Vendor threatening my brother with lawyers

[Kath Russell]

Just got off the phone to my brother & his wife in need of some late night advice please. They are in contact with their real estate agent, settlement agent and waiting to hear back from their solicitor, hopefully ASAP tomorrow. Scenario :

- WA property
- Offered & accepted $390K, clauses written by real estate agent before sourcing finance
- $2K deposit
- They weren't sure on which bank they were going through at that stage so r/e agent said it didn't matter and wrote WBC
- WBC didn't approve initial request for finance. They didn't make an 'official' application after being advised this as didn't want it noted on their record
- Went to CBA, they wouldn't give finance either. Got this in writing.
- Advised agent sorry, no finance, can't go through with it

Vendors r/e agent not returning calls. Brother advised (can't remember who from) to contact REBA if they don't respond tomorrow. Vendors settlement agent dealing with bro's settlement agent & advised they're "going to get lawyers involved" if they don't get written advice from WBC confirming finance not approved.

- Are they stalling just on $2K deposit return?
- Yes I know they should have got finance approval first, but do you think they can be held to the sale or lose the deposit?
- No, I haven't got the finance clause available here

Thanks for any advice.

Cheers

 

[rugrat]

I'm assuming contracts were signed and exchanged?? Was the contract subject to finance???

Do they have a letter from CBA saying finance has been declined? If they aren't servicable at WBC it shouldn't be too hard to get something to say that if need be.

 

[Ausprop]

Vendors settlement agent dealing with bro's settlement agent & advised they're "going to get lawyers involved" if they don't get written advice from WBC confirming finance not approved.

HA HA - good... let em burn up $3k writing a pointless letter. They have no hope. Plus the deposit is in a trust account - don't worry they will get it back. Else they can do what my mate did, turn up on the door step with a baseball bat

 

[Kath Russell]

Thank you very much! Just on Skype with them now.

 

[Kath Russell]

I'm assuming contracts were signed and exchanged??

Yes

Was the contract subject to finance???

Yes

Do they have a letter from CBA saying finance has been declined?

Yes

If they aren't servicable at WBC it shouldn't be too hard to get something to say that if need be.

Cheers

Cut / Paste / Sent to them. Thanks

 

[Rolf Latham]

rea clutching at straws........................

Tell em to get over it and get on with selling the place..........sheesh

ta
rolf

 

[Perp]

If your brother signed a contract saying that it was subject to obtaining finance at WBC, and didn't apply at WBC, then I'd say he hasn't made good faith efforts to comply with the contract he signed.

His mistake was in agreeing to the finance clause listing WBC; you're thereafter contractually obligated to exert good faith efforts to obtain finance at WBC, and the vendor is entitled to proof of such efforts before accepting termination.

I know they'll probably roll over and release the deposit, but it annoys me when people don't want to be held to what they've contractually obligated themselves to do. I can't help thinking that if Kath were the vendor, we'd all be saying "you can keep the deposit".

 

[Rolf Latham]

I can't help thinking that if Kath were the vendor, we'd all be saying "you can keep the deposit"

Not this little black duck

If all is as listed, then I dont care who is the seller. See, on the other side an "open" finance clause would mean youd need to try "every" lender in the country and indeed even be legally obliged to accept vendor finance..........and that just doesnt happen.

Just because a formal application was not made, and there isnt a formal decline letter, it doesnt imply that a genuine attempt wasnt made. The purpose of the specific clause is to protect the buyer against such issues.

I have these sorts of things every week at the moment as unrealistic vendors and super hungry agents try to defeat the laws of physics.

