develop a Code and assist in the preparing of a information pamphlet for Consumers which was a project for us requested by the Consumer Credit board of Australia. We are also getting feedback from the Government of Western Australia on features they would like to see implemented on our homepage. In answer to this we are currently redesigning our whole website to improve services to both Consumers and Members.
In the meantime the Association continues to run their meetings and draw in speakers to keep members up to date on key issues.
Regards
Michael Gruber
President
Disclaimer: The information contained in this email is confidential. If you are not the intended recipient, you may not disclose or use the information in this email in any way. Whilst we believe the information provided is accurate, no reliance should be placed upon its accuracy, reliability or completeness. It is important to be aware that we do not provide investment, financial, taxation or legal advice. Opinions expressed are not expert opinions and may change without notice. In preparing this email, no account has been taken of the particular investment objectives, financial situation and particular needs of the recipient. The recipient must not act on this advice, and must obtain advice from an appropriately qualified advisor in making any investment, financial, taxation or legal decision upon which this information touches. To the extent permitted by law, no responsibility for any loss arising in any way (including by way of negligence) suffered by anyone acting or refraining from acting as a result of this material is accepted by the Vendor Finance (Wraps) Association Incorporated.
Yes wrapping is a business, and requires a business plan to implement. Anything else is just speculation. Michael Gerber got it right with his book E-Myth and I would recommend it to any potential business owner.
There are a number of ways to reduce your business risk, and these suggestions have been taken from personal, learned, professional advise or read of situations;
- register with Baycorp - you will learn about your obligations under the privacy act, and you will learn to access the credit worthiness of your clients. From this you can determine which clients may be suitable, you may even be able to work out systems that will improve their credit situation (by taking the time to work with them - there are times, when given the right motivation - ie the potential to own a home, that clients have gone away fixed up their debt levels and have come back with better servicability - because someone said "we will help you" - a flat out no from some lenders have stop them dead in hoping to own a house, others who said their are better off renting, have not allowed them to consider an alternative livestyle and therefore they haven't bothered to change).
- understand the consumer credit code (specific to installment contracts, not lease options) this will show you what info you need to prepare in your contracts (to inform the clients of the fees, obligations and repayments upfront). Again working within their means will mitigate risk of default.
- systemise arrears tracking - again read up on the consumer credit code on your obligations of reporting and notifying updates on the changes the occur.
- independant legal advice - also have a system that stops the suspends the process until they obtain independant legal advice (also check they are getting qualified legal advice from someone who understands the contract)
- offer them a copy of the building inspection report (allow them to assess the condition of the property (this also includes matching the client to the property - ie single mum would not be suitable to a "renovators dream", but a tradie could build up "sweat equity")
- if rates rise - have a system where the length of the loan can be increased to reduce the repayment amount - this would be a helpful short-term anti-default system.
- ask your clients to obtain income protection or some other form of insurance (life cover ?)
- provide an info kit with a checklist of things they need to know as a home buyer (as opposed to a renter).
- fully disclose the purpose of your loan (protect the client's interest)
- always use proper insurance (one's that recognise the right of the client)
- use a structure that seperates the assets from your personal liabilities
- use a transaction account system that locks the clients payments with the the mortgage payments (ie tamper proof) (joint accounts, etc)
All these problems are solvable - and mostly common sense, this is what we discuss at our Vendor Finance Association membership meetings. The association is developing a Code of Conduct with the assistance of the State governments, we have key speakers from Government Consumer Advocates instruct our members on best practice and we speakers keep us up todate on relevant policies.
The number of bad cases reported to use from the various Government departments are few. For example, there was 1 in Western Australia, where a fine was issued because their didnt have a credit providers license, that was paid for, licenses are easy to obtain and the client did refinance later and got their own home. There have been some cases in Victoria where there have been some bad practices and I'll be the first to say to throw the book at them.
I'm not going to deny there are people abusing the system, but I'll be the first to say there are more good operators out there than bad. And all the members of the Vendor Finance Association are dedicated to learning how to become the best and most Consumer focused operators out there.
In summary, what is the Association doing about this? Working with the Government to develop a Code and assist in the preparing of a information pamphlet for Consumers which was a project for us requested by the Consumer Credit board of Australia. We are also getting feedback from the Government of Western Australia on features they would like to see implemented on our homepage. In answer to this we are currently redesigning our whole website to improve services to both Consumers and Members.
