Vendor threatening my brother with lawyers

[Dazz]

Offered & accepted $390K, clauses written by real estate agent before sourcing finance

- 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

Kath,


As Terryw noted well, this is a classic trap for the newbie in WA, where the sales rep whips out the 2 page contract pro-forma, clicks their pen and says "OK then folks, what do you want me to write on the Contract."


That's when you step in and say "Whoa back there pal, this is the Buyer's offer, so howza about the Buyer write it."


The notion of the Seller's rep writing an offer back to their Seller is just farcical. The reps, when confronted with it, just don't get it.


I would find it extremely strange, almost unheard of in fact, for a normal residential sale to have a finance clause that wasn't the standard clause # 1 on the REIWA Contract of Sale proforma.


I just happen to have a copy of one in front of me...


The WA Finance Clause has three data boxes ;

Lender : < Insert specific Lender's name >
Latest Time : 4pm on : < Insert Date >
Amount of Loan : < Insert Maximum Borrowings sought >


Now to the relevant wording ;

1.1 (a) The Buyer must ;

(1) immediately after the Contract date make an application for Finance Approval to the Lender.

(2) use all best endeavours in good faith to obtain Finance Approval

1.1 (b) If the Buyer does not comply with clause 1.1 (a) then the Contract will not come to an end and the Buyer may not terminate the Contract.

.
.
.
yada yada yada
.
.
.


1.6 Buyer must keep Seller informed - Evidence

(a) If requested in writing by the Seller or Seller's Agent the Buyer must advise the Seller or Seller's Agent of ;

(1) the progress of the Finance Application
(2) provide evidence in writing of the making of a Finance Application, in accordance with 1.1 (a) and of any loan offer made, or any rejection, and
(3) if applicable the reasons for the Buyer not accepting any loan offer

(b) If the Buyer does not comply with the request after 2 business days then the Buyer authorises the Seller or Sellers Agent to obtain from the Lender the information referred to in 1.6 (a)

-------------------


My interpretation Kath, is that if Westpac have been put in the lender's Box, then they have failed to comply with 1.1 (a) (1), and they have failed 1.6 (a) (2) and as such.....

....the over-riding clause 1.1 (b) kicks in, whereby they are not entitled to end the Contract.


The CBA rejection in writing would be sufficient to end the Contract if the CBA was written in the Lender Box....but your brother and SIL allowed the agent to write Westpac.....so they are up **** creek.


Lesson learnt - never let the Agent write your offer up. Do it yourself - when they aren't there so you've got plenty of time to think and talk it thru !!!

 

[wylie]

If it means losing their deposit, perhaps they apply to Westpac and get a formal decline letter? How much time do they have?

What affect would that have on their credit rating?

Brokers........??

 

[Perp]

If it means losing their deposit, perhaps they apply to Westpac and get a formal decline letter? How much time do they have?

What affect would that have on their credit rating?

Their contractual obligation was to apply immediately, so this wouldn't help. and yes, the decline would be listed on their credit report.

 

[wylie]

Then if it was me, I would be trying to use the broker letter and see where that leads.

It is probably worth a call to a solicitor who knows what they are doing.

It doesn't seem clear just what is right or wrong. There are many opinions on this anonymous property forum. The ones that would be most interesting are those of the brokers who are saying a letter from them is good enough.

A legal opinion would be good .

 

[Terryw]

1.6 Buyer must keep Seller informed - Evidence

(a) If requested in writing by the Seller or Seller's Agent the Buyer must advise the Seller or Seller's Agent of ;

(1) the progress of the Finance Application
(2) provide evidence in writing of the making of a Finance Application, in accordance with 1.1 (a) and of any loan offer made, or any rejection, and
(3) if applicable the reasons for the Buyer not accepting any loan offer

(b) If the Buyer does not comply with the request after 2 business days then the Buyer authorises the Seller or Sellers Agent to obtain from the Lender the information referred to in 1.6 (a)

It looks like they must provide evidence that they applied for the loan and any rejection, and this evidence must be in writing. The wording doesn't say the rejection must be from a bank, so a letter from a broker would, presumably, be enough.