The least amusing ones are where the sellers ( more usually the agent) wont accept a broker's letter that finance was not available.

ta
rolf

 

[grossreal]

hi perp
no you can't
its in a trust account from my reading
and it can't get out of that trust account unless two things happen
one there is a sale in which case that money does not go to the vendor it goes to the real for part of their fee
or be the depositor asks for it back
and there is no time frame on asking for it back
so you could wander down and ask for it
if its a a 5% or 10% deposit then it goes in as a exchange deposit and thats held by legals not real estates.
the person in this post has got a problem still for me
as this is wa
and from my understanding if you offer in wa and both accept the offer it binding
not withstanding the subject to finance clause.
because the vendor could get finance on the deal and you are then in a pickle
for me this is looking a legal question and its a question for a wa legal person
for me go to the local court and as to talk to a solicitor there they are free and find out your position
not for the 4k forget about that
but if I am right and hope i am not
then the vendor can ask to complete
if not sell to some one else and come after the difference the same as at auction if you bid and change your mind
wa is a funny place to buy real estate
and has some funny rules
this one is for our wa buyer and sellers and legals

 

[wylie]

There was a thread very recently where the brokers, in answer to a question about getting out of a contract via the finance clause, said that a letter from a broker is as good as a letter from the bank.

Kath, if this is so, and your relatives don't want a declined credit application on their records, perhaps a broker could look at their figures, and give them an official "Westpac will not approve this loan" letter.

 

[grossreal]

question wylie
you are the vendor
would you accept a letter from some broker, you have not seen, known,or had dealings with
knowing what brokers
can do
do do
and will do
please are you serious do you think that would work
if I got it
the black bin for that one

 

[wylie]

If it was me, I would ask my solicitor if such a letter is acceptable. If so, then I would look for the next purchaser.

I had never thought about it until the recent thread, and if the brokers on here say such a letter is as good as a bank letter, then, yes, I would accept it and move on.

 

[grossreal]

thanks
you move on very quick for me
a broker is someone that is independant of any bank or funder normally
for me has little or no backing at all
I don't go even with an offer backed by a broker letter of funding
I wait for a bank letter
to me a broker is not far off the postman
one delivers the mail the other delivers a loan proposal
and thats it
what form on legal standing can you have on this
you might as well send me a email and I send it back say yep checked it out and can't get you funding
and you are saying thats fine.
there are a few brokers closing off being brokers at the momnet and they would right that letter in a heart beat for 100.00
and they would send you a certificate from office work to be the real looking thing.
sorry wylie but I have been in business a very long time
and you may well accept it and thats fine for you
but it would not get out of my inbox if an email
black bin if a fax
and wasted stamp if mailed
there is nothing a broker could send that would constitute a letter of offer or decline unless they were the funder themselves (and there are a few of those)
if they are the funder very different question.

 

[Rolf Latham]

Hi Gross

I dont believe anyone said you should legally rely on a loan offer on broker letterhead.

The broker is deemed to act as the agent of the client.............even more so since the advent of the NCCP. As such , if a vendor, vendors agent, or legal rep wont accept such a finance declined letter and insists on a formal piece of paper its time they came out of their time and reality warp.

Understand that such a useless piece of paper is a available from a lender employee, this is easily obtainable from a broker BDM etc.

WA O&A in terms of finance issues is not much different to qld, sa vic etc.

ta
rolf

 

[wylie]

I am simply going by what was said in another thread. Perhaps one of the brokers could jump in here and tell us how it really is.

If a purchaser decided to get out of a contract due to a finance clause, and we didn't accept a broker's letter, then they would simply get out of the contract due to building and pest.

Our agent of choice would probably have a back up contract ready to roll. This is how she works, and how she did the last sale last year. Back up contract ready to go if the first purchasers decide they want to back out.

I would not want to force a purchaser to buy something if they decided they didn't want it. I don't need the stress of forcing such a situation, and unless I was desperate, I would simply say "NEXT". But I don't think I would allow us to be in a position of such desperation.

We are all different.