In the meantime the Association continues to run their meetings and draw in speakers to keep members up to date on key issues.
Regards
Michael Gruber
President
Disclaimer: The information contained in this email is confidential. If you are not the intended recipient, you may not disclose or use the information in this email in any way. Whilst we believe the information provided is accurate, no reliance should be placed upon its accuracy, reliability or completeness. It is important to be aware that we do not provide investment, financial, taxation or legal advice. Opinions expressed are not expert opinions and may change without notice. In preparing this email, no account has been taken of the particular investment objectives, financial situation and particular needs of the recipient. The recipient must not act on this advice, and must obtain advice from an appropriately qualified advisor in making any investment, financial, taxation or legal decision upon which this information touches. To the extent permitted by law, no responsibility for any loss arising in any way (including by way of negligence) suffered by anyone acting or refraining from acting as a result of this material is accepted by the Vendor Finance (Wraps) Association Incorporated.
Michael,
Good reply but the disclaimer isn't needed
Hopefully in the next two years we'll see a code for wrapping. Of course the big hole is still lease-options which are currently NOT covered by credit codes or other consumer protections whilst wrapping is covered right now.
Often it seems the bad press on wrapping comes from those involved in lease-options....like the recent SBS article
Personally I do not currently wrap, but I'd like to see it - and other tools - legally available so I can pick the most appropriate & legal approach in my property business
Buy and Hold is so 90s!
Cheers,
Aceyducey
Good reply but the disclaimer isn't needed
Hopefully in the next two years we'll see a code for wrapping. Of course the big hole is still lease-options which are currently NOT covered by credit codes or other consumer protections whilst wrapping is covered right now.
Often it seems the bad press on wrapping comes from those involved in lease-options....like the recent SBS article
Personally I do not currently wrap, but I'd like to see it - and other tools - legally available so I can pick the most appropriate & legal approach in my property business
Buy and Hold is so 90s!
Cheers,
Aceyducey
Very Interesting point Kristine,
from memory I think it's Section 6 of the Sale of Land Act, that entitles the person under a vendors terms contract to call for a mortgage back and the vendor has to oblige as long as the (wrapee) pays the legals.
From my understanding of this wrap thing, the wrapper usually has finance in place over the subject property, that is being serviced from the payments of the wrapee, so in the mortgage back situation I would think the wrapper has to pay out the original loan as the original lender would want their funds back prior to releasing the title in order that the wrapees name can be registered as proprietor.
The wrapper of course would hold first morgage over the title, but my question in this situation is, how does the wrapper get the money to pay out the original lender and on what security.
regards
Hi,
Yep both Vic and QLD have these conditions, its a case of when and how much, but in both cases the wrappee can request the title once they have obtained a certain % of equity.
It is my understanding that to obtain this % they would be quite a few years into the mortgage.
Let's assume worse case scenario, price of property has not moved during that time and their LVR is not sufficient to refinance with another lender.
They could ask for the title, the wrapper - not having the funds to pay out the loan, defaults. The property is repossessed.
Now, in this example provided the wrappee would eventually obtain the title when they make their last payment or if the value of property is sufficient to refinance. My question is, what benefit would the wrappee (in this scenario) obtain by exercising their right to the title, knowing full well that their property would be repossessed.
Structured properly only the properties in the same structure would be affected, so only the other wrappees properties in that structure would be affected. Again I'm not sure what advantage is acheived here?
I agree the laws gives the right for title, but under an installment contract supported by a 1st mortgage that is properly executed, there is no advantage obtained by the wrappee to ask for the title immediately after the law grants the right (but I am willing to be proven wrong here).
Maybe the association should issue a consumer alert, explain their rights and implications of execution? Actually, in the Association we have a rule, if you suggest it, you make it happen. Kristine, if you want to inform borrowers of this right I would welcome you onto a sub-committee to draft a consumer-alert that explains the right and implications of this particular section of the law. We would also need to include a paragraph or two for solicitors because the Government asked that when we draft education material for consumers we include the consumer's solcitors as well.
