OTP - loan not confirmed until settlement (QLD)?

[jerrybee]

I just messaged a friend to see how things were going with his OTP, whether finance was confirmed. He said the bank won't confirm until they have the title deed. That doesn't sound right does it? As far as I'm aware it's a three step process - 1) Valuation, 2) Loan is confirmed, 3) Settlement.

2 and 3 aren't the same thing - wouldn't make sense to turn up to settlement without a confirmed loan. Or is this the way it works with new builds?

 

[RPI]

He is correct.
Finance offer won't be unconditional until title issued

 

[pinkboy]

The loan will be conditional:

1. Titles are issued.
2. Valuation stacks up when titles are issued.

Contract price/valuation yesterday might not be the same as valuation tomorrow, so this is where the lender makes sure they are getting what they are lending against.

pinkboy

 

[jerrybee]

Makes sense, everything could still go haywire up until the last minute. Thanks

 

[Ausprop]

Makes sense, everything could still go haywire up until the last minute. Thanks

ooh yeh, in my foray into OTP apartment, when I went to settle the bank I got preapproval thru decided it wasn't a bank any longer. Then they gave it a couple of years and decided maybe they would like to be a bank after all so would give it another go. (Macbank)

 

[CosmicTrevor]

Also take note that with OTP often the time given to settle is 14 days (including weekends). Make sure your friend has all of the documentation ready to finalise the application so time isn't lost.

The last OTP I settled went pretty smoothly, but I still needed a 3 day extension. Whether the developer will accept an extension is an extra stress.

Interestingly in my case I had unconditional approval in 3 days - that included valuation. However, getting the documentation finalised and then booking the settlement took longer than I had expected. Make sure they have a good broker and as I said all documentation ready to go.

 

[Redom]

Also take note that with OTP often the time given to settle is 14 days (including weekends). Make sure your friend has all of the documentation ready to finalise the application so time isn't lost.

The last OTP I settled went pretty smoothly, but I still needed a 3 day extension. Whether the developer will accept an extension is an extra stress.

Interestingly in my case I had unconditional approval in 3 days - that included valuation. However, getting the documentation finalised and then booking the settlement took longer than I had expected. Make sure they have a good broker and as I said all documentation ready to go.

Yes it can be an issue at times. I find for most OTP developments they allow valuations to occur a month or so prior to settlement date.

That allows it all to get done in on time. For those that drag back valuations to within 14 days of settlement - it will can be tricky to get it all ready in time, even with a great broker and 1 day finance approval. There's not much room for any potential delay (missed signature, incorrect name spelling, missing middle name, wrong colour pen (yes i've seen this before!), etc).

 

[Jamie M]

I generally aim to have applications for OTP formally approved 4 to 6 weeks out from expected settlement date. I get the client/agent to keep me updated on construction progress - and we order the val as soon as practical.

Sometimes the registration of titles is a settlement condition rather than an approval condition.

Cheers

Jamie

 

[jerrybee]

Also take note that with OTP often the time given to settle is 14 days (including weekends). Make sure your friend has all of the documentation ready to finalise the application so time isn't lost.

The last OTP I settled went pretty smoothly, but I still needed a 3 day extension. Whether the developer will accept an extension is an extra stress.

Interestingly in my case I had unconditional approval in 3 days - that included valuation. However, getting the documentation finalised and then booking the settlement took longer than I had expected. Make sure they have a good broker and as I said all documentation ready to go.

What could the dev do if they don't agree to the extension? Surely they won't / can't void the contract at the 11th hour after years of dev?

 

[pinkboy]

What could the dev do if they don't agree to the extension? Surely they won't / can't void the contract at the 11th hour after years of dev?

Absolutely they can! Especially if the market has been rising, they love to wait for these people who haven't got their $h!t together so they can keep deposit and up sell!


pinkboy

 

[Jamie M]

What could the dev do if they don't agree to the extension? Surely they won't / can't void the contract at the 11th hour after years of dev?

They can be quite ruthless!

Thankfully I've never had any issues - but it's important that your finance person is proactive.

Cheers

Jamie

 

[Ausprop]

What could the dev do if they don't agree to the extension? Surely they won't / can't void the contract at the 11th hour after years of dev?

LOL... nah a developer would never do something like that! would they??

 

[CosmicTrevor]

What could the dev do if they don't agree to the extension? Surely they won't / can't void the contract at the 11th hour after years of dev?

Check the contract - it is most likely in favour of the developer. Whether they will exercise the rights is another matter.

Logic dictates that if the developer wants to settle, get the project off their books and move on an extension should be granted as long as the buyer isn't taking the p*ss. The key is to keep the communication up and as others have said get a good broker on your side to help with that.

Of course it is possible that if an alternative buyer could be found quickly and the market is hot the seller will just exercise their rights and your friend will suffer the consequences. I don't think this is very likely in QLD because the market isn't moving like Sydney.