Vendor terms contracts

A “vendor terms contract”, also known as a terms sale contract, is a method of buying and selling real property where the purchaser pays the purchase price to the vendor in instalments, rather than paying the full amount of the purchase price by way of a home loan secured by a mortgage over the property.

The vendor retains the title to the property until the full amount of the purchase price is paid, which may be some 25 years after the contract is signed.

Vendor terms contracts have become more common recently, especially in the rural property market, where low-income earners who are unable to qualify for finance from a mainstream lender are targeted by property sales companies offering the chance to own their own home.

Unfortunately, some unscrupulous companies are using high pressure sales tactics to persuade consumers to enter into vendor terms contracts for the sale of properties not fit for habitation, at up to three times the price for which they were purchased by the vendor.

Before entering into a vendor terms contract, it is crucial to obtain advice from an independent solicitor not affiliated with the vendor.