Numerous
real estate Vendor Finance techniques can be used in Australia. Our
favourite technique is the Instalment Contract to which this overview
relates. Instalment Contracts have been used in Australia since the
1870's. They are a form of Vendor Finance, i.e. the Seller (Vendor)
helps the Buyer to purchase the property by allowing a proportion of
the price to be paid off over time.
They
were initially used buy land developers who subdivided land and sold
the resulting blocks, with a small deposit and a payment plan over a
number of years. Large parts of the well known suburbs such as North
Sydney and Chatswood were sold in the early 1900's using Instalment
Contracts.
The
legality of the Instalment Contract was established by the High Court
of Australia in 1927 in the case of The Federal Commissioner of
Taxation versus Thorogood.
They
became popular again in the 1950's and 60's when banks became reluctant
to lend on housing blocks. During this period it was common for people
to buy their land with an Instalment Contract, pay it off over time and
then get the bank to lend to build their home.
Since the 1970's the NSW Dept of Housing has used Instalment Contracts to sell properties to its tenants.
All
Australian States, except South Australia, make the First Home Owner
Grant available to first home owners, buying their first home with an
Instalment Contract.
The
Australian Government recognised Vendor Finance when the 2006 Census
established that 1.2% of homes in Australia were being bought with
Vendor Finance.