Urgent finance questions

[damo03]

My wife inspected a property last night and it looked promising. Unfortunately I haven?t secured finance yet or applied for it (as I am in the process of moving interstate). I spoke to some banks last year and I know that the amount I will be applying for is well below the limit of one of our incomes, and we have two with secure jobs.

My question is, can I submit an offer subject to finance, without having approached by a bank at all? If for some (crazy) reason the bank rejected me, would that be enough to void the contract?

Secondly, if I voided the contract for this reason would I lose a deposit?
Also, should I have the Section 32 reviewed in the cooling off period by a property lawyer?

Finally, how much is usually provided as a deposit upon acceptance of the cooling off period? I plan finance for 80% of the house on IO as a PPOR.
Thanks in advance.

 

[Terry_w]

My wife inspected a property last night and it looked promising. Unfortunately I haven?t secured finance yet or applied for it (as I am in the process of moving interstate). I spoke to some banks last year and I know that the amount I will be applying for is well below the limit of one of our incomes, and we have two with secure jobs.

My question is, can I submit an offer subject to finance, without having approached by a bank at all? If for some (crazy) reason the bank rejected me, would that be enough to void the contract?

Secondly, if I voided the contract for this reason would I lose a deposit?
Also, should I have the Section 32 reviewed in the cooling off period by a property lawyer?

Finally, how much is usually provided as a deposit upon acceptance of the cooling off period? I plan finance for 80% of the house on IO as a PPOR.
Thanks in advance.

Yes, this happens all the time. Get a lawyer to review the contract before you sign it and make sure there is a finance clause that is adequate.

Failure to rescind the contract properly will result in you losing your 10% and possibly more.

 

[Aaron_C]

My question is, can I submit an offer subject to finance, without having approached by a bank at all? If for some (crazy) reason the bank rejected me, would that be enough to void the contract?

Yes you can definitely do that, you don't need pre-approval for a subject to finance clause. If finance doesn't come through before then you can void the contract and get your money back.

Finally, how much is usually provided as a deposit upon acceptance of the cooling off period? I plan finance for 80% of the house on IO as a PPOR.
Thanks in advance.

Whatever you agree on but usually 10%.

 

[damo03]

Thank you all. I appreciate it greatly.

The real-estate agent sent through this statement in the email with the Section 32:

?If you would like me to assist you to purchase the property, we will need to book an appointment for you to come to my office and put your offer in writing. (In the form of a contract)?

Now, I?m assuming that If I wish for a lawyer to review the contract I?d have to get a copy of the contract first or have it reviewed during the cooling off period?

The real-estate agent has also stated that since the open house last night they are only taking offers until Sunday night (and have already received two) so they are obviously looking for a quick sale.

Given the heated market, how is the best way to approach this with regards to reviewing a contract by a lawyer and also being able to submit an offer in time?

 

[allsuccess]

I'm just going by something happened to a friend of mine. Please check with your lawyer though;

He just had "Subject to finance" and didn't really specify a lender or any other details. So, after signing the contract, the original lender he signed up with rejected that particular sale. So, he had to run around finding other lenders to get a loan to complete the sale.

 

[Aaron_C]

Yes best to specify a lender otherwise that can happen to you.

As for making an offer - just get the contract checked by the lawyer and make your appropriate offer with a signed contract.

 

[The Y-man]

The real-estate agent sent through this statement in the email with the Section 32:

...

Now, I?m assuming that If I wish for a lawyer to review the contract I?d have to get a copy of the contract first or have it reviewed during the cooling off period?

There'll be a standard contract attached to the front of the S32 emailed to you. That whole email attachment is what people often call "the contract". Email to your lawyer who can do VICTORIAN conveyancing for a squiz.

The real-estate agent has also stated that since the open house last night they are only taking offers until Sunday night (and have already received two) so they are obviously looking for a quick sale.

Given the heated market, how is the best way to approach this with regards to reviewing a contract by a lawyer and also being able to submit an offer in time?

Walk away and see if they are bluffing. If they come chasing, tell them you need more time. You might not be able to do this though if it's the house of your dreams.

The Y-man

 

[damo03]

There'll be a standard contract attached to the front of the S32 emailed to you. That whole email attachment is what people often call "the contract". Email to your lawyer who can do VICTORIAN conveyancing for a squiz.


Walk away and see if they are bluffing. If they come chasing, tell them you need more time. You might not be able to do this though if it's the house of your dreams.

The Y-man

Unfortunately only the S32 is attached, so I would either request the contract and get a lawyer to review then resubmit before Sunday, or sign a contract and review during cooling off period (if offer is accepted).

I could always submit after the closing date and see if they are bluffing.

Either way, thanks for the valuable advice.

