Vendor Finance

hi,

Happy new year all.

I am selling my investment property, and the tenant is interested in buying, however, she has trouble getting finance, the option now is vendor finance, however, i know very little about this. Can someone offer some advice and what i need to be aware of?

thanks
 
hi,

Happy new year all.

I am selling my investment property, and the tenant is interested in buying, however, she has trouble getting finance, the option now is vendor finance, however, i know very little about this. Can someone offer some advice and what i need to be aware of?

thanks

Its fraught with risks - too many to be worthwhile imo.

My advice is if you know very little about it, then don't do it.
 
I wouldn't necessarily agree as FHOG Pty Ltd (which is our specialist VF Company) gets lots of enquiries each day but all i would say is ask yourself why the tenant cannot get traditional finance.

If it is he or she doesn't earn enough to satisfy a standard lender then why do you think she would be able to repay your loan.

If it is past credit or lack of deposit savings then possible take it further as their track record with you will give you a good handle on their ability to demonstrate a willingness to repay.

Course just make sure the Tenant knows they will be up for your legal costs etc and use a Solicitor well versed in WA VF Contracts.

If the property has potential long term capital gains factor that into your initial sale price.

All of this of course assumes you don't need thee money now for your next venture.

Cheers
 
Like Richard we do quite a lot of business helping owners sell there properties with vendor finance. It's a great way to get a premium price for your property but, as Richard mentioned, only if you can trade off some time, i.e. you don't need all the money now, for your next property.

our 'negative2positive' website is about us helping owners sell with VF

Cheers, Paul
 
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I just sold one on VF, it really can be a great way to sell a slow moving property at a good price. Time will tell how it works out.... if it works out ok I think it will be quite rewarding getting a young family into a settled place.

Paul will be in touch to get you to administer the loan
 
hi Lofty/Ausprop

can you elaborate on the premium selling price you can achieve. eg. if my property is currently valued at 500K, if i go through VF, should i get 10% more?

I have spoken to a VF advisor, he is not very forth coming when providing detailed info. As for me the only reason to take the risk is to get a higher selling price, but the advisor seems to want to agree to 500K???
 
it's whatever you think the market can bear but dont go too nuts as the buyers need to refi at some point to a bank val. A slow moving property worth $500 could sell for $525+ pretty quickly? Paul might know more varied results tho. its the interest rate that most people take a decent clip on
 
hi Lofty/Ausprop

can you elaborate on the premium selling price you can achieve. eg. if my property is currently valued at 500K, if i go through VF, should i get 10% more?

I have spoken to a VF advisor, he is not very forth coming when providing detailed info. As for me the only reason to take the risk is to get a higher selling price, but the advisor seems to want to agree to 500K???

Hi btc

Back in 2003 when we started in Vendor Finance (VF), marking up a property by 20% over market price was the standard. How things have changed!

Our standard way of pricing a VF sale these days is to do an auto-valuation on RP Data. The valuation then comes up with a low estimate, a high estimate and a mid point they call the estimated price. We now use the high estimate as our VF sell price. It?s a price we believe the various courts and tribunals you can end up in, won?t see as excessive

Don?t forget these institutions are ?all about? the consumer, as a purchase like this is possibly the biggest purchase your consumer may ever make.

Cheers, Paul
 
As Ausprop says we also make income from the interest rate marging we charge. All in all there are normally three points in a vendor finance transaction were we receive money:

a. The VF buyers must pay a minimum deposit.

b. The positive monthly cash flow, prior to the VF buyers refinancing (from the interest rate margin).

c. The "back end profit", when the VF buyers refinance or sell. This the difference between the current balance of the vendor's under lying loan and what the VF Buyers owe on their loan.

Cheers, Paul
 
thanks for the info guys.

I am not in a hurry to sell, so if i can achieve 10-15% more in the selling price i m willing to give it a shot.

Paul, do you have or know someone that operates in Perth?

cheers
BTC
 
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