Vendor to pay purchasers stamp duty

How would you word a written offer to sell the idea to a vendor to allow you to pay stamp duty in the purchase price and have them pay that amount at settlement?

My intention is to effectively borrow the stamp duty. The offer I would like to make is not a "lowball" offer but a "very fair offer + stamp duty amount" and I am willing to compensate the vendor by way of a "few extra $".

Any ideas?

My observation is that lenders usually take one look at clauses of this nature and reduce a purchase price by the amount of the stamp duty rebate. As a result the purchaser still needs to come up with the stamp duty because the bank doesn't lend as much.

PT_Bear said:

My observation is that lenders usually take one look at clauses of this nature and reduce a purchase price by the amount of the stamp duty rebate. As a result the purchaser still needs to come up with the stamp duty because the bank doesn't lend as much.

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MMmmm....and that's what I'm trying to avoid. Does it not matter at all what the bank values the property at and what the purchase price amount is? If there is a big difference with more than enough to cover it, do the banks still hold the same view?

FrugalOne said:

MMmmm....and that's what I'm trying to avoid. Does it not matter at all what the bank values the property at and what the purchase price amount is? If there is a big difference with more than enough to cover it, do the banks still hold the same view?

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if there is an x vendor rebate then the property value usually reduces by x

very very rare that a valuer would value a place above purchase price, and most lenders, in almost all circumstances ( unless favourable sale between relos) wil take VAOL or contract whichever is lower to lend against

t
arolf

So it's basically a case of getting over the idea that someone else is going to pay my stamp duty?

FrugalOne said:

So it's basically a case of getting over the idea that someone else is going to pay my stamp duty?

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You would have to make a separate agreement with the vendor that is NOT on the contract of sale to pay you back an amount of money equivalent to the stamp duty. Otherwise you will get caught out.

Do you have another asset you can borrow against for the stamp duty?

Regards,

Jason

Aaron_C said:

You would have to make a separate agreement with the vendor that is NOT on the contract of sale to pay you back an amount of money equivalent to the stamp duty. Otherwise you will get caught out.

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If you make a separate agreement, you need to disclose it to the bank or be at risk of committing banking fraud.

It's also going to be very difficult to enforce a separate agreement.

I agree - you could be creating a minefield for both yours and the vendors solicitors, to cover off, to ensure bank fraud isn't a percieved possibility by the lender.

Stamp duty is an unfortunate evil, but it does exist in all states and territories and we're all stuck in the same boat.

As such, many lenders can still lend larger sums and LVR ratios; so long as they know clearly the hard costs up front.

Hi Frugal

We don't buy a property if the vendor won't pay some or all of our Stamp Duty. In fact we usually get the vendor to pay our Stamp Duty and Legals. We've observed vendor's paying the real estate agent's commission at the settlement table, without the valuation being marked down, so we figured, what's the difference between paying an Agent's costs and paying ours.

The result is we've now purchased dozens of properties using a Vendor Pays Offer and have never had a problem with the lender regarding the valuation, i.e. the valuation has never been marked down. That's not to say that it won't happen but to date it hasn't.

And it's not as if we hide anything. Most lenders these days want the front page of the Contract and the Special Conditions. And right there in the Special Conditions are our Special Clauses regarding Stamp Duty and Legal costs.

As I said above, we've done dozens of these and never had a problem but there are a couple of points you want to watch, i.e. Price Jacking and Rebates. My suggestion is to never offer one price and then increase it to cover your costs. This is seen as Price Jacking. The other is to always get the cheques made out to the OSR and your law firm, never yourself. This avoids any perception of a Rebate.

Information on our Vendor Pays Offer product is available at: https://vendorfinanceinstitute.com.au/home/vfi-products/vendor-pays-offer/

Cheers, Paul

That sounds great Paul,

But how do you get the vendors to agree to pay for the costs? I would assume the only way is to offer them more than you would without them paying the costs.

Hi JWR

Our Offers are always in writing and include a bold statement that the Vendor will receive $xxxxx net from the Purchaser. The Offer can be quite confusing for the Vendor (and the Agent), so you need to make the 'bottom line' very clear.

From a negotiating point of view we make it clear that this is the only offer we will supply.

Cheers, Paul

Ok thanks. Is this for exclusively vendor finance purchases or do you do it in normal resi deals too?

No it's worked fine for all our purchases.

Cheers, Paul

You could enter into two contracts.

One to buy the place with the price reflecting what you want to pay plus stamp duty.

The second one where you agree to sell the vendor a pot plant for a sum equivalent to the stamp duty ...

Now this is not really ethical but it is a separate contract.

Make the pot plant an orchid, after all for a while in the 1600's they used to be worth more than a house anyhow!