Regards
Michael Gruber
Vendor Finance Association
Disclaimer: The information contained in this email is confidential. If you are not the intended recipient, you may not disclose or use the information in this email in any way. Whilst we believe the information provided is accurate, no reliance should be placed upon its accuracy, reliability or completeness. It is important to be aware that we do not provide investment, financial, taxation or legal advice. Opinions expressed are not expert opinions and may change without notice. In preparing this email, no account has been taken of the particular investment objectives, financial situation and particular needs of the recipient. The recipient must not act on this advice, and must obtain advice from an appropriately qualified advisor in making any investment, financial, taxation or legal decision upon which this information touches. To the extent permitted by law, no responsibility for any loss arising in any way (including by way of negligence) suffered by anyone acting or refraining from acting as a result of this material is accepted by the Vendor Finance (Wraps) Association Incorporated.
Yep both Vic and QLD have these conditions, its a case of when and how much, but in both cases the wrappee can request the title once they have obtained a certain % of equity.
It is my understanding that to obtain this % they would be quite a few years into the mortgage.
Let's assume worse case scenario, price of property has not moved during that time and their LVR is not sufficient to refinance with another lender.
They could ask for the title, the wrapper - not having the funds to pay out the loan, defaults. The property is repossessed.
Now, in this example provided the wrappee would eventually obtain the title when they make their last payment or if the value of property is sufficient to refinance. My question is, what benefit would the wrappee (in this scenario) obtain by exercising their right to the title, knowing full well that their property would be repossessed.
Structured properly only the properties in the same structure would be affected, so only the other wrappees properties in that structure would be affected. Again I'm not sure what advantage is acheived here?
I agree the laws gives the right for title, but under an installment contract supported by a 1st mortgage that is properly executed, there is no advantage obtained by the wrappee to ask for the title immediately after the law grants the right (but I am willing to be proven wrong here).
Maybe the association should issue a consumer alert, explain their rights and implications of execution? Actually, in the Association we have a rule, if you suggest it, you make it happen. Kristine, if you want to inform borrowers of this right I would welcome you onto a sub-committee to draft a consumer-alert that explains the right and implications of this particular section of the law. We would also need to include a paragraph or two for solicitors because the Government asked that when we draft education material for consumers we include the consumer's solcitors as well.
Regards
Michael Gruber
Vendor Finance Association
Disclaimer: The information contained in this email is confidential. If you are not the intended recipient, you may not disclose or use the information in this email in any way. Whilst we believe the information provided is accurate, no reliance should be placed upon its accuracy, reliability or completeness. It is important to be aware that we do not provide investment, financial, taxation or legal advice. Opinions expressed are not expert opinions and may change without notice. In preparing this email, no account has been taken of the particular investment objectives, financial situation and particular needs of the recipient. The recipient must not act on this advice, and must obtain advice from an appropriately qualified advisor in making any investment, financial, taxation or legal decision upon which this information touches. To the extent permitted by law, no responsibility for any loss arising in any way (including by way of negligence) suffered by anyone acting or refraining from acting as a result of this material is accepted by the Vendor Finance (Wraps) Association Incorporated.
Michael
I read your reply with great interest, and much puzzlement.
I would strongly advise that all people even contemplating buying a property to sell on a terms Contract buy themselves a copy of the Sale of Land Act.
There is no such thing as ...>>can request the title once they have obtained a certain % of equity.<<
It is the purchaser's right under the law to request a Mortgage Back from Day One.
...>>but under an installment contract supported by a 1st mortgage that is properly executed<< Sorry! But this sentence makes no sense. A terms contract is not supported by a mortgage.
Also, by law,
Sale of Land Act 1962
S.7 'Land subject to a terms contract not to be mortgaged by vendor' (to a third party)
and by Golly!
If the vendor's answer to a purchaser requesting a registered Mortgage Back is to then default on their original mortgage, meaning the terms purchaser loses all their money and right to the property, then please tell me again what is the benefit to the purchaser, when there is no security for them and their money in the deal at all?
I would strongly suggest that anyone contemplating buying, selling or otherwise becoming involved in vendor's terms seek informed legal advice.
The Law does not take kindly to people making up the rules as they play the game.
The Law is there to protect the weakest, and to protect us from ourselves.
'Not telling' someone something of material importance in a situation constitutes, by your silence, fraud by misrepresentation.
