What happens if I can't secure financing?
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.
What are the risks and responsibilities for Purchasers with regards to finance?
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.
