Settlement risk MITIGATION

Gold Coast apartments settlement risk on the rise!

Are you an off-the-plan buyer worried you may not be able to settle by the due date?

Off-the-plan apartment buyers often place a deposit two to three years prior to the completion of a high-rise apartment complex. Completion of some projects may be delayed further due to shortages of building materials, construction workers off sick, or other Covid related issues.

From the time of paying a deposit through to settlement, some buyers will have been impacted by unexpected circumstances because of the pandemic, such as losing their job or having their hours cut. Others may have had serious business losses or have even had to close a business they were relying on to service borrowing costs.

With interest rates beginning to rise and banks toughening lending criteria coupled with the poor state of the economy, many borrowers are finding themselves in the predicament of not being able to settle. Meeting settlement dates is becoming a huge challenge, with some buyers even wishing they could walk away from the contract.

As we stumble towards our first recession in 30 years, with the ever-present uncertainty about new Covid variants, many buyers may decide to pull out of deals and wear the losses.

Risk mitigation for off-the-plan buyers.

You could try to negotiate an extension of time with the developer – but what happens if your financial circumstances don’t improve?

Or, you could try selling a share in your apartment, with settlement of the share sale and the purchase of the property timed to occur simultaneously.

This is known as a simultaneous settlement. Potential buyers of a share could be a relative (think the bank of Mum & Dad), a friend or colleague.

The advent of the ticX has brought about a greater level of liquidity to tenant-in-common shares in real estate which gives buyers more confidence purchasing a share in a property with family, friends, colleagues, or others.

How is a property share created?

A property share is created when a property (or part of the property) is sold and is purchased by two or more co-owners as tenants in common in separate equal or unequal shares. 

A tenant in common share is an asset you own that can be willed (bequeathed), sold, or mortgaged separately.

To sell a share in your property you will need a ticX agent

Other reasons you might like to sell a share in your resort style holiday property.

Not using your property as often as you did in the past; 

Sell a share to release some equity to fund your lifestyle;

Sell a share to reduce the holding costs such as body corporate, rates, insurance, interest on borrowings.

The fact is, not everyone wants to, needs to, or can afford to own 100% of a resort-style holiday home or apartment.

With fewer buyers prepared to take out a large mortgage on their own, shared ownership is becoming the prudent and sensible approach to owning and enjoying the Queensland holiday lifestyle.

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