Long settlement due to limited funds?

Discussion in 'The Buying/Selling Process' started by Bhp19, 3rd Jun, 2015.

  1. Bhp19

    Bhp19 Member

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    Just wondering if anyone on here has negotiated a significantly long settlement (12 months +/-) on a property before?

    We have spotted a perfect block of land in the area we plan to move to in a few years and it is being marketed for what we believe to be a very good price, unfortunately though we don't currently have enough funds for a 15-20% deposit that would be required but servicing should be no problem for us (although my wife only just began working again so several more months of history would most likely be needed).

    We would be happy to pay the asking price but would require a fair bit more time to raise the rest of the deposit needed and it's highly likely the block would sell before we were able to raise the funds.

    Has anyone else been in this situation before and if so were you able to still buy the property somehow?
     
    Last edited: 3rd Jun, 2015
  2. jerrybee

    jerrybee Member

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    If you offered a premium sure. Otherwise why would they agree.
    But yes I've heard about it before - one agent contacted me and asked if I wanted to buy a place that wouldn't settle for ages. I said sure but only if there was a discount. It swings both ways.
     
  3. chi3f

    chi3f Member

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    As jerrybee mentioned, unless you offered a premium price there is no incentive for the vendor to commit to a 12 month settlement.

    What about vendor finance? If servicing is not an issue it may be a good way to get around the lack of funds for a deposit.
     
  4. Ausprop

    Ausprop Member

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    if it is a dead market the vendor may grab the opportunity. No harm in making the offer. Or make a few simultaneous offers perhaps, one with vendor finance, one extended settlement, one where they take your *car/boat/collection of round 50c coins* as part payment etc
     
  5. Jamie M

    Jamie M Mortgage Broker - Oz Wide

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    You've got nothing to lose by asking - but agree with the others, the terms would have to be quite attractive for the vendors to accept.

    Cheers

    Jamie
     
  6. The Dark Knight

    The Dark Knight Member

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    Not sure if the rules have changed but years ago you could (if they agree) put down a small deposit 5% or 10% long settlement but the vendor has access to the deposit. Extremely risky but if you know for a fact you will get the loan across the line in 12 months could be a option? Also depends on the vendors motivation for sale as well :/
     
  7. Bhp19

    Bhp19 Member

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    Ok, so a smaller deposit can be agreed upon by both us and the vendor then when it's closer to settlement date I would arrange finance as normal with the deposit raised over the previous 10-11 months?

    The land has been in the market for 188 days and was dropped by $10k in Feb, but after speaking to some local agents I've been told the area usually takes time to sell.
     
  8. Ausprop

    Ausprop Member

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    bang! sounds like a prime candidate. A small deposit, full ask (if worth it) and long settlement offer should fly.
     
  9. The Dark Knight

    The Dark Knight Member

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    Agree with Ausprop you do have some haggling grounds. 188 days that's over half a year. That's some good reasoning for haggling :) especially with such lower interest rates if someone hasn't picked it up yet how do they think it'll go over the next uncertain 6 to 12 months no one has an idea how rates will go but with lender tightening id say they are going to have less investors looking at it. I'd put it to them that if no one is interested in it now what are their chances of selling it in the next year. As Jamie said you have nothing to lose. Don't be ashamed to ask even lower than the asking price. Ive done it numerous times with stupid offers or delayed settlements. The majority of the time they say no the minority of the time they agree and I've saved tens of thousands. Do you think I care about being told no compared to how much $ I've saved. Good luck and I hope you get it and get a kick **** price
     
  10. jerrybee

    jerrybee Member

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    188 days, you should have said so upfront. That totally changes the game!
     
  11. Propertunity

    Propertunity Real Estate Buyers Agent

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    You might also offer the vendors an Option To Purchase which gives you the right, but not the obligation, to purchase for a certain price by a certain date. You pay a premium of whatever you can agree on - say $10-20K. If you do not proceed to purchase that premium goes to the vendor for their time & trouble having it off the market.

    The REA (if one is involved) will not like it too much as he has to wait for his comms. Some solicitors would not be experienced with this either. But it can and does work.
     
  12. BayView

    BayView Member

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    We did.

    Our current PPoR - which was a build commenced in 2010, was originally a vacant block of land directly across the road from our previous PPoR.

    The owners (who are our friends) had put it on the market, and I happened to mention to him that we would love to buy it, but were not in a position to do so, as we were in the process of getting prepared to move to the USA for 3 years, we weren't sure of how the finances would go, etc.

    Anyway, 2 months later, he came over to our house and announced that he had 3 months to live (asbestos cancer). We were 1 month away from getting on the plane.

    He said; "I know you can't afford to buy the property, but I really want you to have it, and be the neighbors for my wife after I go, so work out a deal that will suit you and we'll talk."

    So, he offered us a slight discount off what he was originally asking for it, we borrowed $50k from our PPoR equity as a deposit, and arranged a 3 year settlement - to coincide with when we returned from the USA.

    Another transaction;, our 3rd PPoR was sold to a couple moving back to Aus from the USA, and they couldn't settle until the sale of their USA business had finalised. They requested a 9 month settlement which we agreed to.

    With your situation; you may be able to arrange for the Vendor to "carry" some of the money required for the deposit as a Vendor finance. You put in what you can towards the deposit, you get the remainder of the loan to settle the purchase, and the Vendors supply the rest of the deposit money and maybe the purchase costs.

    In other words; they "lend" you the money and you pay them a better interest rate as a reward. Proper contracts for this aspect will need to be drawn up if they agree.