Vendor Is Only Accepting Non Conditional Offers- Advice on How Best to Proceed

lockmc on 11/04/2018 - 14:17
Last edited 11/04/2018 - 14:23 by 1 other user

Hi guys.

I am trying to purchase a home with my partner.
We've found something we absolutely love (the only thing we've really found in the past year of looking), however, the owner is not accepting offers that are subject to finance.
My understanding is that he has had 2 offers in the past and had the finance fall through. He is also sick and as such is not willing to entertain any offers subject to finance (I see his point).

What options do we have to go in having some level of confidence that the bank will give us the money?

Few things to note:
- The RE is checking with the owner to see if he is open to having a valuation by the bank done on the property. This would give me confidence that the valuation is roughly what I would pay and that the bank will give us the required money
- My parents have offered to put one of the investment properties that they own up as collateral for a loan in case our finance falls through. I suppose this does give us some level of confidence
- Anything else that could be thought of?

Obviously, our worry is that we are gambling a lot of money on the bank saying yes or no.
We have no reason to believe the bank would knock us back- we have a perfect record, earn a decent wage between us and have pre-approval.

Any advice?

Financial

Comments

  • loulou1 on 11/04/2018 - 14:23
    +47

    I would question why the finance is falling through. Perhaps there is something in it, maybe the house is overpriced and valuations are coming back low. Or are vendors using it as an ‘out’ clause because their solicitor’s are finding other issues such as a major road about to be built right on the doorstep or the house is on a path for a proposed road and maybe subject to involuntary resumption in the future.
    Also, I personally would never buy a house without a building and pest inspection coming back as satisfactory.

    • lockmc on 11/04/2018 - 14:27

      I am hoping to get a valuation done to ensure that the value isn't coming below that.
      In terms of the building and pest, I've been advised by the RE that it is pretty easy to remove that clause and have the building and pest completed within the cooling off period (however I guess that would be up to the vendor accepting someone entering to complete a building and pest).
      In terms of any developments- we know 2 townhouses are being built next door.. but apart from that, nothing else is planned. We know the area very well as we have been looking/studying the area for about a year now.

      I don't think the vendor is using it as an "out" clause as 2 previous offers were accepted subject to finance… although you never know how much you can trust an RE.

      • loulou1 on 11/04/2018 - 14:30
        +8

        Sorry, I meant purchasers solicitors rather then vendors.
        I trust a real estate agent as much as, well, a used car salesman. They are there to make money, not to ensure you buy a house that meets your needs,

      • yanhaot on 11/04/2018 - 16:57
        +1

        Talk to your solicitor. Get a building certificate to be sure that no developments are going to obstruct or cause annoyance to that property.

      • Wonka on 12/04/2018 - 07:41
        -1

        They aren't allowed to lie though. I trust them more than a used car salesman.
        Sure, it's not their job to work out if the house meets your needs but they are their to secure a buyer for the property - if you know that you want the property and if there are no other buyers, the agent will likely go out of their way to help you and do their best to convince the buyer about your point of view or circumstances. However if it's a really hot market (as it has been) and they have multiple interested parties (which has happened to us) then they will be looking for the purchaser who can move at the greatest speed with the most attractive offer. Unfortunately in this instance, that doesn't work in your favour but it's understandable on where they are coming from.

      • Slippery Fish on 12/04/2018 - 15:53
        +5

        You need to ask why finance fell through twice, is it selling for much above its value?

        I'd put 2 offers in, one which is how I want my offer with finance and one that's 15-25% below with no finance clause and let the buyer be greedy and take the first offer.

        Edit: also bank valuations only check that it's worth your offer, they always come back very close as they are ment to be based on market value and by accepting your offer the market value is what your paying.

        They just check they can get their money back before lending.

      • Mrs W on 13/04/2018 - 00:38

        I’ve never had an issue organising a pest and building inspection for my clients during a cooling off. Get a company that has a 24 hour turnaround, your solicitor probably has a company they normally use.

        It is alittle odd that two purchasers have fallen through due to finance, it could be a coincidence or it could be something else.

      • cameldownunder on 13/04/2018 - 09:15
        +2

        " I've been advised by the RE that it is pretty easy to remove that clause and have the building and pest completed within the cooling off period"
        And he surely told you that Santa Claus and the Easter Bunny are visiting the house regularly. He is doing whatever he can to get the deal done, so he can get his money.

