shared Vendor Finance Questions Answered!
How does it work?
Vendor finance is when the person selling something is allowing the person who is buying the asset or object to pay for it over time. This can be for anything, a house, a car, a bike or already something as small as an iPod! For example, If I was selling you a bike for $500 then you can either pay me $500 now, and take the bike away. Or you could pay me $100 now and then $100 over the next 4 weeks.
Either way you are nevertheless buying the bike for $500 dollars and I am nevertheless getting $500 for my bike. The only difference for me is that instead of getting $500 up front I am getting $100 up front and the rest at $100 over the next 4 weeks. If you buy the bike the second way then I have vendor financed that bike to you.
It is the same concept with a house. The only difference is that with a house there are a few additional bits of paper work that you need to use to make sure that the time of action goes smoothly. Most people who are selling their character want the money up front and consequently don’t want to offer the vendor finance.
But every now and then a character comes along and it does suit the seller to sell using vendor finance. For example maybe they don’t need all the money now because they are going traveling or they have changed jobs and are moving out of the area and will be renting for the next few years so they don’t need all their money straight away.
This is why when a character that is selling using vendor finance terms, then there is always a lot of people who can see the opportunity and often it is the quickest person that makes a decision who gets home ownership. Vendor finance is a great way to buy a home!!!
Is it legal?
Yes vendor finance is 100% legal! It has been used in Australia for over 100 years. The Australian Government has already used vendor finance at times to sell similarities.
Starting in the late 1800’s many parts of Australia including North Sydney, the Blue Mountains and the Hunter Valley in New South Wales were sold using vendor financing on house and land packages.
Historically, vendor financing is popular when edges decline their lending. During and after World War II, there was very little money from edges obtainable to buy residential character, as most of the money was being used for the war efforts. At that time, if a vendor wanted to sell their house, they would offer vendor terms (financing) to the new buyer because the buyer couldn’t get a bank loan.
Today, small and already larger developers such as Meriton, sell their similarities using vendor or seller financing. One reason Meriton sells this way is that buyers can buy on a lower place. Instead of needing 20% place upfront to qualify for a bank loan. This makes it a lot easier for Meriton to sell their home units because they are opening up the market to more buyers than just those who have 20% place. Naturally, as part of their course of action, Meriton will do their up most to confirm that the buyer has sufficient income to sustain their monthly payments.
Why don’t more people know about it?
Most people use a bank for buying a character. This is because the people selling typically want all their money up front. Most of the time they will pay off their mortgage and if they have any money left over they typically have plans for that money. They may want to buy another character, buy a car, invest or just put it in the bank.
What this method is that most people don’t want to sell using vendor finance and so, there is never a enormous amount of similarities on the market that you can buy using vendor finance. That is why they often sell quickly.
However, there are always people out there who are willing to sell using
What’s the catch?
There is no catch. You can legally and ethically buy a character this way. There are many people just like you who buy a character this way every day. Most people have never heard of buy a character this way and so have their misgivings. But you don’t need to as this is a great way to buy your own home if you don’t have a complete place, or you may just not meet the edges tough qualifying criteria.
What if I get into trouble and can’t make a payment?
What would happen if you bought a character using a bank and you stopped paying? It is the same with this course of action. You would get a letter asking you to catch up. If you made up the payment then that would be the end of it. If you don’t then you get another letter. This course of action follows like the banking system. If you don’t pay then you cannot keep the house. If you fall behind then you aren’t thrown out onto the street.
There is a course of action which allows you to make arrangements to catch up. It is in everyone’s interests that you don’t fall behind with the payments.
That is why we never put people into a house if we feel they cannot keep up with the payments. We have checks and certain criteria which we look for to make sure that we do our best to eliminate the possibility of you falling behind. That being said you never can control the future.
Who owns the house?
The owner of the character keeps their name on the title but you get the right to occupy and you get what’s called equitable title (in Queensland). The Government recognises the contract and it is stamped and processed by them. Check with a solicitor your legal rights. If you like you can contact our office, as we can put you in contact with solicitors who have a lot of experience with vendor finance arrangements.
Can I on sell the character whenever I want?
You can sell the character at any time. The only thing that you need to be aware of is that you need to make sure that when you sell the character that it sells for more than you paid for it. For example, if you bought the character for $400,000. Then you will need to sell it for more than $400,000 because when the character sells you need to pay out to the seller what you owe him. Which in this example is $400,000.
What’s great about this is if the character goes up $50,000 and you sell it for $450,000 then you get to keep the additional $50,000. You can then use that money to get another character if you like. This is why it is in your interests to buy a character and then clean it up because it adds value which you get to keep once you on sell the character.
Do I nevertheless have to have character inspections?
No the character is yours. You are not renting it. consequently you do not have any character inspections. Also, if you wanted to paint the character a different colour then you can. If you wanted to do any landscaping you can. It is your character.
Who pays the rates?
It is the exact same system as if you went to the bank and bought a character yourself. In other words, if you bought the character using a bank loan, who would pay the rates? You would as it is your house.
It is the same with vendor finance.
Important notice: Please beware that you this information is only a guide and you should get legal and financial advice from professionals whenever you are buying a character. Whilst we have tried to keep this information as current and up to date as possible it is only a guide and further investigation is needed.