Anyone can be become a victim of a vendor finance scam if they are not aware of the pitfalls involved and get into the vendor finance agreement blindly.  It is better to know what to look for and about the usual tactics of fraudsters so that you can guard against them.  Vendor finance is a convenient alternative to people who do not meet the down payment requirements of home loans.  The process involves less paperwork and is fast and flexible. This simplicity attracts many Australians to opt for the vendor finance system for owning homes. The vendor finance contract contains all the terms and conditions in the contract such as the loan amount, interest rate, instalments and other such details.  The Vendor finance terms should be adhered to strictly or the buyer will lose the property. Any failure by either party to abide by the rules contained in the vendor finance contract can be contested in the court.

Vendor Finance Scams

The buyer of the property commits the fraud against the vendor (seller) of the property who provides finance to him. The buyer uses the property as security to obtain a third party loan even when he owes payments its vendor.  The Fraud Awareness papers are aimed at increasing awareness of the various scams and provide advice on how to detect and prevent them.  Before signing the contract the buyer should make sure that details on fees and charges are given in a pre-contractual statement.   It should contain:

• the loan amount
• the interest rate
• how the interest is calculated and when it is charged
• the credit fees and charges to be paid or how they will be calculated
• you should be informed of changes affecting interest rates and fees or charges

• It is advisable to seek legal advice before signing the agreement.   
• The vendor may fail to examine the contract closely when a too good a price is offered, for fear of losing the deal. This is one of the reasons that give way to fraud.  It is important to exercise a high degree of caution when offers exceed the actual price.  Undue urgency should be viewed with suspicion.   
• Urgency is a clear sign which is intended to force a quick decision on the vendor so any decision should be based on facts and not on emotions.  
• When the second mortgage is registered it should be reviewed carefully.  Another form of scam is to include many clauses and fees in the contract.
• The buyer of the property should read and understand every clause and get it straight before you sign the contract.  You cannot go to court having signed such a contract and come to know of the fraud later on.  
• Check with the Better Business Bureau to know if any complaints against the vendor.   If there is no information about them you must decline to work with them as scam artists acquire new business name or change their names to unleash vendor finance scams.

Vendor finance schemes are beneficial if the contract rules are adhered to by both parties concerned.  But they should also be careful not to become victims of vendor finance scams.