Category: Legals

If The Loan Honeymoon is Over, Will You Have To Sell Your Home?

If The Loan Honeymoon is Over, Will You Have To Sell Your Home?

The Honeymoon Could Be Over.  Will You Have to Sell Your Home?

The first thing I want to say is this article is not designed to be alarmist or offer specific financial advice.

More than anything it is designed to prepare those of you, or anyone you may know, for what is in store when ‘The Banks’ stop their loan honeymoon period, which commenced at the time of the CoVid lockdowns.

In short, and you probably already have a grip on the subject, Banks allowed borrowers who were about to face some financial hardship as a result of Government re-action to ‘the virus’, to defer their repayments for 6 months. A honeymoon away from financial pressure of sorts.

That was back in March/April, and now we are headed into September/October – the 6 months have passed.

According to a couple of recent articles (see below) around 900,000 loan holders, mortgage and business, took up the deferrals and, very soon, the banks are going to start contacting around half of these people to discuss resuming payments and other ‘options’.

Deferrals over – Economic Crisis

Time’s Up…

For those of you who may be affected, or know someone that is, here is a cautionary tale regarding a property I was called in to sell a few years back, where the bank was ‘knocking’ and the owner was in a bit of pickle.

Mary (not her real name), had been involved in a marriage break up and she secured the family home after an agreement with her ex-husband to pay him out based on a valuation of $530,000 in August of 2008.

Why is the date significant?

It was around that time that the market ‘peaked’ and a month later began the slide punctuated by the collapse of Lehmann Bros Bank in the US – the GFC. Australian Govt stimulus for the property market finished on the 1/1/2010.

From that moment until early-mid 2013, the Australian property market felt the credit squeeze fallout, and in some regions, prices fell 20%+.

Mary was, sadly, under financial pressure, and had to sell.  The bank had been in ‘discussions’ with her and they were well aware she was trying to sell it.

This was early 2011 and the market was still sliding, with high stock levels and low buyer numbers.  Property prices were under pretty heavy pressure.

Mary had been with another agent who thought the market was still rosy and appeared not to have the where-with-all to give Mary and honest assessment of how the market was faring and how that applied to her home, and its price.

I was referred to Mary and I laid out the exact landscape of the market and how that applied to her place.

She had been trying to achieve $580,000 for a few months with no takers.

One of the trickiest things to do is price a property when the market is literally rolling down a hill – you have to get in front of the growing snowball before it runs you over.

We started a fresh campaign with an Auction guide of mid to high $400,000’s which drew feedback from potential buyers of ‘$450,000ish’ but no takers or bidders.

With $500k+ still on her radar we then went to a price of ‘Mid $400,000’s Buyers’ – no takers – feedback still $450ish.

It was here I asked Mary if she was open to having a serious conversation.

She agreed. This was around mid 2011.

I said, “Mary, the bank is on your hammer. It seems they may only be a few weeks away from taking it off you. I implore you to listen to the market and take control of the sale yourself.  If the bank steps in, they will sell it for whatever they can get, and they will come after you for any shortfall.”

“I want to get $500k. It owes me that.”

“I hear you clearly, Mary, but this market is on the slide and buyers are not willing to match your expectations. Let’s put it at buyers from $450,000 and see what the best offer is from the market.”

She agreed, but I knew I was pushing sh*t up hill because she was fixated on the $500k or ‘near to’ price.

She had been on the market for over 6 months with zilch result.

The price was changed to Buyers From $450,000 (legal in Qld) and pretty quickly we had three offers come in, with highest maxing out at $450,000. Strong finance, short settlement period.

Mary said, “No.” Her situation was becoming desperate and I actually held her hand and almost begged to her accept it, for her own good.  She refused and she instructed me to put the price up to $499,000.

I knew from that moment she was cooked.

The repossession notice from the bank came in and I had to step away as I was not on that Bank’s list of local agents.

The property went to a Mortgagee in Possession Sale and the property was eventually sold for…$390,000!

The lesson is this for those who may be confronted with a decision with the closure of the current loan deferment/honeymoon period – take control of your own destiny.

If your circumstances are that you can no longer afford to service your loan or reach a new agreement, favourable to you, with your bank – sell it before they do! The costs and stress could be enormous.

The one advantage homeowners have who are faced with that choice, right now, is that property prices are steady and still rising in some part of Australia. You may not have to take a ‘haircut’ if you decide to sell your home. But if a glut of properties come to the market – this could change.

Also, if you have any equity in your home (its worth more than what you owe the bank) you are way ahead.

Sadly, Mary was underwater, she owed more than what she sold for.

