Subject To finance clause

[scott]

Often mention is made to protect yourself when signing a contract such as "subject to finance, subject to pest inspection "etc

Where exactly do you put this clause? On the sales advice when you hand over the 0.25% (in NSW). Or in the actual contract that gives you a 5 day cooling off?

Thanks
Scott

 

[bundy1964]

Hi scott
In SA at least it is part of the sales contract.

bundy

 

[asy]

Hi Scott,

Contracts will have a spot for the agent to put the 'subject to' clauses. Ask the agent to point out the clause to you, and if you are unsure, remember that you have the right to take the filled out contract away with you to read at your leisure, or to a solicitor for some legal assistance.

The things I would always be aware of when signing a contract "Subject to finance" are:

That the words "To the purchasers approval" are put in, for instance, where it says Financial institution, and the agent writes "any"... you are leaving yourself open to possible interpretation, and the agent could come back and say, well, you haven't applied to Dangerous Bill's Shark Loans yet... and technically you would be obliged to take a loan from Bill, even if it didn't suit you, because it complies with the contract agreements.
So, make sure it says:
Financial institution: Any to the purchasers approval.

AND

If you are in Victoria make sure that you pay the deposit by the due date. (I am not yet sure about the legislation in other states, but it would be prudent to check whether this applies to you too!)

There is a little clause in the Standard clauses which says that if you are IN DEFAULT UNDER ANY CONDITION OF THE CONTRACT YOU MAY NOT EXCERSISE YOUR RIGHT TO TERMINATE UNDER THE FINANCE CLAUSE!!!!!

This means that, if your deposit is due the day before the finance clause runs out, and you haven't paid it because the finance was looking shaky and then you try to back out under the finance clause they have the right not to let you. It's an AR*E of a clause, but it's there, and be aware of it. Most agents aren't aware of it either, I have posted on this before, but it bears repeating. (Sorry to those who have heard it before...).

anyway, I hope that adequately answers your question, if not, please don't hesitate to ask more, or ask for clarification!

PS: usual disclaimers apply, I am not a solicitor.

asy

 

[bundy1964]

Looking at my last contract it says you have to show paperwork for a minimum of 3 aplications for finance and that the interest rate could be as high as 9% for a loan of 145k.

bundy

 

[Peter_Tersteeg]

I'm seeing a lot of other peoples contracts fall through on finance clauses at the moment. My perception is that lenders and valuers are getting conservative. As a result, an offer without a finance clause is getting taken more seriously, even if the price is lower than one with a finance clause.

A good way to still protect yourself is to first get a pre-approval, then the use a valuation clause like, "Subject to valuation of at least the purchase price by a registered valuer representing <your bank> within 14 days".

If the agent is sceptical, ask him why he is worried the valuer won't value at the agreed price.

If you get cold feet and you've got a good relationship with your bank, you can always get them to tell the valuer to give a worst case valuation to get out of the contract.

Also note that the clause does not require you to hand a copy of the valuation to the vendor - although the might give you a hard time if you don't.

You should check with your solicitor regarding any clauses, but this has helped me in the past.

 

[Kevmeister]

PT_Bear:

I really like the "Subject to valuation" clause. It's really hard for an agent to "work around" without them losing their credibility (if they had any in the first place, perhaps).

 

[TOTS]

If it is subject to finance, make it very specific ie. Subject to approval of the Commonwealth Bank 104 Pitt St. Sydney. as posted by others this keeps control. The same applies to building inspections, pest inspections by people you trust and not dodgy Dave.

 

[scott]

Thanks

Thanks for the info.
Scott

 

[Ciara Mc]

I was told by a client of mine that her solicitor informed her that the 'subject to finance' clause isnt worth the paper its written on.

To date none of my clients have had to pull out because they havent had finance.

By my understanding this solicitor is incorrect ..... can anyone comment?

Cheers

 

[TOTS]

As prevoiusly stated make the clause specific and even get it initialed and dated sep.