When Finance Falls Through

From: Ray Summerton


Dear Forum,

A finance broker looks at your figures and says you have access to $x's for an IP so you go and buy a property under that price with a settlement date of say 30 days. Then the bank refuses finance, with 7 days to go. The vendor buys another place with bridging finance and wants to claim interest for the period even tho' it was a subject to finance loan. Is there any cost to the purchaser if the deal falls through?
Regards
Ray
 
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Reply: 1
From: Rolf Latham


Hi Ray

Dont know of the legal aspects, I suppose logic is that if the contract was still subject to finance and the buyer bailed during the period, the vendor wouldnt have a valid claim.

On another point NEVER assume that what a broker says is either right or possible when it comes to finance volumes. The reasons are manifold but until you have a pre-approval or conditional approval from the lender, you DONT have finance. Even at that point we have had lenders turn up their nose since the conditions are designed so they can easily squeek out.

If youre on a marginal deal you should almost always go for unconditional finance before your purchase contract goes unconditional - doesnt work for auctions.

Ta

Rolf
 
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Reply: 2
From: Steve Navra


Hi Ray,

Cart before the horse?
Get a finance pre-approval first, this way you can then channel your energy to researching the 'numbers' so that you acquire the best property within the price range.

Regards,

Steve

PS: Ask to Rolf:- If he says $XXXX the deals seem to go through!
 
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Reply: 2.1
From: Gail H


Read the subject to finance clause carefully. The date that the finance must be obtained by (ie. the date that the contract becomes unconditional) is usually a long time before settlement.

If you are saying that the finance fell through only 7 days before settlement, then I would be surprised if the contract was still subject to finance. Some people make the mistake of assuming that the last date at which finance can be secured is the date of settlement, when it is usually much earlier. Read the clause carefully.

Gail
 
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Reply: 2.1.1
From: Duncan M


>Read the subject to finance clause carefully. The date
>that the finance must be obtained by
>(ie. the date that the contract becomes unconditional)
>is usually a long time before >settlement.

Additionally.. I'd be very suprised if there wasnt some wording to the
effect of "The purchaser shall use their best endeavour".. If you dont have
some letters of rejection and detailed notes on what you've done in your
endeavours to find finance then you're in for a fight over what's going to
happen to any deposit that has been paid.

Duncan.
 
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