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Off the plan East Perth - settlement

Discussion in 'The Buying & Selling Process' started by ppv, 2nd May, 2016.

  1. ppv

    ppv Member

    Joined:
    2nd Aug, 2015
    Posts:
    6
    Location:
    Perth
    Hi all,

    I just thought I'll put it out there as propertychat (sommersoft in the past) has been the go to place for me to ask/learn and bounce some ideas.

    In Feb 2014 when I didn't know any better, I placed a 10% deposit on a 1bx1bathx1car park apartment in East Perth with purchase price of $415k. The contract was not subject to finance.

    Is May 2016, now the apartment is ready. The bank valuation have dropped to $390k.Shortfall of $25k.
    The only cash I have is only sufficient to cover the stamp duty and settlement cost. In 2014 I was hoping of applying for a 90% loan .

    Knowing what I know now, I would want to get my 10% deposit back and use it for other investment. However I believe this would not be feasible unless there has been a default by the seller.

    Questions: -
    1) If I default on the contract, on the basis I cant get finance. Other than losing my deposit, can the seller actually sue me for the remaining of the purchase price ? And maybe declare me bankrupt ?
    2) Even though I can service the loan, I doubt the banks will lend 90% on a second property for a inner city apartment (NLA 48 m2) ?
    3) Shall I try to source for the $25k shortfall from somewhere (miracle) and try to get finance.
    4) Or shall I just write of my $41.5k deposit as a learning experience write off? But I don't wanna be sued for the rest
    5) Can anyone suggest a property lawyer in Perth that I can see to discuss my options ?
    6) Anyone care to share any OTP experience where the property value dropped from purchase agreement to settlement ?

    Thanks

    ppv
     
  2. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,764
    Location:
    Perth WA
    Who did you get to value the apartment? It could be worth getting a few vals done with different lenders to see if any come in higher.
     
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  3. ppv

    ppv Member

    Joined:
    2nd Aug, 2015
    Posts:
    6
    Location:
    Perth
    Thanks Jess for the input.
    The valuation was done by WBP property group.
    Trying another lender atm. See how that goes
    In your experience have you seen the valuation vary between lenders ?
     
  4. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
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    Location:
    Perth WA
    They can vary, so it's worth getting a second opinion - if the valuer had a bad day, it can affect the outcome. Vals are not an exact science.
     
  5. Blacky

    Blacky Well-Known Member

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    25th Jun, 2015
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    Location:
    Bali
    I may be wrong, but if you dont proceed the builder can sell the property, then chase you for the difference.
    Eg - if they sell for $390k they will come for you for the extra $25k which you were contracted to. Weather they would or not is another question.

    By my maths you need to go to about 95% LVR to settle.
    Other alternative would be to get a second valuation.

    Or maybe try and sell prior to settlement? If you can sell for $390k it is a $25k loss, not a $40+k loss. Lick your wounds and move on.

    First port of call would probably be to Jess to see what alternative finance arrangements can be made in the short term.
    Second port of call would be to another REA to see if they could market and sell it prior to settlement.

    Blacky
     
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  6. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,764
    Location:
    Perth WA
    Also worth noting that going to lots of different banks yourself is a really bad idea - if you're buying at 95% LVR, a few recent hits on the file could cause issues with credit scoring. It's a very different lending environment than it was in 2014.
     
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