Defaulting on an apartment

Hi all,

Just wanted some more info about a possible default.

I am currently seeing if I can settle two apartments, one I can finance myself, the second I need help with a family relative to finance and settle.

These are off the plan apartments which are about to be completed in December.

If I was to default on the second apartment, I know I would lose the $25,000 deposit, but how likely am I to lose much more (not considering minor legal fees). Can anyone tell me of similar examples and what happened? Should I do my best to avoid a default even though I am struggling to come up with funds to settle both apartments.

Thank you

 

worst case is that if the values gave come down since you agreed on the price and then you defualt and dont settle it-the developer can resell it at the new lower value and then sue you (plus costs)to get the extra amount up to your original agreed purchase price

 

A nomination would be the best way to go if you can't complete the purchase. You need to find someone to take over the purchase from you. Alternatively, the real estate agent/developer may have someone interested. This way, you should get your deposit back, but there will probably be some minimal legal fees involved to document the transaction.

 

The problem is, the original purchaser nominated me for this apartment. So I can't nominate anyone else as I am not the original purchaser. And that person won't nominate another person because let's just say, they are a shady character who tried to get some money out of me under the table so now they are angry at me because I got lawyers involved (another story).

Can I directly ask the sales team for the developer to try and find an alternative buyer? It says in the contract that they do not allow to on sell prior to settlement.

I am stuck. As I want to get rid of the second apartment but seems like my only option is to default or settle.

 

@cocacola : sounds like the apartment situation is getting bad, which city are you defaulting in? Perth?

The first thing to consider is if the developer you bought from will be able to complete the project in the next couple years. If it is likely they go bust, there is really no point throwing more money at a bad situation.

If you are confident the developer wont go down the drain and can complete building, and if you are looking long term, just get family to help with the purchase and hold it for 10-20years, property values will recover by then and you'de be in the green. If you are unable to get the cash flow to hold for next 10 years this will not be an option. Remember the double whammy of big price falls and empty rentals during an apartment glut

Another thing to consider is when the building is done the bank may not value the apartment at current values and you might have to get more deposit. God knows if you can even get an approval for loan the way the banks have been forced to tighten and BASEL 4 coming next year.

I reckon the apartment bust has just started as completions starts to skyrocket. Either bite the bullet this year or you are in for the long haul.

 

I dont want to hold it for longer than a year, actually if I settle it, I will try and sell it asap.

Do you think it's worth it? As in would it be cheaper to default as oppose to pay the RE agent a commission upon a sale as well as other costs associated with the sale?

I would not be holding this apartment for longer than a year either way as id be keen to return the money back to my brother as he would be helping me fund the property.

I will find out how much the apartments go for in the area and see if its worth keeping or defaulting.

 

where is it ,
and how much are u paying,
and what is a comparable worth ?

 

If it were me I wouldn't be keen to hold an apartment in this market. Where is it?

 

Fitzroy St, St Kilda, Melbourne.

I am paying $455,000 one bedroom apartment. I am going to contact some real estate agents and ask how much it will go for.

 

good move do that research ,also ask demand and future demand

 

It seems that most 1 bedroom apartments are going for 450,000 in the area.
St Kilda, VIC 3182 Sold Apartment & Unit Prices & Auction Results

Maybe I should default, kiss good bye to my $25,000 deposit and call it quits. Then concentrate on using my first 2 bedroom apartment for the airbnb.

 

Hi Y Man, what would you recommend? To settle or let it go? It would be for airbnb.

It's just I need to have around $100,000 to settle both apartments and I currently have $85,000 so Id need to borrow more plus all the other costs.

 

If you are the nominee then you will probably not be in a contract with the vendor - but a contract with the person that nominated you. The developer may not be able to sue you.

Have you sought legal advice.?

 

There are apartments and there are apartments. How big is it? What level is it on? Does it have a balcony or courtyard? You need to compare to similar featured apartments.

You could always approach some top agents in the area and ask their opinion of price. No need to give them a sob story just tell them you are thinking about maybe selling soon after settlement and wondering an estimate of the value.

Too early to tell if you should default or not. You need a lot more information.

 

Speak to Biggins and Scott in Fitzroy st. they know the apartment market well. Doesn't sound like a bad buy to me though.

 

I think it's a good idea that you continue with the original thread about this issue. this is the 3rd thread on the same issue you raised previously. easier to follow that way.

What sis your lawyer say? agree with @Perthguy and @Cactus

AIRBNB, 2 apartments, need some advice please.

How soon can you sell an apartment after settlement?

 

Thought I had read this thing a few times recently.

To re sell, sales commission + stamp duty to buy must be a fair chunk of change

 

Depends on the size of apartment 450k is a bit ex for a one bedded. U could get cheaper one bedders closer to cbd but not in cbd which are close to tram line or train.

 

VM, why were you OK with this arrangement, given the risk that has now fallen to you? If the value of the property would have doubled, how would this have worked out, in your favour or the purchaser?