Fraud is not a pretty thing, particularly when masquerading as 'helping the battlers'.
And if the purpose of selling on a terms contract is to create an income for the vendor - it is, after all, described as a business venture, then the subject of 'equity' is a long shot if the vendor intends to live off the proceeds and not use the terms payments to pay down their loan.
To say that >>there is no advantage obtained by the 'purchaser'<< when without a mortgage registered over a title in their own name they have no rights and have bought nothing whitewashes the situation in the extreme.
Sorry, Michael, as a nasty licensed person I don't wear rose coloured glasses. I like my vendors and my purchasers to be well informed, legally alert and to make adult decisions while in sound mind and in possession of their full faculties.
Otherwise, the people involved in deliberately selling on terms are, indeed, preying on the weakest people in society, promising the Holy Grail of home ownership while at the same time denying the legal right to protect their own interests.
Prove me wrong! Show me the legal security.
Kristine
I read your reply with great interest, and much puzzlement.
I would strongly advise that all people even contemplating buying a property to sell on a terms Contract buy themselves a copy of the Sale of Land Act.
There is no such thing as ...>>can request the title once they have obtained a certain % of equity.<<
It is the purchaser's right under the law to request a Mortgage Back from Day One.
...>>but under an installment contract supported by a 1st mortgage that is properly executed<< Sorry! But this sentence makes no sense. A terms contract is not supported by a mortgage.
Also, by law,
Sale of Land Act 1962
S.7 'Land subject to a terms contract not to be mortgaged by vendor' (to a third party)
and by Golly!
If the vendor's answer to a purchaser requesting a registered Mortgage Back is to then default on their original mortgage, meaning the terms purchaser loses all their money and right to the property, then please tell me again what is the benefit to the purchaser, when there is no security for them and their money in the deal at all?
I would strongly suggest that anyone contemplating buying, selling or otherwise becoming involved in vendor's terms seek informed legal advice.
The Law does not take kindly to people making up the rules as they play the game.
The Law is there to protect the weakest, and to protect us from ourselves.
'Not telling' someone something of material importance in a situation constitutes, by your silence, fraud by misrepresentation.
Fraud is not a pretty thing, particularly when masquerading as 'helping the battlers'.
And if the purpose of selling on a terms contract is to create an income for the vendor - it is, after all, described as a business venture, then the subject of 'equity' is a long shot if the vendor intends to live off the proceeds and not use the terms payments to pay down their loan.
To say that >>there is no advantage obtained by the 'purchaser'<< when without a mortgage registered over a title in their own name they have no rights and have bought nothing whitewashes the situation in the extreme.
Sorry, Michael, as a nasty licensed person I don't wear rose coloured glasses. I like my vendors and my purchasers to be well informed, legally alert and to make adult decisions while in sound mind and in possession of their full faculties.
Otherwise, the people involved in deliberately selling on terms are, indeed, preying on the weakest people in society, promising the Holy Grail of home ownership while at the same time denying the legal right to protect their own interests.
Prove me wrong! Show me the legal security.
Kristine
Hi Kristine,
I would strongly advise that all people even contemplating buying a property to sell on a terms Contract buy themselves a copy of the Sale of Land Act.
>>and a copy of the Consumer Credit Code Act, and at least check the website at www.creditcode.gov.au
There is no such thing as ...>>can request the title once they have obtained a certain % of equity.<<
>>sorry, but that I mean once they have obtained a % of equity under the terms contract.
It is the purchaser's right under the law to request a Mortgage Back from Day One.
>>I agree
...>>but under an installment contract supported by a 1st mortgage that is properly executed<< Sorry! But this sentence makes no sense. A terms contract is not supported by a mortgage.
>>my apologies, I meant a terms contract with a previous existing mortgage.
Also, by law,
Sale of Land Act 1962
S.7 'Land subject to a terms contract not to be mortgaged by vendor' (to a third party)
and by Golly!
>>well that just means that once a terms contract is in force, the vendor can place no further mortgages on a property. I think this would including refinancing and possibly redraws (but you would need to check on that bit) either way, the law protects the client from the property being further encumbered after the contract is started.
If the vendor's answer to a purchaser requesting a registered Mortgage Back is to then default on their original mortgage, meaning the terms purchaser loses all their money and right to the property, then please tell me again what is the benefit to the purchaser, when there is no security for them and their money in the deal at all?
