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Vendor Finance: Reality or Myth

Discussion in 'Property Finance' started by legallyblonde, 9th Sep, 2015.

  1. legallyblonde

    legallyblonde Well-Known Member

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    I am home sick today which resulted in my cruising the internet for houses like normal. I occasionally head over to gumtree and today I found a really interesting wanted ad. The purchaser had a 20k deposit and was looking for vendor financing up to 300k and would pay $300 a week in repayments.

    Kudos for having a go! Traditional finance can be painful when lacking a deposit/serviceability... But for the life of me I cannot think of what is in it for the vendor.. UNLESS the purchase price is extravagant or they have been trying to offload a property for a llllloong time, or perhaps traditional finance isn't available due to building defects or something random like that!

    Reading Steve McKnights books last year the concept sounds solid... But it is still something that I have trouble conceptualising as a normal transaction... Logistically... Wouldn't it be a paperwork nightmare? I just can't help thinking that my bank does all the hard work calculating interest ect. as I put money in and take money out... How does one keep track of this with a private arrangement...

    Please forgive the thought train which is a result of sleep deprivation and a groggy head!

    Do many people on here sell or purchase with vendor finance? Any tales of success or failure?
     
  2. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    If you're really interested in this, check out http://vendorfinance.asn.au/

    I've known a couple of people to do this well, but I've seen a lot of deals go very badly.

    Steve McKnights approach worked 10 years ago, but since then a lot has changed. Vendor financiers actually have to get a credit license these days, or become an authorised rep of a license holder.
     
    legallyblonde likes this.
  3. D.T.

    D.T. Adelaide Property Manager Business Member

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    Not an enforceable contract in South Australia.
     
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  4. Azazel

    Azazel Well-Known Member

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    It's tilted towards the vendor, what you mentioned is possible, and they don't do it as a charity, they charge a higher interest rate.
     
  5. Leo2413

    Leo2413 Well-Known Member Premium Member

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    I have seen quite a few gone bad. I would guess that its not many people who have done extremely well from VF.
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Ive done several but would not do again. Too many potential issues and not enough profit.
     
    TaylorChang likes this.
  7. TaylorChang

    TaylorChang Well-Known Member

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    You need a good solicitor to understand the whole process; as well as, the counter party's solicitor also on board with your vendor finance idea.

    Just like Terry said there are many potential issues.