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.
What steps must a Buyer take to obtain finance approval if the contract is subject to finance?
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.
How must a Buyer notify the Seller if they elect to terminate the contract under the finance condition?
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.
What happens if a Buyer fails to take reasonable steps to obtain finance approval?
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.
Can a Buyer withdraw finance approval notice once it is given to the Seller?
Once notice of finance approval is given to the Seller under the Contract, it cannot be withdrawn.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.
What options does a Buyer have if they do not obtain satisfactory finance approval?
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.
What happens if a Buyer does not notify the Seller about the finance status by the finance date?
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.
What happens if the Buyer lacks sufficient funds to pay the balance at settlement?
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.
What happens if the contract is not subject to finance approval?
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.
What happens if you can't secure financing and the Contract isn't subject to finance?
If the Contract is not subject to finance, and you are unable to obtain 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 use the finance condition to terminate the Contract.
What are the risks and responsibilities for Buyers without a finance condition in the contract?
This lack of a finance condition places a significant responsibility on the Buyer to 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 entering into such agreements.
Buyers 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, Buyers may face severe consequences such as breach of contract, loss of deposits, or even legal action from the Seller.
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.
