Pollyana

Some of you may remember The Bloke and I are having horrendous house-buying hassles, and in fact we had shelved the idea until I get PR (13 months time!)
An Aussie friend of his has now told us that there is a 'wonderful' scheme called "Vendor Finance" - which (she claims) will allow us to buy a porperty without having to borrow any money from the banks. Apparently someone buys a house, then rents it to us for a while, then sells it to us after a couple of years at a price suitably reduced to allow for the amount of rent. We pay the monthly mortgage payment to the vendor and the vendor is the one involved with the bank or mortgage company, and we would not have to worry about a) only having a small deposit OR b) my not having PR.

Neither of us have come across this scheme before, though she assures us there are properties in the paper every week and its a 'really good scheme'.
Our initial feeling is that it sounds a little dodgy; why would someone buy a house then sell it in monthly instalments to a complete stranger, with no security?
Has anyone come across this scheme, or used it themselves?
Any comments on it?

Jacko1

It is very similiar to the Housing Association style part purchase schemes in the UK I would guess that interest rate and terms may be higher than usual mortgage schemes but there is no harm in checking it out.
Try to find an financial adviser/mortgage broker they will probably know the ropes


Paul J

ABCDiamond

Yes. It depends on the ethics of the person who sets it up. There have been some very bad cases, but also many good ones.

If you can find a Good deal, and get it checked VERY thoroughly by a GOOD solitor, then it may well be a good opportunity for you.

The rent payments you make will generally have to exceed the vendors own mortage repayments, which are often considerably higher than normal rent.

Look into further, and with caution on your side, you should be OK.

But also look at this thread about WRAPS another name for Vendor Finance.
http://www.somersoft.com/forums/showthread.php?t=18729

ProofReader

Polly, I'd be very wary of this type of venture. Some vendor finance deals might be ok but very few in my experience. I've read and drafted tons of contracts, updated special conditions for property developers' contracts and seen quite a few of these vendor finance ones. What you must be wary of is what the contract, in any situation, doesn't say! Many people don't read the fine print, or don't understand it, or don't realise that it's what's missing which may be important. I'd also go so far as to say that many lawyers don't know their real property law as well as they should - often it falls to the paralegal or secretary to do conveyancing and, in many cases, they know more than their bosses!

My advice, for what it's worth, is be very careful if you're contemplating something of this nature. Get more than one legal opinion before you sign anything like this. It may cost you a bit more initially, but it'll be worth it in the end!

Hels

Hi Polly,

I am sure they have these up in Brissy too, but I only have info on the scheme here in Vic, but might be something to look into.

Group self-build scheme's. It says in the advert in my local rag that its No Deposit home ownership and from what my family have told me that because you do it this way, the house is alot cheaper.

I am sure you would find something in the papers up there, or call the council and they might be able to point you in the right direction.

Hope this helps a little bit towards you getting your own home. I know how important it is to you.

Hels
xxx

Pollyana

Thanks for the advice guys; and that link is a good one ABC, several other threads on that forum which are of interest - especially once they start talking about adding 1.5% to the interest rate, and 20% to the final sale price!
Sounds like we would be better off financially sticking it out till my PR comes through, although I appreciate there probably are guys out there who will do good deals. The problem would be finding them!! And as ProofReader says, its not whats in the contracts, but whats left out. It may well cost us far more in legal fees than a "normal" purchase would.

Interesting to read on that site too that apparently these deals are illegal in several states.......

Banksia

The history of housing finance is littered with schemes which attempted to bend the long established basic eligbility rules only to come unstuck. Even the NSW state government got horribly caught up in a scheme designed to help poor people buy homes. Caused great distress to vulnerable people and cost the government a packet in (partial) compensation and the chief executive got a huge performance bonus just before the scheme collapsed.

There are certain long established safeguards built into the mortgagor/mortgagee relationship. If you attempt to duplicate those rights outside that relationship, you can miss out if one of them is overlooked. It's a bit like building your own car from parts. Why bother when there are factories designed to do the job properly?

Here is real estate consumer advocate you may wish to browse to

http://www.jenman.com.au/ He is highly critical of real estate institutes whn it comes to conumer protection and it can slip through the cracks when it comes to general consumer protection because goods aren't involved.

ABCDiamond

Do you know much about the Jenman Real Estate system? I was looking into a Real Estate business at one stage, and the Jenman agencies seem to be very well operated, quoting higher profits than most other agencies. It makes it tempting.