What about the legal side of buying without a bank?
What about all the SCAMS I’ve heard about?
Buying a house where the seller (the Vendor) provides the Finance (aka Vendor Finance) is perfectly legal when done correctly. In fact it has been practice since the early 1900’s.
(Really it has, look it up: http://vendorfinance.asn.au/history)
Just like in any profession there will be rogues who don’t follow the rules. Plumbers, car salesman, even doctors & lawyers all have their bad apples (aka scammers. Unfortunately Vendor Finance is not free from them.
Just like any other professional service, you need to be comfortable with the person you are working with and if they raise your suspicions, simply find someone else!
The paperwork you will fill out when buying a home on Vendor Finance is pretty much the same government paperwork you would use when buying using a real estate agent. There will be some amendments and additions to it that have legal effect and determine the actual terms of the sale.
You will need to have a solicitor you are comfortable with, that understands Vendor Finance to help you through it. Please be aware that not all solicitors do know much about it, just like not all doctors know everything about heart surgery. Be sure to speak with someone who knows what they are talking about, and doesn’t just tell you that it is a scam without being able to justify it.
If it were a scam, do you think the government would have asked you in question #56 of the 2011 Australian Census form, if the property you’re living in was purchased on a rent to buy arrangement?
Buying a house is a big deal and is risky if you don’t do it properly. You need to do your due diligence whether you are buying directly with a bank loan or using Vendor Finance. If you don’t use a good solicitor (or at least a conveyancer) you put yourself and your home at risk.
As long as you are fully aware of your rights and responsibilities, you can manage the risk and enjoy the benefits of owning your own home before you need to qualify for a bank loan!