My last ditch effort to purchase...

[onthebus]

Hi I am wondering if anyone can advise me. I am wanting to sell my old ppr (now an investment property) in order to buy a ppr in a different state. (Unfortunately I have been unable to get a loan without selling.) I have been trying to buy this house for a long time, so this is my last ditch effort! The properties are similar in price, so essentially it will be a security swap. The owners of the property I want to buy, are selling privately, but are about to list the property with an agent in a week or so. I won?t be able to afford the new agent listed price, so I have this week to come up with a solution. We have agreed on a price, but they want a definite sale, within 3 months as a previous contract fell through. The house is not advertised anywhere at the moment.
The owners won?t accept a ?subject to sale? contract without advertising it, in case my house doesn?t sell. And, as I am only selling in order to buy this particular house, I wouldn?t want to be competing with other buyers or the stress of a 48 hour clause. I am nervous about signing an unconditional contract, in case my house doesn?t sell within 3 months. I think it will sell reasonably quickly, (agents have quoted me 2-4 weeks in the current market), but I worry that the tenants, who really love the house, could be difficult.
My solution is I have a friend who has offered to be a co-borrower, so I am wondering, could I have my friend essentially ?buy? the property with my name also on the mortgage and title and when the investment property sells, move that loan across and get my friend off the title and mortgage? Or I have thought I could sign an unconditional contract, market my house, and if it doesn?t sell in 2 months, buy it with my friend as co-borrower and then wait for my house to sell and have her name taken off the title and mortgage. This woman is a good friend and she has helped me before. If this scenario is feasible, how could I set this up so I don?t have to pay stamp duty twice and reduce any fees? I am with ANZ. Sorry a bit long winded and complicated ? hope it makes sense. Thanks so much to anyone who replies.

 

[Rolf Latham]

have you talked with your lender about porting the security to the new place, and leave the existing loan in place?
ta
rolf

 

[Terry_w]

Changing names on title results in stamp duty. It also results in new loan applications being needed. Changing names on contracts can also result in additional stamp duty too - seek legal advice on this.

You don't want to get into the problem of having to sell your house quickly just to settle as this would result, probably, in a lower price.


Look at a security swap like Rolf suggests.

 

[Jacque]

If the security swap doesn't work for whatever reason (as we aren't privy to your personal financial circumstances) you could consider doing the following:

1. Offer the vendor an option to purchase at $X in X days time. This way if you don't exercise the option you only risk losing the option fee.
2. Offer to buy with an extended cool off period eg: 28 business days. This should enable you sufficient time to list and sell or at least obtain offers on your own property. Again, worst case scenario if you pull out you forfeit the 0.25%
3. Purchase with an extended settlement eg: 120 days which hopefully gives you sufficient time to sell your current PPOR

If you're being realistic on selling price of your own place and the market is active, then it shouldn't be a problem. Best of luck.

 

[onthebus]

Thanks so much for the replies. Re the security swap, provided the new property is accepted by the bank as acceptable security, and I have the funds to cover any unexpected shortfall between the price of the new property that I am buying and the one I am selling, is there any reason a security swap wouldn?t come off, providing it all settles on the same day?

Jacqui thanks for your reply. I have never heard of an option to purchase. How much would I pay the owners up front for the option? The contract price would be $330k. What is the 25% I would forfeit if I pulled out? I have 3% of purchase price in cash (about $10k) ? is that enough to offer? Or do people use a bank deposit bond? Would it be reasonable to ask for 2 months to sell, up to 2 months settlement? Just in case the tenants slow things down? Is an option to purchase a safer bet for me, rather than me signing an unconditional contract with a 4 month settlement?
Thanks for the ideas!

 

[Jacque]

Jacqui thanks for your reply. I have never heard of an option to purchase. How much would I pay the owners up front for the option? The contract price would be $330k.

Hi onthebus Option fees are "usually" 10% of the purchase price, though depending on circumstances, property price and demand this can vary and needs to be attractive enough for the vendor to agree. Remember that this is the only sum of money that the owner is guaranteed to receive. If the option period expires unexercised, remember that the vendor will retain not only the rights to the property, but the option payment as well.

What is the 25% I would forfeit if I pulled out? I have 3% of purchase price in cash (about $10k) ? is that enough to offer? Or do people use a bank deposit bond?

It's 0.25% of the purchase price- in your case that's only $825 so may not be sufficient for the vendor to agree to take the property off the market (which is what happens during a cool off period as only you can withdraw from the sale during this time) for more than the standard 5 business days however there's no harm in asking.

Would it be reasonable to ask for 2 months to sell, up to 2 months settlement? Just in case the tenants slow things down? Is an option to purchase a safer bet for me, rather than me signing an unconditional contract with a 4 month settlement?
Thanks for the ideas!

Only you can decide, depending on your level of risk, security and emotional attachment to this property (unquantifiable in many cases!) 2-3 mths is certainly not unreasonable however it will depend on the vendor's circumstances. What is important to them, besides price? Do they need to move quickly or could they consider a longer settlement advantageous? Buying smart can often be about solving the problems of the vendor as well in many circumstances.
Best of luck with it all and I'd advise you speak to your conveyancer/solicitor re: options

 

[Aaron_C]

I am guessing your servicing is an issue? Could be tricky.

 

[Rolf Latham]

Thanks so much for the replies. Re the security swap, provided the new property is accepted by the bank as acceptable security, and I have the funds to cover any unexpected shortfall between the price of the new property that I am buying and the one I am selling, is there any reason a security swap wouldn?t come off, providing it all settles on the same day?

depends on your lender.

for many its not a hassle - for some a new credit assessment may be required.

If your lender is a "bank" or other deposit taking institution you my also be able to stretch the time between sell and settle by using a term deposit as temp security to keep the mortgage open

ta
rolf

 

[onthebus]

Hi Rolf. The bank is ANZ. They are saying a straight security swap. Does that sound correct? Just making sure...

 

[Rolf Latham]

ANZ arent usually straightfwd, but security port isnt credit tested im guessing.

havent done one in ages and wouldnt want to provide wrong info

can chase BDM in the morning for confirmation

ta
rolf