>>a caveat gives the client security against the vendor and their right of possession gives the client security against a bank. Which is why when a wrap is setup the vendor/wrapper is obligated to disclose their intent to the lender that a third party is involved. This provides the client security with the bank. In the case of a client asking for a mortgage back, they would need to determine if they can refinance out at that stage, all I'm saying here is that if they wish to force the wrapper to become the first mortgagee (which is their right) and the wrapper cannot meet their demand and must foreclose, I do not see the benefit, when if let alone they would be in a better position to refinance at a later date.
I would strongly suggest that anyone contemplating buying, selling or otherwise becoming involved in vendor's terms seek informed legal advice.
>>I wouldn't just suggest, I would state that you should not commit to a terms contract (or any other purchase of propert) unless you first get qualified legal advice. In fact, not just any legal advice, but advice from someone with experience in terms contracts.
The Law does not take kindly to people making up the rules as they play the game.
>>That's right, which is why I am please the Dept. of Fair Trading has asked the Vendor Finance Association to draft a consumer information pamphlet which they intend to distribute and why it was great then the Consumer and Employee Protection Dept. of W.A. did a 90min presentation of Credit Provider Licensing at our last meeting. In fact they even gave us tips of structures to help save money on fees (in fact anyone looking to become a legal credit provider in W.A. can email me at [email protected] for the info)
The Law is there to protect the weakest, and to protect us from ourselves.
>>I agree, which is why its important organisations such as the Vendor Finance Association exist, to help distribute free information to consumers (we're still designed the website after recommendations from the Government)
'Not telling' someone something of material importance in a situation constitutes, by your silence, fraud by misrepresentation.
>>True, information kits play such an important role in educating the customer. You can cram all sorts of stuff into a kit like FAQs, checklists for home buyers, and contact info for relevant free advice for consumers.
Fraud is not a pretty thing, particularly when masquerading as 'helping the battlers'.
>>Again I agree, which is why these scammers who churn people over just to get the FHOG money need to be caught and charged.
And if the purpose of selling on a terms contract is to create an income for the vendor - it is, after all, described as a business venture, then the subject of 'equity' is a long shot if the vendor intends to live off the proceeds and not use the terms payments to pay down their loan.
>>That would be a bad business model if used, that would mean you cashflow would shrink and your debt increase. I doubt any business running under that model would last, don't you agree?
To say that >>there is no advantage obtained by the 'purchaser'<< when without a mortgage registered over a title in their own name they have no rights and have bought nothing whitewashes the situation in the extreme.
>>they do have rights, just not at the level with those who are able to source traditional finance have.
Sorry, Michael, as a nasty licensed person I don't wear rose coloured glasses. I like my vendors and my purchasers to be well informed, legally alert and to make adult decisions while in sound mind and in possession of their full faculties.
>>Again I agree, which is why I took the time to answer each of your comments carefully and in a manner which I hope shows respect for your viewpoint.
Otherwise, the people involved in deliberately selling on terms are, indeed, preying on the weakest people in society, promising the Holy Grail of home ownership while at the same time denying the legal right to protect their own interests.
Prove me wrong! Show me the legal security.
>>I can't remember the actual section, but I think its #13 part 5 of the FHOG act recognises legal possession of the property as enough security to access the FHOG money. The Office of State Revenue reviews all terms contracts (in full) when assessing each application and each time a grant is awarded on the condition of legal possession.
Kristine
>>and don't forget to check the Credit Code website!!! www.creditcode.gov.au
Regards
Michael Gruber
President
Vendor Finance Association
I would strongly advise that all people even contemplating buying a property to sell on a terms Contract buy themselves a copy of the Sale of Land Act.
>>and a copy of the Consumer Credit Code Act, and at least check the website at www.creditcode.gov.au
There is no such thing as ...>>can request the title once they have obtained a certain % of equity.<<
>>sorry, but that I mean once they have obtained a % of equity under the terms contract.
It is the purchaser's right under the law to request a Mortgage Back from Day One.
>>I agree
...>>but under an installment contract supported by a 1st mortgage that is properly executed<< Sorry! But this sentence makes no sense. A terms contract is not supported by a mortgage.