This is not financial advice. This is experience from the real world of real estate and banking.

My closing tip is, if you think you will be affected by the removal of the ‘honeymoon’ loan period, seek financial advice and keep talking to your bank – ignoring them is a fatal mistake.

Stay well, stay afloat, stay safe.

Craig

PS. It is well worth considering selling your own home, and save thousands, should your circumstances head that way.

PPS. And to help current and intended members with better exposure for your properties; we are offering 15% off 30 Day Feature Listings on realestate.com.au until 6pm on the 30/9/2020. First 10 to respond will get the advantage of this great offer.  Call us or see the pop-up on our home page.

 

 

 

 

 

How to Put Buyers on The Bench When You Sell Your Own Home.

How to Put Buyers on The Bench When You Sell Your Own Home.

The ‘bench’ is a very handy tool to keep buyers warm, and ready to get into the game.

What??

Have you finally lost your mind, Craig?

Kitchen bench, workshop bench…?

Why would a buyer want to sit on my bench?

Luckily I am still able convince the medicos that a I am sane – just.

Having coached junior rugby league for fifteen years, an average (at best) player in my younger days and always a keen observer and avid supporter – I draw quite a few analogies from sport to further my explanations and observations of the property and business world.

In this particular post, I want to show you, if you are looking to sell a house privately, that the ‘bench’ is a very handy tool to keep buyers relaxed, interested and ready to get into the game.

Ok…

Many team sports don’t just rely on the players who take the field at the start of any game.

There is usually a number of ‘reserves’ who can be called upon when one of the ‘starters’ gets injured, shows poor form or needs a quick chat with the coach.

Players who start from the bench aren’t necessarily poorer players.  They may have a role as an ‘impact’ player, not quite at full fitness, or new to the team and getting used to structures and game plans.

In rugby league, for example, the teams with the strongest ‘benches’ generally prove hard to beat and go a long way into playoffs and finals.

The bench is a critical part of any team’s success.

And it certainly is when it comes to selling your own home.

Your ‘bench’ comes into play at the time, or just after, you secure a deal and a contract on your home or property.

Yes, you have a buyer, however, as with nearly all contracts, there are conditions that need to be met before your buyer becomes the new owner.

The most common conditions are:

  • Approval of Finance &
  • Building and/or pest inspections.

Most contracts allow for anywhere between ten and twenty-one days for these conditions to be met by the buyer.

This is called the ‘conditional’ period.  Yes, you have a deal, but if any of the conditions can’t be met – the buyer can’t obtain finance or the building inspection scares the buyer off – the property goes back on the market and a new buyer is sought.

It pays to have all your bases covered!

It is during this conditional period of the sale that you should continue to take enquiries from other buyers – put them on the bench – in case the current contract ‘falls over’ on any of the conditions.

To make any prospective buyer feel comfortable taking a seat on your bench you simply tell them…

“We have a conditional contract on the property. We’ll know soon if it sticks.  Would you like to know if it fails to complete?”

Nine out of ten buyers will say, “Yes please!”

Keep their details, and if the contract does fall over, bingo – go to your bench and get your reserves onto the field.  Usually another offer/contract isn’t far away.

And if your current contract does stick, it’s nice to tell any bench players that they won’t be getting a run today – the property has sold.

Using another sporting analogy – it pays to have all your bases covered!

 

DIY Conveyancing: What can go wrong?

DIY Conveyancing: What can go wrong?

The actual process to sell your own home, from listing to agreeing on a deal, is not necessarily dictated by a library full of legal requirements and obligations.

To sell your own property involves; preparation, promotion, realistic pricing, talking to buyers, showing buyers (inspections) and some negotiation to seal the deal. As long as you act fairly in all your dealings with any potential buyer, during the actual sale process, and your home is offered to the market in good condition (and in good faith), there are few definitive legal requirements you need to adhere to.

Each State and Territory in Australia differs  when it comes to the legal obligations of home sellers before, during and after the actual marketing and sale process, but they are easily navigated and dealt with. For more detailed information about these obligations, check out our guide to property legislation in Australian States and Territories.

The question I am asked the most by potential sellers who wish to sell their own home or property is, “What about the legals?” or “Who does the contract when I get a deal?”

The answer is very simple. Just before or at the time you list your home for sale, talk to a local settlement agent, solicitor or conveyancer and put them on standby to put together a contract when you strike a deal with a buyer.

Be aware that in some States, particularly NSW and Vic, a contract needs to be in place before you go to market. Regardless, once you have shaken hands with a buyer and a deal done; contact your legal representative, give them the details of your buyer and the price/terms etc and they will put it all together and then execute the contract.

