Vendor finance commercial deal

[ugotadollar4me]

Gooday, Is there any laws in QLD about selling commercial property using vendor finance
I'm thinking of selling one of my commercial properties and offering 80% vendor finance
This is what I'm thinking
I will finance the buyer into the property at 80% of the purchase price
the purchase price will be at what the property is worth
Then the buyer pays 20% deposit
And I'm thinking that the buyer pays me say 7.99% fixed for 1 year negotiable and then the rate may go up or down depending on what interest rates do.
And I would leave in the 80% upto 5 years and they can pull out at any stage and refinance else where if they like.
Am I allowed to (offer this type of deal) do this?

 

[Aaron_C]

Because it is a commercial deal there are far more things that you can do since you don't have the pesky NCCP regulations to worry about.

 

[cu@thetop]

Quick cash deal would be better as vendor finance always seems to end in tears.

Just some figures:

What price? (who did you figure that out as market price?
Type of commercial? retail? Office? warehouse?
What rental received?
How much rental bond?
How much to run on lease and rent review mechanisms?
Who pays outgoings and how much are they?

Then I'll give you my 2c worth.

 

[geoffw]

Selling a business on vendor finance enabled me to get a good price. But terms are still under negotiation so I'm not sure what may happen.

 

[Terryw]

Gooday, Is there any laws in QLD about selling commercial property using vendor finance
I'm thinking of selling one of my commercial properties and offering 80% vendor finance
This is what I'm thinking
I will finance the buyer into the property at 80% of the purchase price
the purchase price will be at what the property is worth
Then the buyer pays 20% deposit
And I'm thinking that the buyer pays me say 7.99% fixed for 1 year negotiable and then the rate may go up or down depending on what interest rates do.
And I would leave in the 80% upto 5 years and they can pull out at any stage and refinance else where if they like.
Am I allowed to (offer this type of deal) do this?

Yes, this could be done, would be an installment contract, and could be done in a few ways. Title could stay in your name until the final payment, or title transferred to purchaser with settlement quickly followed by repayment of their loan to you.

 

[ugotadollar4me]

Yes, this could be done, would be an installment contract, and could be done in a few ways. Title could stay in your name until the final payment, or title transferred to purchaser with settlement quickly followed by repayment of their loan to you.

cool thanks, I would keep it in my name until paid out in full

 

[luckyone]

Geoff - did you sell one of your Subway's?

 

[geoffw]

Geoff - did you sell one of your Subway's?

Not yet. So it will still be a while before I can afford that Kindle. Or have time to read it.

It can be a long process. We have an agrees price for both; one is waiting for approval by the powers; the other is awaiting terms to be finalised- which will probably involve me carrying some vendor finance for a significant portion.

 

[ugotadollar4me]

Yes, this could be done, would be an installment contract, and could be done in a few ways. Title could stay in your name until the final payment, or title transferred to purchaser with settlement quickly followed by repayment of their loan to you.

Hi Terry, Another question regarding vendor finance, Can I have finance on the property with my lender?

step one, vendor pays me a 20% deposit of purchase price which I spend
step two, I still owe my lender finance and there not aware that I have done a vendor finance deal.
step three, property stays in my name until vendor pays me the remaining 80% and then I pay out my lender

Is that all possible or do I have to pay out my lender?

Thanks

 

[Terryw]

Hi Terry, Another question regarding vendor finance, Can I have finance on the property with my lender?

step one, vendor pays me a 20% deposit of purchase price which I spend
step two, I still owe my lender finance and there not aware that I have done a vendor finance deal.
step three, property stays in my name until vendor pays me the remaining 80% and then I pay out my lender

Is that all possible or do I have to pay out my lender?

Thanks

Your loan and mortgage agreements with the lender would probably prohibit you from selling the property via vendor finance.

 

[ugotadollar4me]

Your loan and mortgage agreements with the lender would probably prohibit you from selling the property via vendor finance.

Okay thanks. Would there be anyway around it?

 

[Terryw]

Okay thanks. Would there be anyway around it?

You could speak to your lender and see if they will grant permission. Probably best to do it in writing and trying to get it to the people who can decide rather than speak to someone in a call centre on the phone.

Another option is to simply not disclose to them. If you do this you would probably be breaking the terms of your agreement and this may enable the lender to call in the loan at short notice.

 

[Rolf Latham]

step one, vendor pays me a 20% deposit of purchase price which I spend

And therein lies one of the larger risk for the buyer on a wrap.

ta
rolf

 

[ugotadollar4me]

You could speak to your lender and see if they will grant permission. Probably best to do it in writing and trying to get it to the people who can decide rather than speak to someone in a call centre on the phone.

Another option is to simply not disclose to them. If you do this you would probably be breaking the terms of your agreement and this may enable the lender to call in the loan at short notice.

