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DON’T BE CASUAL ABOUT GETTING FINANCE
The property market seems to be picking up a bit, with some property types in very short supply.
Already we’ve seen several instances of more than one buyer for the same property and we’ve even seen contracts terminated because the buyer’s finance wasn’t approved by the due date and the seller accepting a higher offer from another buyer.
We haven’t really seen this since the global financial crisis hit about ten years ago.
So all this means buyers need to be far more assiduous in not just arranging their finance; but also ensuring their finance clause timelines enable them to arrange finance in time.
Finance clauses of less than 21-28 days for wage and salary earners leave buyers vulnerable to termination if finance is not forthcoming. Pre-approval counts for nothing, in my experience, and using it to justify a short finance period leaves buyers extremely vulnerable.
Likewise for businesses, anything less than 30 days is risking losing the property and super fund buyers should allow at least 45 days for finance approval. In a rising market, you really don’t want to go to all that trouble to find the right property and then lose it because the buyer got a better offer when your finance wasn’t ready in time.
The standard REIWA contract requires buyers to immediately make application for finance, using all best endeavours.
This means you must do it within a day or two of making an offer and you must supply all information your bank requires, which will at a minimum, requires pay slips and all bank and credit card statements. You will also need to disclose all regular spending such as car payments, outstanding debts, child support obligations and so on.
Self employed people, businesses and self-managed super fund buyers will generally need to supply their tax returns, including for the most recent financial year as well, which are often not yet prepared by their accountants.
This is not an excuse either banks or sellers will have any patience with. If you need to get your tax returns done as well, then make sure your finance clause is at least 45 days.
There will often be further requests for information from lenders which may seem annoying, but nonetheless will need to be answered before finance approval is forthcoming.
The general point here is that these are all things within the buyer’s power to do, so do them straight away. RIGHT NOW! Not when you get around to it, but straight away.
Not doing so may well see you lose the property, or have to increase the purchase price to stave off competition from another buyer. Bring it on!
This article first appeared in similar form in The Kalgoorlie Miner on 17 February 2018.
Neither Goldfields Settlements nor Paul Browning are lawyers, so none of the above should be construed as legal advice. Readers are encouraged to seek their own independent legal advice on these and any other matter involving property dealings, preferably before entering into them.