Because of COVID19 I Am Regretting Buying Property - What Can I Do?

Lliongalahad on 18/03/2020 - 11:29
Last edited 18/03/2020 - 16:30

Hi fellow OzBargainers
First ever post for me. I have recently took the big decision to buy real estate property (an apartment). With an LVR of approximately 90% is a big strain for me, but my wage is more than enough to cover the mortgage it plus save some money on top.
However, now with this Coronavirus crisis and the industry I am working starting to already slow down, my employer advise that it's quite likely that in the next few weeks we will have to work from home and only 3 or 4 days a week, which will be a significant wage reduction (-20/25%). In this scenario, it's likely I won't be able to cover my mortgage as easily. And we don't know for how long this could go. So I am thinking now that filling myself with debts is not the best idea in this period of uncertainty.
The contract was signed and the loan formally approved, although I still haven't signed the formal paperwork for the finance.
My question is: what are my options? Can I still get out of this without being sued? Anyone in the same situation?

Edit: contract is subject to finance, deposit to the agent was a handful of grands, which I would be happy to lose at this point.

Financial

Comments

  • klonky on 18/03/2020 - 11:32
    +3

    Could you afford it if it were interest only?

  • Hithere on 18/03/2020 - 11:34
    +3

    Ask your financial institution what their policy is/will be for occurrences like this.

    • backpaqer on 19/03/2020 - 07:43

      Yep. Speak to your lender, they will have something in place already to cover this scenario.

  • iforgotmysocks on 18/03/2020 - 11:36
    +27

    What did OzBargain say when you asked them?
    What did your bank say when you asked them?
    What did your conveyancer say when you asked them?

    • Diji1 on 18/03/2020 - 13:34
      -3

      Don't ask the bank.

      When are people going to work it out?

  • rambutann on 18/03/2020 - 11:37

    I was almost put in your exact position. Fortunately for me, Athena took forever to get around to pre-approval.. and the property I was after sold..

    If you were to rent out the apartment would that put you in a better position? Or get a housemate if you must live in it?

    Fairly sure you can bail at this point in time but you will lose your deposit. I'd be speaking with your conveyancer…

    • liongalahad on 20/03/2020 - 22:21

      Yes, probably rent one of the rooms, although not ideal at all, would be a good way to go through tough times, in case of a salary reduction.

  • godofpizza on 18/03/2020 - 11:37

    are you living in or renting out?

  • GangGang on 18/03/2020 - 11:37
    +1

    Call the bank?

    • skid on 18/03/2020 - 11:43
      +1

      I reckon there is a good chance that the bank will help the OP out. We're all in this together.

      • GangGang on 18/03/2020 - 11:49
        +3

        I'd be at the branch or calling the bank ASAP. Not asking here.

  • [Deactivated] on 18/03/2020 - 11:39
    -1

    I don't think you have an easy out. Developer or seller can sell at a reduced price in a distressed market and sue you for the difference. Does your contract state subject to finance?

    • liongalahad on 20/03/2020 - 22:23

      It does, but finance was formally approved Bank says they have policies in place in case of financial hardship. But they won't withdraw the approval just because I am worried, they need solid proof that my income will be reduced, which of course I don't have. So looks like I have to go ahead with this.

  • tsunamisurfer on 18/03/2020 - 11:41
    +1

    First thing to do is to speak to your Settlement Agent / Conveyencor, they will have knowledge of the law and understand your contract. We do not.

  • Traveller107 on 18/03/2020 - 11:43
    +11

    Don't regret it mate. Financial ups and downs are inevitable and as a real estate asset owner you need to learn to ride it out.
    Most banks have hardship options where you can freeze repayments for between 3-12 months during financial hardship. Just call them and they'll help you out. Cheers!

    • dcep on 18/03/2020 - 14:17
      +2

      Just call them and they'll help you out.

      You think bank is gonna give you an umbrella on rainy days ?

      Business go tits up (Virgin airline / Retails / Small businesses)
      Unemployment skyrocket (Majority with little to no savings)
      Housing collapse (Mass mortgage delinquency / foreclosures)
      Banks go bust / waiting bailout

      • EightImmortals on 18/03/2020 - 14:35
        +1

        "Banks go bust / waiting bailout"

        It's 'bail in' now…look it up.

        • ms_caz on 18/03/2020 - 17:35

          Seems nobody’s heard of it …. nobody’s talking about it, anyway.

