There is a lot of misinformation out in the world about vendor finance, and there are also some awful ‘buyer beware’ stories that always seem to make headlines. It is worth remembering that vendor financing into a new home is a wonderful opportunity for over 25% of the population who previously thought themselves locked out of owning their own place for good.
That said, there are some very important points to keep in mind if you are looking to own your own home via a vendor financing agreement. One of the first and most important points to bear in mind is that you are entering into a legally binding contractual arrangement. You should definitely have the contract looked over by a solicitor – preferably one who is familiar with vendor finance contracts. If the vendor you are buying from, or the agent you are buying through, suggests ‘not to bother’ getting legal advice’, this should be a red flag for you.
While legal costs add to the expense of buying your own place, it is simply not worth the risk to skip this step. Rent to buy agencies that act with integrity always insist their clients use a solicitor – this is one of the most obvious ways to tell the difference between the agencies that operate ethically, and the cowboys who just take your money and run.
One of the main things to have your solicitor check for you is the caveat. The vendor finance contract should contain a caveat to protect your interest in the property. This is particularly important if you are buying your home via an instalment contract arrangement. Instalment Contracts Agreements basically offer a tenant the opportunity to purchase the home in which they are living, by paying it down in weekly or fortnightly instalments just like a bank loan.
The caveat protects the buyer’s interests during the period so the seller cannot sell the place to anyone else. Even more importantly, he cannot use the property to secure other loans. This is the sort of clause a solicitor will ensure is included in your contract, and correctly worded.
Buying your own home is exciting and probably one of the biggest things you’ll even do in your life so it only makes sense to ensure you protect yourself legally and understand all your rights and responsibilities under your vendor finance contract before you sign anything.
By: Marc Brasleret
Tags: Bank Loan, Buying A Home, Caveat, Contract Arrangement, Contractual Arrangement, Cowboys, Finance Contract, Finance Contracts, Headlines, Instalment Contract, Instalments, Integrity, Legal Advice, Loans, Misinformation, Population, Red Flag, Solicitor, Vendor Finance, Vendor Financing