Vendor financing - good strategies?

[LucasK]

I'm considering writing offers to purchase properties on vendor financing to Clayton/regional units or houses.

However, just a few questions to clear things up before I go about it:

Is it advisable to write by hand? Problem is my handwriting is terrible. Would a typed letter, if printed professionally (through a professional printing store), be acceptable?

Also, what sort of strategies can you use in suggesting for vendor finance? I've had the idea that vendor financing isn't a widely accepted concept. Should I offer interest rates to the vendor at even higher than current mortgage rates? Or simply offer to buy the property at an increased price?

Finally, how do I ensure the suggestion gets through to the vendor, and won't be thrown in the bin by the real estate agent?


Thanks,
Luc.

 

[sbe]

I would type it. My handwriting sucks also. All my offers are written and signed. Make the typed one personal though - no mass marketing non-descript type. Each offer should mention the property, price, terms etc offered.

A written offer has to be submitted by the agent. They make their commission anyway - how it's financed doesn't matter so much.

Vendor finance is less common in Aus than elsewhere, but it does exist.

Talk to the agent when you pass the offer in. Make sure THEY understand FULLY. You have a much, much better chance of things working out if they understand what you're offering.

You have to make it worthwhile for the vendor too. Up to you how - higher price or higher % or both. Unless it's a hard to move property, where you may get it for market rates just so they can move it.

Good Luck.

Simon.

 

[yuch.]

Did anyone see today Financial Review?

On the cover page, there was big picture with Melb wrapped in some bubbles and it says "Bubbles, bubbles, Melbourne in trouble".

If you write 100 wriiten offer for the vendors to finance you, eventually you will get a few to say 'Yes'.

I think it's worth trying.

 

[mitchmakhan]

doc attached

Hey guys as a side note I have been working on my Vendor Financing deals, and I have just recently made this form....please see attached for a file that I used on my last purchase, this document is skewed in favour of the Purchaser and if you like you can change the expenses of registering the second mortgage and stamp duty etc to be shared equally by both parties. Also if you arrange a P&I Loan this would need to be different as well...

(Anyway place anti liabilty statement here....)
Of course seek competent legal advice about this as this document is posted here only for information purposes and in no way should constitute legal advice. I do not take any responsibility etc etc...

(seriously always consult a Solicitor)

Also you dont have to use the life insurance policy clause I had to because I had a nervous vendor.

Cheers Mitch

 

[mitchmakhan]

Hey guys any feedback on the attached file...I would love to know who has used it and what other adaptions are out there....


cheers Mitch

 

[LucasK]

Hi mitch,

I've read the vendor finance agreement, but I don't understand the life insurance policy? Does it mean if the vendor dies then payments are cancelled, or vice versa?

Also, is it compulsory on such deals for the purchaser to put down a certain sum of money to show good intentions?


Thanks,
Luc.

 

[mmerlin]

Originally posted by LucasK
Hi mitch,

I've read the vendor finance agreement, but I don't understand the life insurance policy? Does it mean if the vendor dies then payments are cancelled, or vice versa?

Also, is it compulsory on such deals for the purchaser to put down a certain sum of money to show good intentions?


Thanks,
Luc.

Hi Lucas,

The way I interpret it is that you are taking out life insurance on yourself, so if you die, the vendor still gets paid in full for the property by collecting on the policy, since the vendor is the benefactor of the life insurance policy.

But I wonder what happens to the property then... does your family inherit the property free and clear? (assuming the insurance policy pays all remaining debt to the vendor).

 

[mitchmakhan]

yes the policy is on the purchaser and the vendor get's paid when you die...

what happens to the property in the event of this depends on what structure you place the property in....

a mate of mine recently bought some flats and got the vendor to put in 33% Vendor Finance at no interest and no repayments....

the only thing is he must pay out the 2nd mortgage and give the vendor 2% of the selling price when he sells....

and he hasn't had to tell him when he is going to sell...

wow motivated vendor or what?

cheers mitch

 

[Guy]

Mitch,
The vendor left 1/3 of the price in the deal with no real ownership or equity?

 

[Hunter]

I intend to sell some properties by vendor financing in the next 12 months. My first step is to build a buyer's database.If anyone is considering buying via vendor finance, please send me email re what kind of properties you are looking for.

My email is [email protected]

 

[mitchmakhan]

hmmn interesting...

can you give me any more info...are you forming a database to wrap properties to?

the vendor finance we are referring to in this example is for the actual investor...I'm not really interested in recieving vendor finance in a wrap type situation if that is what you are after...

but hey if you have some properties you want to sell and will take a portion of the sale on vendor finance terms yes then i will definately look at it.....as i would get traditional finance for the rest...

cheers Mitch

 

[mitchmakhan]

Guy,

he receives a 2nd Mortgage on the property...thus taking the second postion in being the mortgagee on the property....so yes he still kepps his interest..

mitch

 

[Jas]

Do you get the bank's approval for the second mortgage?

Jas

 

[Hunter]

Mitch,

Yes I am forming a database of people who are interested in buying a property financed by the vendor...me!

Originally posted by mitchmakhan

the vendor finance we are referring to in this example is for the actual investor...I'm not really interested in recieving vendor finance in a wrap type situation if that is what you are after...

but hey if you have some properties you want to sell and will take a portion of the sale on vendor finance terms yes then i will definately look at it.....as i would get traditional finance for the rest...

cheers Mitch

Could you elaborate on the above? I am confused whether you want to buy or sell by vendor finance? Perhaps you meant buying properties part financed by the vendor?


Cheers,

Hunter

 

[mitchmakhan]

Hunter,

yes I am an investor so I am always looking for deal...and yes I am looking at buying properties with the vendor leaving money in the deal, provided the price is right....

Mitch