 

[Perp]

It looks like they must provide evidence that they applied for the loan and any rejection, and this evidence must be in writing. The wording doesn't say the rejection must be from a bank, so a letter from a broker would, presumably, be enough.

If the broker simply says that the buyer couldn't get finance, and that's acceptable to the other side, then OK, but a broker who'd say that you applied to WBC and weren't approved would be committing a fraud.

 

[Terryw]

If the broker simply says that the buyer couldn't get finance, and that's acceptable to the other side, then OK, but a broker who'd say that you applied to WBC and weren't approved would be committing a fraud.

I must have missed that. I had assumed they were rejected by Westpac.

 

[Perp]

I must have missed that. I had assumed they were rejected by Westpac.

LOL. That's kind of central...

 

[Rolf Latham]

If the broker simply says that the buyer couldn't get finance, and that's acceptable to the other side, then OK, but a broker who'd say that you applied to WBC and weren't approved would be committing a fraud.

Example

Your bro is a new client to WBC and needs a 95 % lend.

He doesnt know it and certainly the smiling agent doesnt know it.

A formal application to WBC need not be made, because its known that the max they will do for him is 85 %.

Similarly, other policy exclusions can be applied to exclude certain lenders

No fraud in this, just fact............

Taking it one step further, the letter that seems to be so much in demand can be drawn up by any wbc employee on wbc lettterhard

If wbc had not been considered at all, like maybe we by passed the WBC branch because the WBC people were better sales people, then one might have a problem.

Meanwhile, I will get back on my red Stepthrough Honda 90............

ta
rolf

 

[Perp]

A formal application to WBC need not be made, because its known that the max they will do for him is 85 %.

That may be your view, but the client signed a contract which included this provision:

1.1 (a) The Buyer must ;

(1) immediately after the Contract date make an application for Finance Approval to the Lender.

(2) use all best endeavours in good faith to obtain Finance Approval

It doesn't say anything about "considering" that lender; it's a very specific contractual requirement.

I agree if the broker writes "the buyer was unable to obtain finance approval from WBC", and the vendor accepts that, then nobody's committed fraud. But stating that an application had been made - when it hadn't, and which was the contractual requirement - would clearly be fraud.

 

[Terryw]

the op said

WBC didn't approve initial request for finance

To me that sounds like an application whether it was put to them verbally or on the appropriate forms, with or without a credit check, or informal or formal.

 

[Bargain Hunter]

To me that sounds like an application whether it was put to them verbally or on the appropriate forms, with or without a credit check, or informal or formal.

As a vendor I would treat a verbal non-approval the same as I would treat a verbal offer. If the buyer approached Westpac and was told that they would not provide finance then there should be no issue in asking for that advice in writing. If they cannot provide this documentation and I have the right to keep the deposit then I would do so. After all my property has been withdrawn from the market, and there is a possibility that I have missed a legitimate sale during this period.

However I would not force the buyer to proceed with the sale because what's the point? If they can't or do not want to proceed then I'd get the property back on the market and quick.

Regards

Andrew

 

[boods99]

Adding to Dazz's post, further along in the standard REIWA O&A Document (this time I'm using the 06/09 edition Dazz ) under Definitions;

Non Approval Notice - "means a notice in writing given by the Buyer or the Lender to the Seller, or Seller Agent to the effect that Finance Approval has been rejected or has not been obtained"

So, the buyer is able to write their own letter advising non approval of finance...

Still, if the Seller wants to be difficult, they can still insist on the evidence clause 1.6

Lets be realistic though, if they are able to provide evidence of rejection from CBA, it would have to be an absolute tos**r who would not accept that...

Lesson - never nominate a lender or loan amount in the Finance clause on a REIWA O&A contract.

Boods

 

[Perp]

it would have to be an absolute tos**r who would not accept that...

I wouldn't try and enforce specific performance - which obviously would be pointless - but I don't see why the vendor shouldn't retain the deposit as liquidated damages for the buyer's breach. The buyer should feel lucky if a vendor's willing to accept only $2K for the breach, rather than their actual damages, which could be substantially more!