Some of you may be thinking, “Well I saved a bundle selling my own home, maybe I could save a few more bucks by doing my own legals.”

Yes, there are DIY Conveyancing kits which can be purchased online, or you may know someone who purports to have some legal experience to assist, but the carriage of a contract and the adherence to the terms and conditions, through to settlement, by the buyer and seller is not something I would recommend be taken on by a legal novice, or yourself for that matter.

This is also the view of the state government bodies responsible for real estate transactions (click relevant state for advice: NSW, Vic, QLD, WA, SA & Tas) who all advise the use of a conveyancer, lawyer or settlement agent.

Sure, marketing, engaging buyers and selling your home is a serious, yet very doable undertaking, but the legal ramifications of that process are less onerous compared to transacting real property; contractual obligations, the transfer of titles, discharge of mortgages, searches and everything else that has to be ticked off in a legal sense after you have shaken hands with the lucky buyer.

If you asked me whether or not you should handle your own legal processes, I would say; unless you have a solid background in Property Conveyancing – DON’T!

Even when it came time to sell my own home I employed the services of a reputable conveyancer to look after the contracts.

As a traditional Agent of almost 16 years, I cringe if I hear one of my sellers/clients say that they will be handling their own legals and the carriage of the contract.

Although not the majority, each time, as the completion of the contract was nigh (the settlement) you can back it in that something had been overlooked and the deal may be delayed with the potential for penalties and time sensitive delays.

It got real messy and stressful there for a while.

I remember one afternoon, a property was due to settle at say, 3pm, and five minutes before settlement, the ‘self acting’ sellers came bursting through the door of my office saying, “We’re not sure how much they are supposed to give us and what we have to pay out?” After a few minutes of calm mathematics, they regained their composure and trudged off to complete the Big Deal…it got real messy and stressful for a while.

Property Law is written and enacted for a reason, to protect the interests of both sides of the deal – sellers and buyers.

Compared to an Agent’s commission on the sale of a property, legal fees on the final transaction of the average Australian residential property are minor, and can range between $500 – $2,000 dependent upon the complexity and conditions of the contract.

That is a fairly small price to pay to ensure the sale (or purchase) of your asset worth hundreds of thousands of dollars, or even millions, completes to your satisfaction and all parties leave the table, and move on or in, with a smile on their face.

Always seek the services of an expert in the field.

The risks of DIY conveyencing are real and can prove costly.

 

When SOLD isn’t SOLD!

When SOLD isn’t SOLD!

When do you tell the world that you have sold your own home?

It appears that many of you, and a good proportion of agents, want to jam on the ‘under contract’ sticker on the For Sale Sign and splash the same message all over the online property sites before the weight challenged lady actually sings.

What do I mean by that?

Even when we have shaken hands in agreement with a buyer and then signed the contract, in the vast majority of cases, there are conditions that have to be satisfied on the contract before the buyer is actually ‘locked and loaded’. Plus there is a mandatory cooling off period for buyers who have purchased under private treaty, rather than auction.

If a buyer purchases under Auction rules, whack up the SOLD sign. They own the property, purely waiting for completion or settlement date.

In some states this ‘locked and loaded’ milestone is called deeming the contract ‘unconditional’ or ‘exchanged’. This is the moment where, say, the buyer’s finance is approved or they are satisfied with their building inspection or both, or some other condition of purchase has been satisfied.

This means the buyer is now fully committed by law, and trying to leave the contract would put the buyer’s deposit at risk and followed up by possible legal action instigated by the seller.

Prematurely announcing to the world that the deal is done is a common mistake made by sellers and agents alike.

The big question is – What happens if the buyer pulls out because a condition of the contract could not be met or satisfied? Your home or property is back on the market!

If you have ‘SOLD’ or ‘Under Contract’ plastered everywhere, how many potential buyers have you scared off because they thought the property was actually sold- done and dusted?

Until any contract is locked in, you should and must continue to take enquiry from potential buyers just in case the worst happens – it falls over.

Simply tell them that you have a conditional agreement and will contact them should it fail to complete. The majority of buyers will understand this and be encouraged by the fact that someone else thought the property was good value and laid down an offer. This is the herd mentality at work in the seller’s favour.

I call this, ‘placing buyers on the bench’. It is a vital tactic whether selling your own home privately or using an agent.

If your current contract falls over you can go straight to the list of buyers you spoke to during the ‘conditional’ period.

Yes, it is very exciting when that deal comes together, but put that itchy ‘Sold’ finger in your pocket until that contract is set in concrete.