changing conditions on an offer?

[dexx]

I have an accepted offer on a residential block. It stipulates that finance approval from my nominated bank is required within 28 days of signing and that settlement is x days later (30 days). I ran into difficulties which slowed the loan approval process. But thats now all back on track. However its likely that finance approval will take an extra week. I've asked the selling agent for an extension and hes replied that the owner has denied the request. Reading between the lines, the owner now thinks he can get a better price and is hoping the sale falls through.

So i have a few questions: the 28 days for finance approval - are they business days or calendar days? Second question, if i asked for the condition of finance approval to be removed from the offer - making it unconditional - is the seller under any obligation to comply? In the unlikely event that finance did fall through (eg lost my job, was diagnosed with a terminal disease, some other major event) would the loss of my deposit be the only forseeable consequence?

 

[Perp]

the 28 days for finance approval - are they business days or calendar days?

I'm not sure what the default interpretation is in NSW, but check the definition of "days" in the contract.

Second question, if i asked for the condition of finance approval to be removed from the offer - making it unconditional - is the seller under any obligation to comply?

Yes, you can remove the finance condition at any time within the 28 days, and the contract then becomes unconditional and binding on both parties.

In the unlikely event that finance did fall through (eg lost my job, was diagnosed with a terminal disease, some other major event) would the loss of my deposit be the only forseeable consequence?

It's the probable only consequence, but if the vendor had to re-sell at a lower price, and the difference was more than your deposit, they could come after you for the difference. In practise, it's usually uneconomical to litigate and if the vendor wants out of the contract because they think they can get a higher price, the chances of this are "particularly low".

 

[dexx]

Thanks for the prompt reply. Regarding how settlements work in WA, I would expect no refund if an unconditional sale fell through, but what about if conditions arent met (eg finance approval not obtained)? Is the deposit refunded at the termination of the contract?

 

[Perp]

Thanks for the prompt reply. Regarding how settlements work in WA, I would expect no refund if an unconditional sale fell through, but what about if conditions arent met (eg finance approval not obtained)? Is the deposit refunded at the termination of the contract?

Sorry for thinking NSW, not sure where I got that from!

If you advise that you wish to terminate for lack of finance approval, yes, you have your deposit returned. You may be requested to provide proof of the failure of finance, but if the vendor wants out, probably not.

 

[dexx]

Well my finance is coming through. So thats good. A related question, say I'm buying property B but need the sale of my existing property A to fund it. It gets to the point where the sale of property A looks 99%. However settlement on A gets delayed - delaying the settlement of B. Can the seller declare the contract breached and over? Or is he required to wait for the delayed settlement - charging interest if he wishes?

 

[Perp]

say I'm buying property B but need the sale of my existing property A to fund it. It gets to the point where the sale of property A looks 99%. However settlement on A gets delayed - delaying the settlement of B. Can the seller declare the contract breached and over? Or is he required to wait for the delayed settlement - charging interest if he wishes?

The seller can cancel the contract if you are unable to settle on the date nominated. Contracts of real estate generally include the provision that "time is of the essence" - hence the common saying - which means that inability to fulfil the contract at the time stipulated is sufficient to cause the contract to collapse. (Unlike many other contracts.)

The owner may accept the postponement with or without penalty interest being applicable.

 

[Terry_w]

Well my finance is coming through. So thats good. A related question, say I'm buying property B but need the sale of my existing property A to fund it. It gets to the point where the sale of property A looks 99%. However settlement on A gets delayed - delaying the settlement of B. Can the seller declare the contract breached and over? Or is he required to wait for the delayed settlement - charging interest if he wishes?

Seller doesn't care where you get the money unless this is in the contract. You must settle on time or risk losing the property and your deposit.

 

[sanj]

It is pretty common now in WA for there to be clauses like "subject to successful settlement of property A" and for some crazy reason a lot of people accept it. ive always cancelled them on offers ive received but it certainly seems to be a lot more common than it used to.

 

[dexx]

Seller doesn't care where you get the money unless this is in the contract. You must settle on time or risk losing the property and your deposit.

From what i've read theres a 3 day grace period from the settlement date. After that the seller can charge penalty interest and issue a default notice. If settlement doesn't happen with 14 days of receipt of that notice, then the contract is void. Therefore if my settlement is a week late it may be ok (minus some penalty interest).

 

[marg4000]

If you default on an unconditional contract and the property is subsequently sold for less than your contract, you can be sued for the difference.

Whether or not the vendor would bother would depend on the amount. There are current court cases where the difference is substantial.
Marg

 

[sanj]

From what i've read theres a 3 day grace period from the settlement date. After that the seller can charge penalty interest and issue a default notice. If settlement doesn't happen with 14 days of receipt of that notice, then the contract is void. Therefore if my settlement is a week late it may be ok (minus some penalty interest).

yes there is 14 days allowed before contract can be cancelled but it isnt automatically cancelled at 14 days, the party that is ready and able to settle will have to decide if they want to cancel it or not.

3 days grace is correct, just rememvber that if you settle a week late you pay 7 days penalty interest and not 7 minus 3.