Help with current situation

Hi All,

I need some ideas on how I might be able to proceed with the sale of my property.

Current situation is-

-We accepted an offer from the purchaser
-Building and pest came up ok
-Buyer had finance pre approved.(for a much higher amount than this purchase)
-Bank valuation came in ok

The problem has arisen due to a (ridiculous) technicality with lenders mortgage insurance due to the type of property being purchased. Basically the purchaser needs to eliminate the need for LMI to be able to proceed with the purchase but doesn't have the extra deposit required to do this at the moment.

Both the purchaser and I are keen to come up with an arrangement to make this sale happen so I'm basically looking for ideas.

What options are there to secure a sale with settlement in say 12-18 months time when the purchaser will be able to proceed?

Thanks

Willy

 

But if the purchaser hasn't got the finance approved at the moment wouldn't they be risking losing their deposit if they aren't in a position to complete in 18 months?

We'd be happy with a long settlement but I know if I was the purchaser that would be too risky.

 

You possibly have a couple of different options that you could consider but it would depend totally on your situation.

• What type of property is it?
• Is there a reason why you can't terminate the contract and put it back on the market?
• Are you related to the purchaser?
• Why is the bank preapproving an amount that the purchaser cannot borrow (is it misrepresenting its position even after the RC?)
• Is vendor finance for the difference a possibility?
• Why would the purchaser not be able to raise the full deposit within 18 months?
• Can the buyer seek finance approval elsewhere (with different bank/broker/LM insurer)?

 

Lend them the deposit or installment contract

 

Thanks for your response.

In answer to those questions-

- Property is a house on 5 acres
- we can terminate and put back on the market but at this point our best option is to work with this purchaser.
-The bank has preapproved for a much higher amount, it's the mortgage lenders insurance that has pulled it up on what seems like a minor technicality.
-Not keen on vendor finance due to being the second mortgage holder after the bank.
-The purchaser would be able to raise the full deposit within 18 months, just looking for a way to secure the purchase in the meantime. Don't think we will be able to exchange contracts with a long settlement until finance has been approved so looking for other options.
-Buyer has tried seeking finance approval elsewhere. It's a mortgage lending technicality, there's only two mortgage lenders insurance companies and both have the same issue.

Willy

 

Hi Terry,

Have looked into this but didn't like the idea of holding a second mortgage after the bank.

I've been reading about put and call options and it sounds like this could be the way to go. Would give the purchaser time to save more deposit and avoid LMI which solves the problem.

Would appreciate your thoughts on this?

Thanks

Willy

 

Thanks,

Looking into this now.

Willy

 

Not sure how this would assist you?

 

Could the purchaser look at a different bank? A bank with in-house LMI might look at it differently.
Some are also happy to go off the contract which can help gloss over details that would otherwise come up in a valuation.

 

From my limited understanding, the purchaser would pay us an amount to secure the option to purchase within a negotiated timeframe and would rent the property until they were ready to purchase.. This would give the purchaser time to save more of a deposit so as to avoid LMI when applying for finance to proceed with the purchase.

If the purchaser does not take up the option to buy the property they forfeit the amount paid to us which is essentially our security over the deal.

Am I understanding this correctly?

Thks

Willy

 

The purchasers mortgage broker has looked at the different banks he deals with but all use the two main providers of LMI.

Any suggestions for banks who use in house LMI?

Thks

Willy

 

Yes that is how it could work, if you don't mind waiting.

 

I think the broker might be new or perhaps isn’t familiar with this type of scenario. There are only 2 or 3 Lmi providers in Aus. However some of the larger lenders have delegated underwriting authority. So their policy is accepted by the lmi providers. Cba for instance has an open policy which means they don’t have the same size restrictions as their lmi provider for small apartments.
I’d need to check but this also applies to large acreage I think.
Anz uses the other insurer, but again has delegating authority so their policy is accepted over the lmi providers. There might be other reasons why these lenders with in house lmi aren’t suitable, hard to say without all the info.