Halebop
your comment..
"a wrap sale agreement is very similar except for one key detail. An unconditional agreement does not mean the purchaser can settle, it just means they are obligated to settle."
In this respect there is no difference between a deferred settlement or immediate settlement. Of course "unconditional" contracts fall over, but the occurance is very rare, and yes invariably involve an emotional, costly legal battle.. The advantage with a wrap sale is it is completely flexible. You have control and it and can be altered at any time by mutual agreement to cover unforseen events as you describe. The bottom line is the 3rd party has to live somewhere. Knowing that the probability of my wrap deals settling within 5 years is great, if the 3rd party runs into diffulties it is a simple matter to extend settlement term to reduce payments, or offer a payment holiday for a period once your buyer has built up equity, and allow them to use part of that equity in the form of penalty (a horrible word) % increase. All repayment schedules in the wrap deals I did were about the same as, or less than current rent at the time, so if they could not afford their repayments, they could not afford to rent. In the case of the default mentioned earlier the woman and her children made no repayments for 12 weeks, no problem, it just meant an adjustment to final settlement figure. This relieved her of some stress during a difficult time, we made a bit more in extra interest, she still came out better than she started with some cash to get restarted... again everyone happy. Remember by applying gst, deposits, extra cashflow to mortgages repayments my debt/equity ratio is only about 40%, so I had more than enough cashflow from other properties to cover the outgoings.
Banks are like computers, unemotional non caring and dictatorial. There is no advantage to me in causing extra hardship on a purchaser experiencing hard times. We all have them occasionally.
You say "In a wrap deal the purchaser makes an assumption based on their standing several years rather than several weeks or months from the point where they must settle."
Again there is no difference. Unless the purchaser is paying the total purchase price in cash of course. Repayments are repayments irrespective of to whom they are paid.
Halebop, I do agree, property investment has its risks like any other life scenario.
My Mum used to say.. "don't go near dogs they will bite" Well I have trained hundreds of dogs, during my 14yr stint as sheep station manager, and have never (yet) been bitten by one.
I'm sure someone will get some benefit from these discussions, keep em coming
Cheers all, hope its a better day at your place
JK