          • EightImmortals on 19/03/2020 - 07:20
            +1

            @ms_caz: Nobody's heard of it because the media haven't reported on it/ covered it up. Basically it started with Cyprus after the 2008 crisis and has been slowly creeping around the world since then. The nail in our coffin here was on Feb 14th 2018 when the government snuck it though with most of the senate absent, 'on the voices' (no record kept of who voted). Not dodgy at all. More info here.

            https://www.youtube.com/watch?v=W7uXrvNp3cQ

            https://cec.cecaust.com.au/releases/2018_02_16_Govt_APRA.htm…

            Of Australia’s 76 senators, only seven were present when the government rushed the bill to a vote, which passed “on the voices”, with no opposition from the Labor or Greens senators present. The process was hurried to ensure that senators who planned to move an amendment, to stipulate that the bill’s “bail-in” provisions must not apply to bank deposits, did not have the chance, and weren’t even present when it passed.

            This was followed up a couple of weeks back by forcing the cash ban through despite massive public opposition. Democracy?…..hahahahahahahaha

      • Bargain-er on 19/03/2020 - 07:25

        Go bust meaning go under? Big 4 are too big for gov to lose.

  • serpserpserp on 18/03/2020 - 12:04
    +9

    Get down to the Winchester, have a cold pint, and wait for this whole thing to blow over…

    • seraphim2017 on 18/03/2020 - 16:33
      +2

      don't forget to kill phil "sorry phil".

    • dasher86 on 18/03/2020 - 17:39

      What about a Cornetto?

  • DarthAntz on 18/03/2020 - 12:06
    +3

    Build a bunker on the property, hook up some solar and water tanks, and re-sell it at pandemic prices.

  • Ocker on 18/03/2020 - 12:17

    If you have signed an unconditional contract for the purchase then there is no way out.
    Also, apartments are a lousy buy/investment at the best on times.

    • netjock on 18/03/2020 - 16:54
      +1

      Also, apartments are a lousy buy/investment at the best on times.

      There is an art to apartment investing which most people don't know about because they think of apartments should act like houses. That is the first and most fatal mistake.

      • brendanm on 18/03/2020 - 17:50
        +2

        Is it to not buy apartments?

      • MrBear on 19/03/2020 - 10:12
        +5

        Enlighten us netjock.

        • Trying2SaveABuck on 20/03/2020 - 04:48
          +1

          I have never purchased an apartment however i have brought and sold a few properties and been around property for a little while to say netjock is right on a certain level.

          If you ask me Apartments are more risky other properties (That come with land) however due to the nature of them they can be quite profitable for investors.

          Let me explain

          Positives

          • smaller space can be easier (cheaper) to renovate you can turn over an old apartment in as little as 8 weeks if you got the materials and skills
          • Lack of land naturally makes it easier to maintain this also makes them better to rent out (if you ask me)
          • Due to the fact the supply of apartments is (not endless but lets say) endless compared to land you often get people like in this case desperate selling them in situations of difficult situations esp ppl who are dumb enough to pay a premium price off the plan (unlike townhouses/houses buying apartments off the plan is a sure way to burn money)
          • Significant savings on stamp duty (probably the main benefit)

          Negatives
          - it is less likely to have 'capital growth (thus you need to buy one below market value ie ppl desperate to sell like OP will be if he defaults on his loan)
          - Exorbitant body corporate fees this is usually because apartments come with elevators and they are expensive to maintain
          - You have too many neighbours side-to-side is normal but in most apartments above and below is also common and if lets say the moron above you doesnt clean up his place and gets cockroaches be sure you will end up with them too or the guy under you decides to join a band and is practising at 1am it can make things difficult

          PERSONALLY I wouldnt buy an apartment as a 'investment' but if i was a tradesmen and could do 80% of the work myself i would be hunting down stupid apartment owners looking to sell and fix them up and selling them at a substantial mark up - key is you CANNOT be desperate to sell it is why it takes some apartments years for building to commence because the developer sells ea apartment at a well over priced rate but eventually people do buy them. Literally have to be able to wait it out until someone is willing to pay for it - if you ask me Auctions generally dont work for apartments unless it is in a highly sort after location because the 'demand' isnt there like in other properties but if you private sale it slap a ridiculous number on it to begin with someone will haggle you down 5-10% and bang you have made a large profit i have seen it a number of times but i understand it is not for everyone and it is far more risky

          • MrBear on 20/03/2020 - 21:23

            @Trying2SaveABuck:

            Exorbitant body corporate fees this is usually because apartments come with elevators and they are expensive to maintain

            Well, you can invest in places that don't have high fees.

            You have too many neighbours side-to-side is normal but in most apartments above and below is also common and if lets say the moron above you doesnt clean up his place and gets cockroaches be sure you will end up with them too or the guy under you decides to join a band and is practising at 1am it can make things difficult

            This isn't really an issue for the investor, but the tenant.

            So that is really only one negative.

            • Trying2SaveABuck on 20/03/2020 - 21:35

              @MrBear: If you sell buy and sell within 18 months the fees don't make a big difference if u make big capital gains

              It is 100% an issue you try sell a place with cockroaches crawling on the floor for a top price….