 

[The Y-man]

Unfortunately only the S32 is attached, so I would either request the contract and get a lawyer to review then resubmit before Sunday, or sign a contract and review during cooling off period (if offer is accepted).

I could always submit after the closing date and go from there.

Either way, thanks for the valuable advice.

In that case they'll probably use a standard reiv contract form.

It just has a blank section for "special conditions" - your lawyer will be familiar with it. Just get them to word up the statement you need to insert (again they should be familiar this).

The Y-man

 

[damo03]

In that case they'll probably use a standard reiv contract form.

It just has a blank section for "special conditions" - your lawyer will be familiar with it. Just get them to word up the statement you need to insert (again they should be familiar this).

The Y-man

Thanks,

If I break contract within the 3 business day "cooling off period" is it correct that I only lose 0.25% and the remaining deposit is returned?

The reason I ask is that if a building inspection found major defects I would wish to break contract, but a inspection report during the "cooling off period" would prevent me from having to add it as a clause into the contract.

 

[Peter_Tersteeg]

The standard REIV contract also has a standard finance clause section. You need to fill in the name of the lender, the amount and the timeframe for finance to be obtained.

You probably already have a lender in mind. Fill in an appropriate amount (90% of purchase price is a good figure if you don't know), 10 working days from when they accept the offer is usually appropriate.

 

[damo03]

The standard REIV contract also has a standard finance clause section. You need to fill in the name of the lender, the amount and the timeframe for finance to be obtained.

You probably already have a lender in mind. Fill in an appropriate amount (90% of purchase price is a good figure if you don't know), 10 working days from when they accept the offer is usually appropriate.

Thanks PT_Bear. So to clarify, if after say, 10 working days (or the timeframe specified) the finance fell through with the specified institution, I would lose only the 0.2% or $100 (which ever is larger)?

 

[Aaron_C]

So to clarify, if after say, 10 working days (or the timeframe specified) the finance fell through with the specified institution, I would lose only the 0.2% or $100 (which ever is larger)?

Nope. You would lose nothing as you are pulling out under the finance clause. If you pulled out under cooling off (3 days) then you lose 0.2%.

 

[Sean M]

Hi Damo,

Please see below:

1. Finance: you seem worried about your ability to get finance. I would suggest you speak with finance broker to see how much you are able to borrow. This is to prevent you wasting your time and others.

2. Finance clause - this is pretty standard and it is important that you get your lawyer to word it correctly. As others have mentioned in the standard REIV contract there is a Finance clause built in.

3. Using the finance clause to pull out on a deal - you have to be very careful because you must ensure that your being honest in that you cannot actually get the finance. You may be asked to supply proof of this so you cannot just bluff it.

4. Using the cool down clause - yes it is possible but as mentioned previously you do loose a certain amount, depending on your contract of sale document.

If you need any further help feel free to send me a message.

 

[Terry_w]

4. Using the cool down clause - .

aka the cooling off period.

 

[damo03]

Hi Damo,

Please see below:

1. Finance: you seem worried about your ability to get finance. I would suggest you speak with finance broker to see how much you are able to borrow. This is to prevent you wasting your time and others.

2. Finance clause - this is pretty standard and it is important that you get your lawyer to word it correctly. As others have mentioned in the standard REIV contract there is a Finance clause built in.

3. Using the finance clause to pull out on a deal - you have to be very careful because you must ensure that your being honest in that you cannot actually get the finance. You may be asked to supply proof of this so you cannot just bluff it.

4. Using the cool down clause - yes it is possible but as mentioned previously you do loose a certain amount, depending on your contract of sale document.

If you need any further help feel free to send me a message.

Hi Sean,

1: Finance amount does not worry me, but as I have not secured pre-approval, I did not want to put an offer in unless I covered myself.

2: Agreed, will use the financial clause.

3: Financial clause would not get me out of a deal unless the bank decided the property was not worth the offer price.

I decided after lengthy thought not to apply for this property as it did not quite meet the requirements I have. This gives me time to secure finance and organise in advance a property lawyer/conveyancer, building inspector etc.

Thanks for the advice.

 

[Terry_w]

Hi Sean,

1: Finance amount does not worry me, but as I have not secured pre-approval, I did not want to put an offer in unless I covered myself.

2: Agreed, will use the financial clause.

3: Financial clause would not get me out of a deal unless the bank decided the property was not worth the offer price.

I decided after lengthy thought not to apply for this property as it did not quite meet the requirements I have. This gives me time to secure finance and organise in advance a property lawyer/conveyancer, building inspector etc.

Thanks for the advice.

No 3 is not correct on 2 counts:
1. Depends on the wording of the clause, and
2. a lender can reject you for reasons other than valuation.