Vendor Finance - most famous concept for
Buying and Selling Real Estate in Australia
Vendor finance is not new. It has been used for a very long time for the sale of real estate in
Vendor finance is popular when the banking system is rationing loans for homebuyers and
It works better at times when there are lots of properties on the market, and buyers are
hard to find.
When everyone else is advertising real estate on price like motor vehicles For Sale $X –
Make us an offer! And dropping the price to meet the market, vendor finance stands out
because it is advertising on terms For sale on affordable terms to attract buyers who have a
low deposit or don’t have bank finance as yet but can afford the monthly repayments to pay
for a property advertised at any price.
Contributing to the resurgence in vendor finance is the Basel II implementation in Australia
of tighter banking system controls resulting in less home loan money being available.
Also contributing is that the wholesale lending market is not providing banks the cheap and
easy funding that it provided before the GFC (the 2008 Global Financial Crisis) and other
sources of housing finance, namely the non-bank and low doc lenders which had a 20%
share of new home loans have not made home loans since their securitised funding dried up
with the GFC in mid-2008.
Vendor finance works for vendors by allowing them to sell a property quickly and easily, for
a good price. For buyers it allows them to escape the rental market, provides other
solutions to obtain the finance (vendor finance) required to buy their own home on
Vendor finance provides a service which matches and betters what the banking system
provides because it is tailored to meet the circumstances of both the vendor and the
purchaser .Vendor finance focuses on the purchaser’s capability to make regular payments,
rather than the banker’s ‘tick the boxes’ approach. Vendor finance can also “step in where
bankers fear to tread”, by accepting purchasers who are self-employed, or with low
deposits, or with “black marks” on their credit file (meaning minor blemishes, not
Vendor finance is “the bridge to the banking system”. That is, it encourages purchasers to
obtain mainstream bank finance in a 1 to 5 year time frame, as soon as the purchaser
establishes a good track record of making payments (“creditworthiness”), capital growth is
achieved and or builds equity in the home by making home improvements (“also known as
sweat equity”) which increases capital gain.
Recently, vendor finance has become popular in Australia not only as a way of selling
properties at a good price, but also as an attractive real estate investment strategy. If we
accept that a real estate investment with a superior rate of return and a locked-in capital
gain is an attractive strategy, then vendor finance can deliver on this strategy!
For more Information visit : http://negative2positive.com.au