Urgent help: Section 27, oh no, borrowings could exceed purchase price..

W

Wise1InOz

Hi,

We signed the contract on 15/11 and they sent us the s27 statement immediately.

Only last week we got a request to release the deposit along with a letter from their mortgagee detailing their borrowings. However, the vendor's section 27 statement shows they understated their total borrowings by over $400,000. If we release the deposit there there is a potential that borrowings could exceed the purchase price and not be enough to cover their bank debts.

We therefore sought a confirmation from the vendors mortgagee that they will not provide any further advances. However the vendors mortgagee advised that they cannot stop the vendor from applying for new advances against the existing mortgage facility and cannot provide us with any assurance that the final pay out figure won't exceed 80% of the purchase price.

We have not signed the S27 statement. The vendors lawyer was however trying to browbeat us and advised the estate agent that we are not justified in stopping the release and that they were coming to withdraw the deposit money. I panicked and said if they took the deposit then we will cancel the agreement.

My question is can we stop the release of deposit but proceed with settlement as scheduled? I was given to understand that if we don't cancel the deal then we have to release the deposit. If that is the case then we will cancel the deal.
Thanks!
 
it seems you don't have to release the deposit.


The buyer may release the deposit money to you earlier than the settlement date. For this to happen, the:

•contract must be unconditional
•buyer must be satisfied with your proof of debts information, usually provided as an attachment to the contract of sale. If you are requesting early release of the deposit you must provide evidence to the buyer’s satisfaction that either:

◦there are no debts secured against the property
◦the total amount of debts secured against the property does not exceed 80 per cent of the property sale price.
 
Aaron_C said:
Some people actually buy property worth more than $10k so a deposit of more than $1k is necessary.
Click to expand...

No need to be a smart a** Aaron.
I'm pretty sure we have purchased more houses than you, without a big deposit.
By the way...the 10K property was purchased on a cc :p ...and we get $650 month in rent...nothing to laugh at there.
 
Thanks everyone. Yes, my solicitor is on top of it and immediately said no.

The vendor's lawyer however said we were not justified. So we were all concerned that the agent might still go ahead and release it despite not having our consent. The vendor's lawyer was really arrogant and very aggressive advising us that we would get the deposit released without our consent and without any further notice to us.
 
savoys said:
That's good. Your solictor won't approve the early release..he/ she can deal with the brow beating :D
good luck
Click to expand...

Thanks! We've been conditioned not to trust RE agents having been advised by all and sundry that they're always on the seller's side. Guess that's probably why we were so anxious, what with them being the stakeholders of our deposit!:eek:
 
It would be very dangerous to release the deposit. Don't do it if you don't have to or want to.

BTW, what is a s 27?
 
The deposit cannot be released without your approval - so their solicitor is just spouting bull.

Unless there was a really big advantage TO ME I would never release a deposit. Until settlement it is my money - why would I trust it to someone I've never met, who is potentially in deep financial trouble?

If the deposit was released by the agent without your authorisation you'd be able to sue the agent for a refund plus costs and the agent would lose their licence. Somehow I don't think the agent would risk that.

Kathryn - in Australia, on exchange of contracts, the deposit must be 10% of the purchase price unless agreed otherwise by both parties (sometimes agreed down to 5% if a big purchase). You can put down a small "good faith" holding deposit prior to exchange of, say, $1,000 to show your commitment and try to get the agent to "not show" the house for a day or so while you get organised - but in most cases there is no point in doing so.
 
Wise1inOz I wouldn't worry too much about them taking the money out without your consent. Their solicitor/REA would never release it without the signed s 27 form because it would amount to a breach of trust money and therefore attract a criminal offence. It's not worth it for them.
 
lizzie said:
Kathryn - in Australia, on exchange of contracts, the deposit must be 10% of the purchase price unless agreed otherwise by both parties (sometimes agreed down to 5% if a big purchase). You can put down a small "good faith" holding deposit prior to exchange of, say, $1,000 to show your commitment and try to get the agent to "not show" the house for a day or so while you get organised - but in most cases there is no point in doing so.
Click to expand...

Hate to disgree with you..but that is not true.
All you need is $1.00 to make a contract binding.

The 10% may be what a REA wants, but that is not law.
Rob has bought lots of houses in Australia over his lifetime.
 
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