        • wongsun on 13/04/2018 - 15:15
          +1

          Keep in mind if you break a contract during the cooling off period you will lose a portion of your deposit. The amount you lose depends on which state you are in.

    • follow on 11/04/2018 - 19:14

      rip

      • SlickMick on 12/04/2018 - 11:47
        +1

        That's probably close to a write-off. The land has got to be a big portion of the value of that property??
        Or looking at it the other way - it's only 10% - probably less than the discount negotiated??

    • [Deactivated] on 12/04/2018 - 22:09

      The purchaser can't use finance as an out. If they do not engage in the finance application eg refuses to provide all the documents so that finance is declined then they can not use that as an out.

  • [Deactivated] on 11/04/2018 - 14:34
    +26

    Run, run, far away.
    It seems like they don’t want to sell.

    • vinni9284 on 11/04/2018 - 14:38
      +7

      I agree and smell a rat.
      Run as fast as you can.

    • tsunamisurfer on 11/04/2018 - 15:25

      What would their payoff be?

      They have incurred the expense of an RE agent + listing + advertising fees.

      If I were doing it as a fishing exercise I would do it myself.

      • airzone on 12/04/2018 - 20:18
        -2

        10% deposit from someone who could not complete the contract… I've come up against that once. It later came out that they had collected 2 deposits already.

    • isthisreallife22 on 11/04/2018 - 17:09
      +3

      As a fellow house searcher, running away from something that took 12 months to find would be heartbreaking (but still possibly correct)

      Life :(

      • ziaxk87 on 11/04/2018 - 18:20
        +9

        don't buy a property with emotion..you will pay more for it

        • SlickMick on 12/04/2018 - 12:14
          +6

          So how do you buy a property? Get a bargain in a suburb you don't want to live in? Or bigger or smaller than you want, because that's the most economical.

          The biggest purchase of your life, and you don't want to consider how you feel about the place??

          We just bought a house based on practicality: it was costing us to store furniture, we weren't interested in any other prospects and we didn't see any better option coming up in the near future.
          I would much rather have found a place we loved.

          Back to OP, every auction is done unconditionally, so it's not unusual at all. Your financier will pre-approve the amount you need based on your income and debts etc, and if you're all good then do a valuation. The only thing that sucks, and why I never buy at auction, is you have to pay for valuation and building and pest inspections even if you don't proceed.
          You can't afford to do that to a heap of houses on your list, but if you're happy to pay full price for this one (just in case seller won't negotiate), then it's not an issue at all.
          Just be aware that the seller knows you've just invested ~$1000 in their property, which might put them in a stronger bargaining position.

          Get the agent to confirm that all locks, electrical outlets and fittings work correctly, or check yourself if you have to, and make sure the contract allows for a pre-settlement inspection. Then you can abort settlement if anything isn't as it was at inspection.

          If they don't allow valuation or inspection, then obviously they are trying to hide a lemon.

        • Illian on 12/04/2018 - 15:29
          +3

          @SlickMick: He wasn't clear, it was terribly written, but I'm pretty sure he meant once you've found something you love, don't let emotion influence the price you end up paying. Plenty of people end up with loans they can't actually manage after going way over their budget at auction etc as a result of emotion.

        • h4zey on 13/04/2018 - 09:22

          @SlickMick: Never buy a house before but i'm curious about this part? Does it mean you have to pay this just to come to the action?

          The only thing that sucks, and why I never buy at auction, is you have to pay for valuation and building and pest inspections even if you don't proceed.

        • SlickMick on 13/04/2018 - 10:17

          @h4zey:
          I've never attended an auction either. I understand that some states require a building inspection to be presented by the seller. But as far as I know, banks require their own valuation, so the only safe way is to get a valuation done so you know how much you can bid.

          But you don't have to get a valuation or inspection. Anyone can go to auction, and theoretically could bid is they had the deposit and knew they could get the finance.

        • h4zey on 13/04/2018 - 10:47

          @SlickMick: so what does it mean that you have to pay for valuation, building and pest inspections even if you don't proceed? Don't proceed with the sale? but then don't legally required to proceed if you win in the auction?