            • liongalahad on 20/03/2020 - 22:30

              @MrBear: Yay! This strata has no lift so has relatively low fees, roughly 500 a quarter.
              And it's top level so no annoying neighbors, in theory.
              Plus it was recently renovated and is at walking distance from the city CBD.
              Need to focus on the positives I guess! :)

  • Austaurean on 18/03/2020 - 12:33
    +3

    You have an obligation to inform your finance lender of your new possible income

    • netjock on 18/03/2020 - 16:48
      +2

      Then they can withdraw finance and contract can be dissolved. Good point.

    • RockyRaccoon on 18/03/2020 - 21:51

      absolutely and when finance falls thru so does sale. But check, subject to finance could have a time expiry

  • chansc on 18/03/2020 - 12:36

    According to what you've described, I assume you are going to live in the apartment you've just purchased?

    Can you change it to an investment property and stay in where you are currently living? If it's interest only loan, I believe your rent can cover your mortgage payments?

    For the place that you are currently living in, are you renting at the moment? If that's the case can you rent a less expensive place?

  • popsiee on 18/03/2020 - 12:42
    -1

    Can I still get out of this without being sued? No Could go bankrupt to protect them from suing you by suddenly losing all your assets and income . Normally the contracts are watertight protecting the seller .

  • sir_bazz on 18/03/2020 - 12:46
    +3

    Good chance that interest rates will drop tomorrow.

    So while your income will be lower, so will your mortgage repayments.

    Just something to consider.

  • nfr on 18/03/2020 - 13:03

    Keeping the deposit is not enough? People are so litigious these days.

  • DashCam AKA Rolts on 18/03/2020 - 13:08
    +17

    Is your loan subject to obtaining finance? Contact your lender immediately with a revised income projection from your reduced hours. You may no longer meet the lender's prerequisites for the loan approval. If your contract is subject to finance, this may be your get out of jail card.

    • Kangal on 18/03/2020 - 14:28
      +1

      ^This.

      And even if not, a property is a long-term investment. Your entire post is from a short-term view.
      Even if things go in the worst possible scenario, there is a high likelihood that your income will go back to normal and even increase in the future. So from the long-term view, this event won't have much/any affect on you. If these expectations do not align, it means you were never qualified for property purchase in the first place. So if you tried to cheat or take a short-cut, you're only cheating yourself. Do some research, you can learn from the successes AND mistakes of others.

    • liongalahad on 18/03/2020 - 16:28

      Yes the contract is subject to finance. I got the formal approval letter but still haven't signed the official documents to start the mortgage.
      I think will notify the bank of the possible reduction in earnings, I can get my employer to sign a letter stating the potential minimum wage I will earn.
      If the lender will withdraw the loan, then the contract should be void in theory.

      I know in the long term I would propbably be OK, so if the loan goes ahead, obvoulsy I cannot void the contract and I will probably rent a room or the whole apartment (as a first home buyer I would need to move in within 6 months, so hopefully the storm will be passed by then).

      • cloudy on 18/03/2020 - 16:34
        +1

        Depends if your contract is subject to finance. If it is, try your hardest to fail to get finance, without obviously looking like you want to fail of course.

  • 87percent on 18/03/2020 - 14:57
    +2

    took an uber yesterday to pick up my car from getting serviced, and the driver was listening to talkback radio. There was a caller who suggested that all the banks halt mortgage payments

    • ihbh on 18/03/2020 - 15:04
      +3

      And the banks' shareholders said get lost.

    • netjock on 18/03/2020 - 16:50

      In the UK they are doing that for 3 months but you still have interest accrue and you have to catch up at later date.

  • ihbh on 18/03/2020 - 15:00

    The contract was signed

    The contract for the property? That is, you exchanged contracts, and it's past the cooling off period?

    If this is the case, then you can't get out of the sale. You could try not to settle and lose the 10% deposit and the seller can sue you for the difference in sale price subsequently (e.g. you agreed to pay 500k, but the seller can only resell for 400k and additional costs).

    Or you can proceed and then try to on sell the property and lose a round trip of transaction costs (incl. stamp duty).

    When you were planning to buy the property, did you factor in any contingency margin for any increase in interest rates? If you did conservatively, then you should be okay. This too shall pass.

  • MauTauAja on 18/03/2020 - 16:24

    How many beds is in the house? start open a share house with your friend / stranger by renting out those spare rooms.

  • seraphim2017 on 18/03/2020 - 16:36

    With cold feet, if you can get out of dodge and are unhappy with your ability to service the loan, and if your offer was 'subject to finance' which you will fail to get if you disclose your reducing income to your loan company, do so.

    Going forwards, never obtain finance that you can't service should your financial circumstances either:

    reduce by half of income or
    interest rates double (or to 8%, whichever is greater.

