Vendor Finance has been used in selling and buying real estate in Australia since the 1870’s.
Vendor Finance throughout the Decades
Its popularity has fluctuated with changes in social and economic conditions and the availability of bank and non-bank finance.
In the late 1960s, 1970s & early 1980s, home builders became major users of Vendor Finance to sell house and land packages to young couples.
During the mid-1980s to the mid-2000s, the number of Vendor Finance transactions diminished significantly as increasing availability of home loan finance from the banks and the non-bank lenders led to growing competition and resulted in lenders offering Purchasers, with minimal savings records, loan finance of up to 95% of the property valuation.
The Resurgence of Vendor Finance
Over more recent years, Vendor Financing has slowly been regaining popularity as it is able to meet the largely unsatisfied demand of Australians who want to ‘escape’ from the rental market and purchase their own home but who for some reason are unable to obtain, or do not qualify for, loans from the banking/non-banking system.
These are generally Purchasers with low deposits, who have their own business or trades, or whose credit rating is impaired. Alternatively, it is used when the property being purchased is of a type for which bank or non-bank finance is not easily obtained by anyone.
What is Vendor Finance?
With Vendor Financing, the Purchaser takes possession of the property and pays the Vendor in installments, typically of principal and interest, until the purchase price of the property is paid off.
Arrangements between the parties are subject to negotiation, however, the Purchaser typically becomes liable, whether directly or indirectly by way of reimbursement paid to the Vendor, for property insurance premiums, fees, levies, rates, taxes and maintenance and repair upon taking possession of the property.
If you are considering entering into an Vendor Financing arrangement, contact the Property Team at Nevile & Co. to discuss how to best protect your interests.