We bought an off the plan apt in Melbourne in 2010 and settlement is in early 2013. We initially paid 10% deposit, but as it stands now we cant get a loan for the other 90%. What will happen if we dont get the loan? Apart from losing the 10% deposi,t are there any other things to consider?
Not settling off the plan purchase
- Thread starter SouthYarra
- Start date
I've heard that the developer can sue you for the difference between what you agreed to pay and what they then end up selling it for to the next person. Plus of course you'll lose stamp duty + legal costs.
Can you save up the other 10% in the meantime. Or if you went with Westpac I believe they still have 85% loans with no mortgage insurance so you'd only need to save 5% in that time.
Can you save up the other 10% in the meantime. Or if you went with Westpac I believe they still have 85% loans with no mortgage insurance so you'd only need to save 5% in that time.
Reply to Aaron C
our deposit was 45k (initial price was 450k), so if they resell it for less than 405k they can sue us for the balance?
our deposit was 45k (initial price was 450k), so if they resell it for less than 405k they can sue us for the balance?
They will sue you for the difference between what you paid and what they have resold it for. So for example if you bought it for $450,000 and they can only sell it later to someone else for $400,000, they will sue you for $50,000 (The difference). However, the $45,000 you would have lost already goes towards the $50,000 so the true cost is probably $5,000 + legal costs + penalty interest.
boomtown & Aaron c
thxs for good advice. I agree they could sue us, but would it be worth the hassle for them? Its not millions we are talkinga bout here. If I wanted to flip the contract, should I go to a local estate agent or do you think I should approach the same company who sold us the apt? Thx
thxs for good advice. I agree they could sue us, but would it be worth the hassle for them? Its not millions we are talkinga bout here. If I wanted to flip the contract, should I go to a local estate agent or do you think I should approach the same company who sold us the apt? Thx
Would you sue someone for breaching their contract, if it means it costs you $50k+ not to?
LilSkater
Fair point, but what I meant was, if it was more or less a wash for the developer, would they do it? I guess property prices in Oz has gone up for so long so noone has ever thought about walking away from a deposit since you were more or less assured of making money if you just took possesion and flipped it.
New recent developments in QLD (Goldcoast) must have had some problems similar to this one? With negative equity from day one?
Fair point, but what I meant was, if it was more or less a wash for the developer, would they do it? I guess property prices in Oz has gone up for so long so noone has ever thought about walking away from a deposit since you were more or less assured of making money if you just took possesion and flipped it.
New recent developments in QLD (Goldcoast) must have had some problems similar to this one? With negative equity from day one?
I guess it depends.
Unfortunately you have signed a contact, so you can either use the next 7 months or so wisely to raise the funds to complete at a lower LVR or lose your $45k indefinitely.
I know which I'd choose.
Unfortunately you have signed a contact, so you can either use the next 7 months or so wisely to raise the funds to complete at a lower LVR or lose your $45k indefinitely.
I know which I'd choose.
ok
so I will ask the obvious question that no one has so far.
Why cant you get a loan to settle this puppy ?
whats changed from when u signed contracts ?
ta
rolf
This sounds like a painful predicament, SY. Commiserations.
I assume you still qualify for a loan (albeit smaller due to a lower than hoped end valuation?), but either can't or don't want to raise additional deposit/equity funds to settle.
Then as pointed out above the developer will likely sue you for losses and costs. But consider, for the developer this will consume time, effort and opportunity cost, so there might be a chance of working something out with the developer without going to court.
(I've not had this sort of problem myself, but know from working with lots of builders big and small that none ever wanted to see a problem end up in court if an even remotely fair and reasonable solution could be negotiated.)
Perhaps a chat with the developer wouldn't hurt? (Of course, you would run any proposed agreement you might reach by your solicitor later to be safe.)
I assume you still qualify for a loan (albeit smaller due to a lower than hoped end valuation?), but either can't or don't want to raise additional deposit/equity funds to settle.
Then as pointed out above the developer will likely sue you for losses and costs. But consider, for the developer this will consume time, effort and opportunity cost, so there might be a chance of working something out with the developer without going to court.
(I've not had this sort of problem myself, but know from working with lots of builders big and small that none ever wanted to see a problem end up in court if an even remotely fair and reasonable solution could be negotiated.)
Perhaps a chat with the developer wouldn't hurt? (Of course, you would run any proposed agreement you might reach by your solicitor later to be safe.)
What is the reason you will not get the 90% loan? - low income, high expenses, credit defaults? Maybe there is some way to address the finance issue?
As the property is in Melbourne you are in better shape than some other areas of the country as nomination of the contract in whole or part to another buyer is easier in Vic.
Regards
Paul
As the property is in Melbourne you are in better shape than some other areas of the country as nomination of the contract in whole or part to another buyer is easier in Vic.
Regards
Paul
off the plan
we could not get a 90% loan now, but we could probably get a 80% loan, so maybe we could get the additional 10% on time, but we would be stretched financially. Given the current outlook in the world and given the massive deleveraging process that is taking place and that just started...I would be concerned over my familys overall debt level. The best way would be to flip the contract. I have know idea if this is possible, anyone in here who knows anything about it?
we could not get a 90% loan now, but we could probably get a 80% loan, so maybe we could get the additional 10% on time, but we would be stretched financially. Given the current outlook in the world and given the massive deleveraging process that is taking place and that just started...I would be concerned over my familys overall debt level. The best way would be to flip the contract. I have know idea if this is possible, anyone in here who knows anything about it?
Just so you realise how potentially serious the situation is have a read of this recent QLD case where a purchaser of an off the plan property did not settle.
South Sky Investments Pty Ltd v Luppi [2012] QSC 27
http://jade.barnet.com.au/Jade.html#sy=261412
The vendor was awarded $400,000+.
I think it was a $1mil purchase.
South Sky Investments Pty Ltd v Luppi [2012] QSC 27
http://jade.barnet.com.au/Jade.html#sy=261412
The vendor was awarded $400,000+.
I think it was a $1mil purchase.
Thanks for the link. The original purchase price was $1.1M, the current value of the property is less than $700,000 and the vendors don't expect to sell it for 24 months.
Even if they had settled, the buyers have lost over $400k anyway on their "investment". They probably took the cheapest way out.
Even if they had settled, the buyers have lost over $400k anyway on their "investment". They probably took the cheapest way out.
yeh this happened to me when macquarie bank gave me a loan approval and then before settlement they decided they weren't a bank anymore so I couldn't settle. mine was also interesting as the deposit bond company had gone belly up as well.
they can and almost certianly will go you for the difference. Am not sure about your stamp duty position but in WA for example you are often better to walk than flip because you save the stamp duty and agents fees.
the developer of course must not have made any materials changes (that is, material to you, not anybody else) to the strata plan that they deliver. the contract must be tickety boo as well. they should aim to mitigate your loss and achieve the best sale price possible and proove this was done
they can and almost certianly will go you for the difference. Am not sure about your stamp duty position but in WA for example you are often better to walk than flip because you save the stamp duty and agents fees.
the developer of course must not have made any materials changes (that is, material to you, not anybody else) to the strata plan that they deliver. the contract must be tickety boo as well. they should aim to mitigate your loss and achieve the best sale price possible and proove this was done