 

[grossreal]

hi Rolf Latham
you are mixing two things here
if the declined letter is from a funder thats fine
if the letter is from the broker saying the offer of funding is declined tahts different and is not fine for me
they are two very different things
and I don't think any legal would accept it
they would ask for confirmation from the funder and its not a time warp its just the way legals are
and wylie
I would not want to force a purchaser to buy something if they decided they didn't want it
you may not but If I had been holding a property and there are cost of that holding and teh legals in drawing up the contracts
if I was on the other side I would be asking to complete.
and if they didn't I would be asking for those fees to be paid
I am asked to pay the costs and fees at negotiating not after a agreement has been reached
but thats a different post
for me the only way out of a subject to finance is letters from funders not letters from people working on your behalf
but thats me

 

[wylie]

No problems GR. For me there is no cost of drawing up legals, as it would simply be a sales contract. Once that contract is signed, we give it to our solicitor.

I suppose if our solicitor had started getting things organised that cost us money, that would be a cost to us, but in my experience, solicitors don't start things that quickly.

Holding costs would also not be a bother to us. Another week of lost rent is not worth getting worked up about, though it would be annoying.

I imagine the value of the contracts you would be signing and the value of the contracts we would be signing would be vastly different , and if we were talking bigger values, perhaps we would be more concerned.

The biggest thing for me with a contract that fell over for any reason is the frustration of having to wait for the next buyer (unless it was still being marketed and a back up was sitting there).

 

[Terryw]

Just got off the phone to my brother & his wife in need of some late night advice please. They are in contact with their real estate agent, settlement agent and waiting to hear back from their solicitor, hopefully ASAP tomorrow. Scenario :

- WA property
- Offered & accepted $390K, clauses written by real estate agent before sourcing finance
- $2K deposit
- They weren't sure on which bank they were going through at that stage so r/e agent said it didn't matter and wrote WBC
- WBC didn't approve initial request for finance. They didn't make an 'official' application after being advised this as didn't want it noted on their record
- Went to CBA, they wouldn't give finance either. Got this in writing.
- Advised agent sorry, no finance, can't go through with it

Vendors r/e agent not returning calls. Brother advised (can't remember who from) to contact REBA if they don't respond tomorrow. Vendors settlement agent dealing with bro's settlement agent & advised they're "going to get lawyers involved" if they don't get written advice from WBC confirming finance not approved.

- Are they stalling just on $2K deposit return?
- Yes I know they should have got finance approval first, but do you think they can be held to the sale or lose the deposit?
- No, I haven't got the finance clause available here

Thanks for any advice.

Cheers

Real estate agents shouldn't be drafting clauses in contracts.

Would you be able to provide the exact wording of the clause?

 

[Kath Russell]

THANKS FOR ALL YOUR REPLIES!

I haven't read them all yet, but forwarded onto my brother & wife. What I have read though is :

His mistake was in agreeing to the finance clause listing WBC; you're thereafter contractually obligated to exert good faith efforts to obtain finance at WBC, and the vendor is entitled to proof of such efforts before accepting termination.

At the time they were undecided whether (reason, I don't know yet) they would go through WBC or CBA. They did make efforts to get finance at both, then even looked into a guarantor but no luck. They are good folk. There's no way they'd do dodgy deals. This is my brother we're talking about!

Real estate agents shouldn't be drafting clauses in contracts.

Yes - told them off for that. Learning that lesson now.

Cheers. Will check back tomorrow.

 

[Perp]

They are good folk. There's no way they'd do dodgy deals. This is my brother we're talking about!

I'm sure they're not trying anything dodgy. I'm simply suggesting that the vendor had no part in the drafting of the clause, and is entitled to expect proof of good faith efforts to obtain finance at WBC, as they have no insight into the history of why the purchasers inserted such a clause. If I were the vendor, and was simply told that the buyer wanted to cancel due to finance, and that buyer had no rejection letter from WBC, I'd be wanting to hold the deposit, too.

Just playing devil's advocate, and seeing things from the other party's perspective, that's all.

I know that your brother genuinely can't obtain finance, but if I were the vendor, I'd be getting suspicious that there's an ulterior motive, if there's no proof of an application to WBC.

If, as Rolf says, the purpose is to protect the buyer from having to accept vendor or other dodgy finance, then you simply get legal words inserted which are something like "finance satisfactory to the buyer at the buyer's absolute discretion", rather than nominating a particular lender.