Commonly in New South Wales, the Contract is not subject to finance. Before signing an unconditional contract or before the expiry of the cooling off period, if you are unable to obtain final finance approval for the transaction or otherwise do not have immediately available cleared funds (e.g. you are relying on an inheritance or property sale), you will have no right to rescind the Contract. You must proceed to settlement regardless, failure of which will entitle the Vendor to terminate the contract, keep the deposit and sue you for damages and any loss on resale if they sell the property for a lesser value within 12 months of the termination.
The Purchaser must ensure they have the necessary funds ready and available by the settlement date. It underscores the importance of having a secure and reliable financial plan before signing the contract. If the contract is unconditional (e.g. in an auction sale or where there is no cooling off period), the Purchaser must make sure they have sufficient finance or can obtain final finance approval to settle.
If there is a cooling off period, the Purchaser must either secure finance or rescind by the expiry of the cooling off period. However, note that rescinding under the cooling off period means that the Purchaser forfeits 0.25% of the purchaser price to the Vendor.
Purchasers must consider all possible scenarios that could affect their ability to provide the funds, including delays in receiving expected monies from other sources. If funds are not readily available, Purchasers may face severe consequences such as breach of contract, loss of deposits, or even legal action from the Vendor.
Therefore, it's critical to have contingency plans in place and to keep clear communication lines with all involved parties. Consulting with financial advisors or legal professionals can provide additional security and assurance that all financial obligations will be met in a timely manner, thereby avoiding any potential contractual disputes or financial losses.
Securing finance approval is a critical step for Buyers when entering into a property contract subject to finance. This article outlines the key responsibilities and considerations for Buyers, including the necessity of timely applications, diligent follow-up, and clear communication with the Seller to ensure compliance with the contract terms.
If the Contract is subject to finance, a Buyer must take all reasonable steps to obtain finance approval by the finance date. This includes making a finance application shortly after the Contract Date and pursuing the application diligently.
If the Buyer elects to terminate the Contract under this special condition, they must notify the Seller in writing before 5pm on the Subject to Finance date. If the Buyer fails to provide notice to the Seller, the Seller will have rights to terminate the Contract at 5.01pm.
If a Buyer fails to take reasonable steps to obtain finance approval, they may be prevented from relying on the finance condition to terminate the Contract. The Seller may request evidence of reasonable steps.
Once notice of finance approval is given to the Seller under the Contract, it cannot be withdrawn. However, most financial institutions will reserve the right to withdraw finance approval at any time prior to settlement for any number of reasons. It is important that Buyers consider very carefully any conditions attaching to a finance approval and are ability to satisfy all requirements (now and up to settlement) relevant to the advance of funds before giving any notice about finance under the Contract.
If a Buyer does not obtain satisfactory finance approval from the financier specified in the Contract, they can terminate the Contract or seek an extension of time for finance. Agreement from the Seller is required for any extension and the request may be declined.Alternatively, a Buyer may give notice to the Seller waiving the benefit of the finance condition. This means you are bound to complete the Contract regardless of whether your financier approves finance or the finance terms are satisfactory.
If a Buyer does not notify the Seller in writing that finance is approved, waived or not approved by the finance date then, the Contract continues and both parties have a right to terminate the Contract. Buyers then have a continuing right to give notice of satisfactory finance or waiver but only if it is received by the Seller before they terminate.
If the Buyer does not have sufficient funds to pay the balance purchase price (including any adjustments) at settlement the Seller may terminate the Contract or seek specific performance of the Contract, and in both instances, can claim compensation.
If the contract is not subject to finance approval, the Buyer must ensure they have an unconditionally approved loan or cash funds to complete the purchase. It is crucial for the Buyer to urgently inform the relevant parties if they do not have the necessary funds to finalise the settlement.
Disclaimer: Every property transaction is different, and the information provided may not be relevant to your circumstances. By using this site you agree that the information provided is for general purposes only and does not constitute legal, financial, or professional advice.
