Buying an Apartment - Is a Return Cash Payment Dodgy?

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  djkelly69 on 12/01/2018 - 10:40

  +12

  Does it keep the valuation higher? Is it to influence Brisbane apartment price data to try and keep prices up?

  Exactly for this reason - when the units are ready for completion, basically all of them will be valued by each buyer's bank before their finance can be approved. If each valuer sees your 3b sold for $570k instead of $600k for the rest, they will value the other units accordingly. The flow on effect of this would be that every unit in the complex (except yours) would be valued at less than the contract price, leaving buyers scrambling to come up with more money, and a risk for the developer that a bunch of people will default on their contracts.

  It is certainly not illegal, and is actually fairly common when developers are trying to sell the remaining units in a development.

  Just be aware that you will pay stamp duty on the higher (contract) price, and this could also affect duty concessions, first home grants, etc, if there are thresholds applicable.

  Also make sure you discuss it with your solicitor, and ensure a condition is written in the contract or a side deed to make sure they pay up. Would also be a good idea to disclose this to your bank.

  • 

    Almost Banned on 12/01/2018 - 12:22

    I am assuming you are buying off the plan?
    I would also be concerned about what the developer is telling their bank.
    Many/most of these deals require a certain level of pre-sales at specified prices in order to secure bank finance.
    If the developer's bank knew that some of the pre-sales were at lower prices than represented it could jeopardise the funding for the project.
    (I would also call it a form of bank fraud).

    • 

      djmatt24 on 12/01/2018 - 20:35

      No, the apartment building is fully complete.

  • 

    djmatt24 on 12/01/2018 - 20:40

    Thanks, this was really helpful!

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  Seraphin7 on 12/01/2018 - 11:04

  +5

  Reasonably common thing done by developers to keep the "apparent value" of the property higher than it is really worth.

  From your perspective then, you need to make sure that you are ultimately paying fair value (in net terms for your property). Not withstanding the issue of stamp duty (and other matters) noted above, are you comfortable that $570k is a fair price for the property?

  Is this a signal that fair price is actually less than $570k? The developer wants to have the reported sale price at $600k even though they will only collect $570k. What does this mean? The developer wants to make sure all negotiations start at $600k even if they are happy to accept $570k. But, if the negotiations start at $570k then is the fair price actually some amount down from there? $550k? $520k? $480k?

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  ihbh on 12/01/2018 - 12:25

  This could be a pricing strategy to covertly discount while giving the appearance of maintaining price - other businesses do it with coupons (e.g. pizzas, etc.).

  The benefits for the developer are:

  • Have as much buyer interest as possible for unsold apartments by keeping valuations higher than the market (improves buyer perception and borrowing capacity, etc.)
  • Not have to drop price (or as by as much) for future buyers
  • Not have previous buyers feel ripped off (if they want to have a long term business).

  Yes, it could keep valuations higher than normal because valuers use comparable sales as a guide to valuation.

• 

  picklewizard on 12/01/2018 - 13:15

  +4

  This is cleeeeearly dodgy. If it looks like a duck…

  What's even in it for you? I mean, if they offered you a 50k cheque, then yeah, you're clearly going to come out in front. But what compensation do you get otherwise for participating in their dodgy (quite possible fraudulent) scheme?

  Don't do it. If you do, you're part of the problem that is the ridiculous housing market.

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  dcep on 12/01/2018 - 13:45

  It's common as per above reasons.

  Some "package" it as free stamp duty + 1yr BC fees + furniture
  Just need to check your threshold on FHOG

  By the way, whereabouts did you find a 3br unit for $570k ?

  • 

    djmatt24 on 12/01/2018 - 20:39

    Oh no, I definitely didn't. It was for an example. I'm paying in the 600's and hoping it's a good deal.

    • 

      dcep on 12/01/2018 - 22:18

      Ahh, 600… you'll have to pay for stamp duty then

      will cost quite a bit there

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  djones145 on 12/01/2018 - 14:49

  +1

  Ask for the money now, at least u can invest and and u it
  Also make sure u don’t have to return it under any conditions like if they activate the sunset clause
  Make sure it’s on ur terms'

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  modsec802 on 13/01/2018 - 14:10

  Assume estimated body corporate charges will double or triple within a couple of years. This is another scam they do to make you think it’s going to be cheap to maintain and there’s nothing you can do about it.

  And we riously buying an apartment in Brisbane? Count the cranes and the number of for rent ads on realestate.com.au