 

[Bargain Hunter]

I wouldn't try and enforce specific performance - which obviously would be pointless - but I don't see why the vendor shouldn't retain the deposit as liquidated damages for the buyer's breach. The buyer should feel lucky if a vendor's willing to accept only $2K for the breach, rather than their actual damages, which could be substantially more!

I agree, if I was the vendor I'd e pretty annoyed however it all comes down to the contract. If the the vendor is entitled to keep the deposit then so be it, if the buyer is allowed to terminate without penalty then so be it. What's fair and just has nought to do with it.

 

[Perp]

I agree, if I was the vendor I'd e pretty annoyed however it all comes down to the contract. If the the vendor is entitled to keep the deposit then so be it, if the buyer is allowed to terminate without penalty then so be it. What's fair and just has nought to do with it.

Agreed again.

 

[boods99]

Agreed again.

Will you people stop agreeing with everything...you're making me sick!!

Boods

 

[boods99]

I wouldn't try and enforce specific performance - which obviously would be pointless - but I don't see why the vendor shouldn't retain the deposit as liquidated damages for the buyer's breach. The buyer should feel lucky if a vendor's willing to accept only $2K for the breach, rather than their actual damages, which could be substantially more!

What is the intrinsic difference between a letter of non approval from WBC and one from CBA? Would the Vendor not have accepted the offer if the nominated instiution was CBA? Would the Vendor be in a different position financially if the Buyer had applied to WBC and been rejected? Would the Vendor be able to prove beyond reasonable doubt that they have suffered damages due to the fact the Buyer applied for finance at another (big 4) bank? Would this be seen as unjust enrichment towards the Vendor?

I know the law is the law and all that, but in this case, the Vendor does not have to follow through with what they are (legally?) entitled to.

Sorry but I stand by my previous assertion that any Vendor that tries to retain the deposit on such a technicality is an opportunistic ****

I still luv ya though Perp!

Boods

 

[Perp]

I know the law is the law and all that, but in this case, the Vendor does not have to follow through with what they are (legally?) entitled to.

Sorry but I stand by my previous assertion that any Vendor that tries to retain the deposit on such a technicality is an opportunistic ****

The vendor did what they were contractually obligated to do and took the property off the market. The buyer contractually obligated themselves to apply to WBC for finance and make good faith efforts to obtain approval - willingly and voluntarily. The buyer didn't comply with their contractual obligation. The vendor has lost money as a result of the breach.

The fact that the clause might have been worded differently, or that the buyer may not have obtained finance from WBC (ie the vendor would have lost anyway), doesn't seem particularly relevant to me.

But maybe I'm just feeling like a hard b**ch because I'm on about day 17 of an unbroken cycle of continuous migraines and headaches, and I'm desperately waiting to get into hospital for a lignocaine infusion...

I still luv ya though Perp!

Aw shucks, thanks, boods - that's cheered me up a bit.

 

[Kath Russell]

Received a quick Skype message when I was online with someone else. Can't get through to bro & SIL now, but this is what I got :

I went to Westpac Bank yesterday with a loan application and had it processed for a Finance Declined. Will send that on to my Settlement Agent today

I still don't have any further details but am sure this is what happened :
- Contract said they'd go to WBC for finance
- They went to WBC and were declined (I'm presuming they punched in their numbers with a branch manager and the screen said 'decline')
- Then they went full doc application with CBA and were declined

- Yesterday they were declined again with WBC, in writing and now forwarding the documents to settlement agent

They've got a few properties and haven't had any problems in the past. I seem to have made up for them with my tenants! Anyway....I too would be mad if I pulled a house off the market and found out a purchaser didn't make an effort to get finance. This is not the case with them. They made every effort. Seems to me they just didn't get it in writing from WBC immediately when they should have, then went straight to CBA and got declined again.

A friend had a purchaser pull out of a contract on him Thursday stating they can't get finance. He actually thinks the guy IS dodgy so wanted to know what he can do about it. This thread has been helpful for all of us. Thanks for all your replies. Will post result when I hear.