Sounds like a plan, I have a personal bank manager who looks after my deals so will see what he says

 

[ugotadollar4me]

And therein lies one of the larger risk for the buyer on a wrap.

ta
rolf

Persoanly I know that there is no risk to the buyer but I guess the buyer won't know me so he may think its risky but then again the buyer would owe me more than I owe the bank so if something went wrong the buyer could pay out the bank and not loose out at all

 

[Rolf Latham]

Persoanly I know that there is no risk to the buyer but I guess the buyer won't know me so he may think its risky but then again the buyer would owe me more than I owe the bank so if something went wrong the buyer could pay out the bank and not loose out at all

I know we see these things as win win, and they often are

However.......

Reality sometimes bangs SMACK into good intentions, I know that all too well personally. There are just so many unknowns over such a long term future ......let alone tommorow.

A prime example is that your funding line is called in due to a liquidity crisis or for some reason credit simply dont like u no more on their annual reviwe....................now what?


If you owe the lender 100 k, and the buyer owes you 80, how can the buyer recover the title of the property with 80 k ?

ta
rolf

 

[ugotadollar4me]

I know we see these things as win win, and they often are

However.......

Reality sometimes bangs SMACK into good intentions, I know that all too well personally. There are just so many unknowns over such a long term future ......let alone tommorow.

A prime example is that your funding line is called in due to a liquidity crisis or for some reason credit simply dont like u no more on their annual reviwe....................now what?


If you owe the lender 100 k, and the buyer owes you 80, how can the buyer recover the title of the property with 80 k ?

ta
rolf

In my case the buyer would owe me more than I would owe the bank
If the bank called the loan back then I would have to find the funds or the buyer would need to come up with the funds. maybe if the bank called the loan then I could call the loan from the buyer and then as a back up I will keep trying to hunt down the funds while the buyer is also looking. By what Terry said it looks like I can't do it anyway. I think I will go back to plan A and sell it for 100% cash else I will keep it for a few more years and then sell it but would prefer to get the cash out and move on to a new project.

 

[Terryw]

Just think from the bank's POV. They are only concerned with getting their money back. If you deal with their security property by selling it to someone else this poses potential problems for them if you were to default on the mortgage. They would have to sell the property to get their money back - they may be likely to sell the the person who you had the installment contract with, but what if he couldn't qualify for finance to buy it from the bank?

The bank's interest as first mortgage holder would probably take priority over the vendor financed purchaser too as he would only have an equitable interest in the property. So they may have to kick him/her out to sell.

All may be fine (sort of!) if prices have risen and there is plenty of equity. But imagine if you couldn't afford to pay the loan you may have other debts too - other people you have been borrowing off maybe. All of these would be unsecured creditors as would your vendor financed purchaser. So once the bank takes what it is owed after selling the property the others will probably share in the left overs, if any.

 

[ugotadollar4me]

Just think from the bank's POV. They are only concerned with getting their money back. If you deal with their security property by selling it to someone else this poses potential problems for them if you were to default on the mortgage. They would have to sell the property to get their money back - they may be likely to sell the the person who you had the installment contract with, but what if he couldn't qualify for finance to buy it from the bank?

The bank's interest as first mortgage holder would probably take priority over the vendor financed purchaser too as he would only have an equitable interest in the property. So they may have to kick him/her out to sell.

All may be fine (sort of!) if prices have risen and there is plenty of equity. But imagine if you couldn't afford to pay the loan you may have other debts too - other people you have been borrowing off maybe. All of these would be unsecured creditors as would your vendor financed purchaser. So once the bank takes what it is owed after selling the property the others will probably share in the left overs, if any.

Yep I see your point, although the bank would be fine as no matter what they would sell up and take there cash first, so really they shouldn't have any concerns but I can see how they wouldn't like it as things will get messy for them etc, and as for the buyer well they would be at huge risk as there not really secured. Thanks for all the info

 

[Bird Dog]

An alternative to this might be as follows.

You (as the vendor) take a out a reduced second mortgage on the property to help alleviate the purchaser getting the whole amount to finance.

EG: Say the property is worth $1,000,000
Of this you still owe say $500,000.
And your purchaser can only raise say (for the sake of this exercise) $500,000..
So they get their loan for the initial amount of $500,000 of which you pay straight to your lender and eliminate the debt.
Then you loan the remaining amount ($500,000) as a second mortgage over the property at a higher rate (to factor in the additional risk you are taking on).
Obviously most (if not all) banks would want their mortgage to take first place over the property and if things go bad you may not be comfortable with settling your debt with whatever is left over but thats where you factor the risk into the interest charge for your $500,000.

Everything in commercial is negotiable and you just need to get creative enough to find the best possible outcome that makes the numbers work.

cheers

B.D