    Margin of safety built in.

  • spammingb on 18/03/2020 - 17:01

    How much savings do you have? Can you afford to go on if you're unemployed for 4 to 5 months?

    • liongalahad on 18/03/2020 - 17:54

      that's the thing, I will have virtually no savings once the settlement kicks in as Im using 90% of them for the deposit. So if I lose my job I would have no parachute. In normal times I would not risk my job in any case, but in this situation anything can happen.

      • EightImmortals on 19/03/2020 - 07:21
        +2

        So you are using all of your savings and STILL have to borrow 90% of the home costs? At the start of a probable recession?

      • TilacVIP on 19/03/2020 - 07:30
        +2

        Can't believe the Bank even allowed you to borrow to this level under the situation you are in. Guess they (Banks) have not learnt from the 2008 GFC.

        I believe all this hasn't hit the property market hard yet, but I think its coming. Who in their right mind is going to commit to a huge mortgage when there is no guarantee their jobs are safe???

        • liongalahad on 20/03/2020 - 22:03

          They have formally approved the mortgage before the shit hit the fan. In normal circumstance I would be fine as I earn enough to pay the mortgage and still save roughly $1500 a month, however with this situation I'm not so sure anymore.
          For reference, when my income and savings were assessed by my broker, she said I could afford to by a property 50% more expensive than the one I bought… Lucky I didn't go down that path!

  • OzHunterNSW on 19/03/2020 - 09:48
    -2

    Why are you asking us

  • MrBear on 19/03/2020 - 10:10
    +1

    With an LVR of approximately 90% is a big strain for me

    Why would you put yourself in this position then and do it during such unstable economic times?

    • Oofy Doofy on 19/03/2020 - 11:50
      +1

      FOMO and property price climbs that defy rationale.

    • liongalahad on 20/03/2020 - 22:13

      @MrBear
      In normal circumstances, my wage would let me repay the mortgage smoothly.
      It's the uncertainty (i.e. reduction, or loss of job) that worries me now. Before the COVID-19 situation I had no real reason to worry.

      @Bamboozle
      Not FOMO, more like tired to spend so much money in rent when mortgage repayments would be pretty much the same!

  • Ocker on 19/03/2020 - 19:00
    +1

    Why the hell do people make a post seeking advice, and then when dozens of suggestions are made based on the post see fit to add additional information?

    EG in this case the OP post never mentioned the deposit paid was only "handful of grands", most members would have naturally assumed the deposit was the normal 10%

    Waste of effort.

    • Bargain-er on 19/03/2020 - 20:24
      +1

      Tough crowd hey…

    • liongalahad on 20/03/2020 - 22:15

      Sorry, I thought deposit for an offer is rarely more than 5 or 10 grand…

  • Trying2SaveABuck on 20/03/2020 - 04:58

    My advice to OP is check you 'subject to finance clause' if you havent past the deadline GET OUT AND GET OUT NOW you will be entitled to your deposit back - because (most) property purchases are a big (life time) commitment and if you are having doubts about her (like a marriage) now you might want to get out before it is too late

    IF you have pasted your subject to finance period is over then you need to weight up if it is worth losing you deposit (usually 10% but you might of negotiated less) or risking going though with the settlement. - in almost all cases it isnt worth losing your deposit then you can beg to vendor to give it back but i wouldnt bet on them doing this ive literally seen people lose 120k in deposit after a subject to finance period ends and they lose there job just a few days/weeks from settlement

    I would dare say income protect might also be an option however i think the insurance companies have some sort of a clause against pandemics

    • liongalahad on 20/03/2020 - 22:10

      The mortgage was already formally approved. My broker talked to the bank and they said that until I do have a reduction in wage, there's no need to worry. They also said that if financial hardship comes they have policies in place. If we see what happened in Italy for example, mortgages were frozen by government law, to avoid people being evicted from their own house.
      It seems it's too late now to get out.
      I do have income protection for 75% of my wage, which would be pretty good, however as you say Im not sure they would cover a situation like this (pretty sure they don't or they would go bankrupt in a second)

  • Peck on 21/03/2020 - 23:40

    With this post the English is so confusing and situation unclear that I would say to go to a solicitor. Explore your options with them. My gut feeling is, if in doubt then pull out. Even if you wear a small loss.

    • liongalahad on 23/03/2020 - 03:38

      Too late to pull out, apparently. I'll have to go with it and cross my fingers.

  • edwardye on 22/03/2020 - 15:34

    Coronavirus crisis sees Banking Association announce six-month loan repayment deferrals for small businesses. this may extend to home loan as well.https://9now.nine.com.au/a-current-affair/coronavirus-banking-association-ceo-responds-to-calls-for-mortgage-repayment-deferral/96058d05-2297-4b9d-b10b-cc7bcbb1fff8

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