>>my apologies, I meant a terms contract with a previous existing mortgage.
Also, by law,
Sale of Land Act 1962
S.7 'Land subject to a terms contract not to be mortgaged by vendor' (to a third party)
and by Golly!
>>well that just means that once a terms contract is in force, the vendor can place no further mortgages on a property. I think this would including refinancing and possibly redraws (but you would need to check on that bit) either way, the law protects the client from the property being further encumbered after the contract is started.
If the vendor's answer to a purchaser requesting a registered Mortgage Back is to then default on their original mortgage, meaning the terms purchaser loses all their money and right to the property, then please tell me again what is the benefit to the purchaser, when there is no security for them and their money in the deal at all?
>>a caveat gives the client security against the vendor and their right of possession gives the client security against a bank. Which is why when a wrap is setup the vendor/wrapper is obligated to disclose their intent to the lender that a third party is involved. This provides the client security with the bank. In the case of a client asking for a mortgage back, they would need to determine if they can refinance out at that stage, all I'm saying here is that if they wish to force the wrapper to become the first mortgagee (which is their right) and the wrapper cannot meet their demand and must foreclose, I do not see the benefit, when if let alone they would be in a better position to refinance at a later date.
I would strongly suggest that anyone contemplating buying, selling or otherwise becoming involved in vendor's terms seek informed legal advice.
>>I wouldn't just suggest, I would state that you should not commit to a terms contract (or any other purchase of propert) unless you first get qualified legal advice. In fact, not just any legal advice, but advice from someone with experience in terms contracts.
The Law does not take kindly to people making up the rules as they play the game.
>>That's right, which is why I am please the Dept. of Fair Trading has asked the Vendor Finance Association to draft a consumer information pamphlet which they intend to distribute and why it was great then the Consumer and Employee Protection Dept. of W.A. did a 90min presentation of Credit Provider Licensing at our last meeting. In fact they even gave us tips of structures to help save money on fees (in fact anyone looking to become a legal credit provider in W.A. can email me at [email protected] for the info)
The Law is there to protect the weakest, and to protect us from ourselves.
>>I agree, which is why its important organisations such as the Vendor Finance Association exist, to help distribute free information to consumers (we're still designed the website after recommendations from the Government)
'Not telling' someone something of material importance in a situation constitutes, by your silence, fraud by misrepresentation.
>>True, information kits play such an important role in educating the customer. You can cram all sorts of stuff into a kit like FAQs, checklists for home buyers, and contact info for relevant free advice for consumers.
Fraud is not a pretty thing, particularly when masquerading as 'helping the battlers'.
>>Again I agree, which is why these scammers who churn people over just to get the FHOG money need to be caught and charged.
And if the purpose of selling on a terms contract is to create an income for the vendor - it is, after all, described as a business venture, then the subject of 'equity' is a long shot if the vendor intends to live off the proceeds and not use the terms payments to pay down their loan.
>>That would be a bad business model if used, that would mean you cashflow would shrink and your debt increase. I doubt any business running under that model would last, don't you agree?
To say that >>there is no advantage obtained by the 'purchaser'<< when without a mortgage registered over a title in their own name they have no rights and have bought nothing whitewashes the situation in the extreme.
>>they do have rights, just not at the level with those who are able to source traditional finance have.
Sorry, Michael, as a nasty licensed person I don't wear rose coloured glasses. I like my vendors and my purchasers to be well informed, legally alert and to make adult decisions while in sound mind and in possession of their full faculties.
>>Again I agree, which is why I took the time to answer each of your comments carefully and in a manner which I hope shows respect for your viewpoint.
Otherwise, the people involved in deliberately selling on terms are, indeed, preying on the weakest people in society, promising the Holy Grail of home ownership while at the same time denying the legal right to protect their own interests.
Prove me wrong! Show me the legal security.
>>I can't remember the actual section, but I think its #13 part 5 of the FHOG act recognises legal possession of the property as enough security to access the FHOG money. The Office of State Revenue reviews all terms contracts (in full) when assessing each application and each time a grant is awarded on the condition of legal possession.
Kristine
>>and don't forget to check the Credit Code website!!! www.creditcode.gov.au
Regards
Michael Gruber
President
Vendor Finance Association
