Reply: 1.1
From: Jacque Parker
Paul is right and has given a very good explanation. Vendors terms are just that- pretend that the vendor is the bank and you begin to understand what it all means. The reasons people choose to buy a property on vendors terms rather than seek a loan through a bank include:
1. The purchaser may not have enough deposit for a bank to lend them money in the first place.
2. The purchaser may have a bad credit history or a series of debts that have prevented him/her from getting a housing loan.
3. The purchaser may be able to afford repayments but his/her earnings may be too erratic (eg self-employed, works casually)for the bank to lend money.
These are just some of the reasons people turn to vendor finance. Of course, the vendor himself/herself must be prepared to do the research themselves to sift through the people... it can be too risky otherwise. It is a good way, however, for those buyers whom banks have completely shut out, to obtain a house.