Dodgy property deals

A broadening of Victoria's unfair terms laws will cover so-called vendor finance contracts, which misuse first-home buyers' grants and have been compared with buying real estate on lay-by. Basically financiers, or wrappers, buy a property at standard bank rates, then "sell" the home at an inflated price to another purchaser at a higher interest rate, often 2 per cent more.

The financier retains title on the property until the second purchaser pays off the deal. Should the tenant default on payments, the home is repossessed and the financier can start the process all over again.

As real estate consumer advocate Neil Jenman said, "It's pure exploitation. There is a reason these people can't get mortgages from banks. They can't afford it. Why suddenly would they be able to afford a loan at 2 per cent higher than bank rates?"

Article on Herald Sun

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