EAA Publications
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| The Freshman |
Content
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| The age of a flat may affect
its financing: the prospective buyer should obtain accurate
information as early as possible |
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 Mr
Ding had been working hard to make money since graduation from
university, in the hope that he would soon be able to buy a
comfortable place in which he could live with his aged parents.
Since property prices had declined in recent years and the banks
had lowered their mortgage rates, Mr Ding reckoned that he had
saved enough money, amounting to 30% of the price of an average
flat, to make a purchase. So he asked a number of estate agencies
to look for a suitable unit.
Soon afterwards, Mr Ding, on the recommendation of an agent,
settled on a unit in a building situated in Sai Ying Pun. The
building did not look too old. Mr Ding's parents found the unit
satisfactory, and the price was within his budget. As Mr Ding
was anxious to clinch the deal, he agreed to sign a provisional
agreement for sale and purchase first so that he could started
applying for a mortgage loan at the bank, and the agent agreed
to check the information on the property. Mr Ding paid an initial
deposit at the same time as he signed the agreement.
After the agreement was signed, Mr Ding went at once to a bank
to apply for a mortgage loan. The bank, following its usual
practice, made an appraisal of the unit and came up with the
result that the building had actually been occupied for 25 years.
Because of the age of the building, the bank agreed only to
provide a loan equivalent to 60% of the price.
Mr Ding then inquired at several other banks, and the result
was the same. The amount required to complete the deal exceeded
Mr Ding's budget. The 10% difference amounted to more than $100,000.
If he failed to honour the agreement he would risk the vendor
forfeiting the deposit and might have to pay both parties' commissions
to the agent. As no bank could offer more than 60% of the price,
Mr Ding was forced to borrow from friends and finally managed
to put together enough cash to conclude the transaction.
A prospective buyer should be in possession of the basic information
about a property, including its age, which directly affects
its value but is not readily discernible to the naked eye. He
should consider such information carefully before deciding to
buy the property.
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