Purchased at auction.. bank won't finance now. How to cancel?

Instead of applying for another loan which the bank might need to take time to do another valuation, the broker can simply add an extra security to the loan application to even bring down the LVR to save on LMI fees.

Un-crossing a crossed loan isn't that hard really, the only potential issue is not having enough equity in the new purchase, which few months down the track when the data being captured I can't see there is any problem.

 

You could try see if mezzanine finance is an option. And if it is an investment property extra interest will be deductable

 

The LVR won't change one way or the other, but if LMI is going to be payable it will often be higher on a x-coll deal due to the higher total valuation. Full valuations usually take a couple of days with major lenders, which for a sub 80% LVR probably won't be necessary. Often a desktop will be fine which takes very little time.

Given the issue he's currently having, why would you take that risk if it wasn't necessary?

 

why dun u try those other lenders peppers, resimac or liberty etc?
better to give it go then no go at all.

 

Not trying to start a debate, but what happens if his current investment property has a lower LVR due to the increased in value? say for example his current IP currently sitting on $500k loan on a property worth $800k, combine both together at a total property val of $800k+$450k=$1.25M, 1.25M*80%=$1M, minus existing $500k loan he will have an extra $500k to play around with his new purchase, initial problem solved with LMI saved.

3 months down the track, all the comparable sales flow through to the system, fill out a loan variation form with the bank to have the loan sitting on 1 security each at 80% (provided vals come back as per expected). now why not?

And in most cases banks will take desk top val when requesting 80% LVR which may save more time if there are other issues that need to deal with.

 

That's okay, no problem.

It works the same way - you can use exactly the same amount of existing equity without crossing the loan.

For eg, $800k*0.8 = $640k - existing $500k loan = $140k equity to use toward purchase.
Plus 80% of new purchase in new loan =$450k*0.8 = $360k
$140k +$360k = $500k.

No LMI necessary either way.

Always take the low risk path where possible, no reason at all to cross in this situation.

 

For a start, it is the RE agent who is probably holding the deposit. Or a solicitor. But NOT the vendor.

You will probably find that the RE agent is entitled to his/her commission. Plus auction expenses.

The vendor will be very lucky to end up with anything if you default. Just the waste of time and the angst.
Marg

 

Sounds like there is an easy solution if the purchaser has equity they can tap into. Crossing for a short period may be fastest, but the other property would generally need to be with the same bank as the new loan.

 

Exactly!

Correct

For which they will happily (and successfully) sue you unless the contact can be found invalid as @Terry_w has said (which is a very unlikely scenario).

Best to do what the others have mentioned. Get another lender/valuer combo who agree with the price paid at auction or find the cash to make up the shortfall at settlement.

 

But its not a lotto ticket. Its a failure to settle to the agreed contract. Toni Collette argued that the vendor sold it without proper consideration for price or a real marketing campaign. Court didn't care. They took the view a contract price is the market price between a willing buyer and seller at a point in time. Provided the parties are arms length the other party (Collette) cant intrude in that contract.

1. Get legal advice
2. Identify all finance alternatives
3. Avoid Court at all costs by settling

 

So your statement " You have no right as the bidder to enquire into how the vendor determines their loss." is incorrect. So the purchaser does have a right to enquire about how a loss is determined?

 

Thanks for all of the ideas guys.

A Real Estate agent keeping the money because that is their lifeline (one auction), would have to also be a big ****...and in such an unfortunate circumstance as this, I'd be scared to actually tell a vendor "sorry, bad luck!" ...repercussions, karma, etc... anyway each to their own.

I've spoken with my broker and we've decided to wait until the 3rd and final valuation comes through from ANZ - which was meant to be today.

The whole idea was to go with CBA as I've recently changed jobs and as such, am in my probation period....so the broker suggested CBA was more liberal with that....not sure if it just suited the broker better or was just a genuine reason.


So, fingers crossed to tomorrow anyway. Thanks.

 

@dublin_101 , i hope everything works out for you.

However please understand you have agrred to bid under auction (no cooling off/unconditional) conditions prior to bidding. The vendor and agent are not to blame, if they decided to recoup their costs should the worst happens.

If you were the vendor and someone won an auction but cant settle. Then purchaser cant sell it for even the price underbidder was willing to pay, you will want to be compensated too for the waste of time and cost.

Sound like you have a few options to work this out, so good luck.

 

The OPs did not confirm if he has other equity to use.

 

Imagine going to work for the next few weeks, then your boss coming to you at the end of the month saying they're not going to pay you because they never ended up using the work you've done over the last month, despite them previously agreeing to pay you a salary. Your boss will also leave you with the bill for the electricity, rent, workcover and other expensies incurred over the month. That's the position the vendor and the real estate agent are in.

The real estate agent was employed to obtain an unconditional contract of sale. They met this commitment and are entitled to expect the agreed payment. They also incurred expenses in meeting their commitment which need to be paid for.

The vendor is now looking at another marketing campain, more expenses, more time, to sell the property. Pray that they're not relying on this sale so they can complete settlement of a new property because if they can't settle, you're probably liable for those costs as well.

I'm not unsympitetic to your situation, it's aweful, but nobody's being a **** A contract was agreed to and signed, they're all entitled to their expectation of the outcome of that contract. If you've agreed to pay more for the property than it's worth it's not the agent or vendors fault. This isn't disireable for anyone involved.

A bad valuation is the risk you assume as a purchaser. If you can't settle you will definitely loose the deposit and if their costs spiral out of control they'll expect that to be covered as well.

The CBA is a good recommendation if you're in probation and looking for a 90% lend. They'd be the top of most brokers lists for that scenario.

 

Which state. I can get out of a lot of contracts in QLD, even Auction ones. We have multiple cases going on over deposits and contracts not completed, terminated or purported to be terminated. I would seek legal advice quickly, and see if you can get out. If not then you might find it better to offer to settle, forfeit the deposit or part thereof in return for being released from everything else.

For a $50k deposit you would need to seriously way up legal action, it will cost more than that even if you won and if you lost you could be up for the deposit, your legals and a fair bit of theirs.

 

Not settling can have consequences for the vendor too. They may have wanted an auction with a fixed settlement date as they had their own settlement or other financial position to resolve at that date. I think you need to move past assuming that someone is greedy for keeping the deposit.
I was let down by a purchaser at settlement once and it was during the GFC. I only had a $1000 deposit (long story) but the impact of them not settling nearly broke me.
It is no secret that an auction does not have a cool off period and generally cant be subject to a finance arrangement. This puts the onus on you to ensure you are absolutely confident prior to bidding. Pre-approved finance is not worth a lot and i would always makes sure you have some room to move (borrowing capacity or access to other funds). Low valuations are the biggest risk in this situation as you have found out.
I hope you can resolve this situation but i think you need to reconsider your anger toward the vendor who is entitled to keep your deposit. If I was the vendor i would probably keep it and reconsider based on how quickly a new sale arises. No doubt they will have to pay for more advertising and a second round of auction/agent fees.

 

It happens all the time. Also, I think your claim of the bank beings dogs isn't quite right, it appears they are willing to lend to you at 90% as per previous pre approval, they just think you paid too much for the place.

If the valuer is saying it is worth 400k then you can't expect them to lend you 450k...

 

Agreed. The OP is the only one doing what he isn't meant to (ie purchase the property he agreed to pyrchase) and yet everyone else is at fault and should be happy to be out of pocket so he isn't.

Time to grow up I think

 

I just refinanced 3 loans with Liberty plus a new mortgage,they are now very aggressive in the market,easy to deal with as well.