Land Settlement Loans - COVID 19

Discussion in 'Loans & Mortgage Brokers' started by SYDSR, 30th Mar, 2020.

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  1. SYDSR

    SYDSR Member

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    Hi All ,

    This is my first post .

    I have signed a contract in last november for a land purchase . The registration is expected to happen in April / May this year .

    Everything was fine until feb suddenly due to COVID and its impacts on markets .

    I am hearing people loosing jobs / salary reductions / stand downs ..etc . I am worried if there is any impact for me job in the next 1 to 2 months due to covid - 19 and whats the impact on my land settlement ?

    Will the banks approve new loans considering covid - 19 effect on market .
    If there is any problem for loan approvals due to covid - 19 and if i am not in a position to settle what are my impacts ?
    Does government changes any policies or providing any measure to defer settlements for a period of few months until everything settles (or) any other financial benefits ..etc ?

    can some one shed light on this topic . i am so nervous from past few days and worried.

    Regards,
    Syd R.
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    Do you still have a job and qualify? if so business as usual.

    No govt interferance with contracts for purchase of land
     
  3. SYDSR

    SYDSR Member

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    I still have job and I believe I qualify at the moment but things are changing too quickly around ...
     
  4. LeeM

    LeeM Well-Known Member

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    @Terry_w , what happened if someone in this position and suddenly not have a job anymore? Either for a house or land....OMG....I fear a large number of distress sales coming ....both buyers & sellers suffer
     
  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    Deposit lost potentially more too.
     
  6. LeeM

    LeeM Well-Known Member

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    So even though the Loan was already approved when purchased contracts signed, banks still not lend you the money on settlement day if you don’t have a job then there & then? What?
     
  7. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    If you have a loan approval you would generally be fine - unless your circumstances had changed perhaps
     
  8. SYDSR

    SYDSR Member

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    Hi , I paid 5% deposit , so will i loose the 5% deposit (or) 10% deposit ? also i heard a section called if the purchaser default and with in 12 months the land is not sold or if it is sold for lesser price , the gap needs to be beared by purchaser.

    is that correct , lets say if i bought it for 500k but i didnt proceed to the settlement . and later the seller sold it for 425 due to market conditions , do i need to pay or fullfil the 75k gap ?

    this is really bad , i know there will be many people in this ship or who will be in the near future with the way jobs are loosing .

    dont know if government will interfere or any proposals from government like how they interfered with rental agreements ?

    Thanks for your support and answers . it will help many people out there.
     
  9. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    seek legal advice. You could be up for 10% plus shortfall plus costs.
    Not sure how government could interfere in private contracts. Rental agreements subject to the residential tenancy act. Contracts for land are just common law with aspects of the real property act and conveyancing acts incorportated. I don't think there would be any changes.
     
  10. Curious2019

    Curious2019 Well-Known Member

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    OP, firstly take a deep breath, you haven’t lost anything yet. You would be surprised how often land title dates are delayed (ours were delayed over 12 months on two occasions). Especially as most employees in the land titles office are probably working from home in isolation for the next 6 months. So there may not be anything to panic over at this time.

    Unfortunately, there are a number of inherent risks in buying untitled land with long settlement periods - anyone can lose their job during this time (Coronavirus or not) - this is why proper risk assessment and due diligence is paramount when entering contracts for large amounts of money. Do you have access to enough cash or equity to cover the purchase in the event you can’t obtain traditional bank finance? Can you borrow from family? Can you access 2nd or 3rd tier lenders? Depending on the value of the land contract it might not actually take that much income to service a loan. You might even consider IO only in the short term if cashflow is an issue.

    Did you have a plan if the bank valuation came in under the contract price? This often happens with untitled land and requires purchasers to front up more that 20% of the deposit to cover the shortfall.

    if you lose your job there is also multiple sources of government support through Jobseeker and Jobkeeper stimulus packages. It is unlikely you will be without any income - you might just have to hold off on building or make a decision if you can afford to hold onto the land - you can sell via nomination (which has its own issues) or you can sell after settlement - but you may not be able to sell for the full purchase price you paid if the market has turned since you bought in November.

    Hope these suggestions are helpful. I can somewhat empathise, We were about to start building on our vacant block in April - that’s on hold for now but we are prepared, with cash in the offset to minimise holding costs while we ride this out. Things will return to business as usual eventually.
     
  11. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member

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    No, lenders have funds put aside - generally.

    Its a moral and ethical conflict

    Do they pull the loan and you lose your deposit and risk being sued for further damages........if the land is sold for 100 k less than the buyer is contracted to, then legally they can chase the defaulting buyer, so its an unknown risk.

    Versus, not responsible to lend to someone that currently has no work but has possible prospects in 3 to 12 mths time.........


    Pls seek specific advice.

    ta

    rolf
     
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  12. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member

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    Get a loan approval going now, like today :)

    We have lots of Land and builds and otp apartments settling.

    is it a good time ? no

    Is it going to be impossible - maybe, but unless one has a go, and doesnt practice " stop and drop" deer in the headlights risk management .

    ta
    rolf
     
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