        • abb on 13/04/2018 - 12:35

          @h4zey:

          what does it mean that you have to pay for valuation, building and pest inspections even if you don't proceed?

          It means that, if you care about having a building and pest inspection done, you have to do it before the auction, at your own expense.

          You then may not win the auction.

          but then don't legally required to proceed if you win in the auction?

          purple monkey dishwasher

        • h4zey on 13/04/2018 - 12:46

          @abb: cheers btw there is a typo, I should have said, don't you legally…

        • SlickMick on 13/04/2018 - 15:22
          +1

          @h4zey:
          Yes, if don't proceed with the purchase.
          Sorry if I said you have to pay. I mean if you want a valuation or inspection, and the vendor doesn't provide, then you have to pay for them.
          So this is all done prior to auction. The information they provide may make you decide not to bid.

          If you win an auction, you are required to proceed.

          Am I making any sense here? I feel like I'm only confusing you?? :)

        • h4zey on 13/04/2018 - 15:24

          @SlickMick: nope it makes sense now, thank you for taking your time explaining :)

        • boostpak on 13/04/2018 - 15:44

          @SlickMick:the way you always buy is to do a building and pest inspection first, I'd never buy a property I want to live in without a full property report like that. You're risking your asset otherwise buy trying to be a bargainer…

        • SlickMick on 13/04/2018 - 15:49

          @boostpak:
          yeah I was just clarifying that it's by choice, not a requirement of attending auction.

          Then again, I would never pay for valuation except lender requires it (I've never seen a valuation different than I've already determined), and I would never pay for an inspection until after my offer has been accepted. No auctions for me.

        • boostpak on 14/04/2018 - 00:37

          @SlickMick: then you lose out on 80% of properties as most go to auction. If you are truly keen on one, I'd just get the building and pest done and go hard at the auction.

        • SlickMick on 14/04/2018 - 22:44

          @boostpak:
          Never going to happen. I have no idea whether somebody might be willing to pay more than me, and I'm not throwing away ~$1000 just to place an offer.

          Are you sure of your figure? You're saying at least 80% of sellers are irrational.
          (Why would you want to sell your house for the lowest price possible? With a "normal" sale, the agent will take the best offer from everyone interested, and the owner will choose probably the highest. The same scenario at auction, the buyer discounts his offer to just beat the other offers.)
          Auctions suck for everybody except the winner and the agent.

    • CLoSeR on 13/04/2018 - 14:19

      NO, just sounds like they want serious bidders only.

  • Seraphin7 on 11/04/2018 - 14:39
    +15

    Never chase a property. Do whatever due diligence you need to in order to become comfortable with the purchase.

    Settlement risk is real and can be a very costly experience for purchasers if they are unable to secure the required funding.

    • MrBear on 12/04/2018 - 09:39

      Where is that line though between pursuing all avenues thoroughly and chasing?

      • Seraphin7 on 12/04/2018 - 10:02
        +1

        Good question. For me, it's when you do something without having all the information available to make that decision … or having all the information and behaving recklessly. In this particular case I was referring to the risk that the OP would not be able to settle on the purchase.

        Once you actually have a contract signed (and deposit paid) the purchaser is effectively committed to the sale. I don't have the specific legal wording to hand, it can become very costly for the non-settling purchaser. The purchaser can lose their deposit and be sued for damages by the vendor.

  • JimB on 11/04/2018 - 14:46
    +2

    When I was selling I told the agent to not bother with subject to finance offers. Buyer could make any excuse not to proceed with the sale and it will cost them nothing.

    In Vic you have 3 business days cooling off period but you will lose 0.2% if the value of the property.

    If you purchased at auction or prior to an auction, you don't get the 3 business days cooling off period.

    Perhaps make an offer subject to a building and pest inspection, that should buy you a week or so.

    • lockmc on 11/04/2018 - 15:04

      Thanks. I don't believe this would help however because if the pest inspection passes and we couldn't secure finance, then we are still up shit creek.

      • JimB on 11/04/2018 - 15:11

        I didn't say just pest, I said building and pest inspection.

        Every building will have a defect. You can use it to your advantage.

        But as a Vendor, I'd be happy with a building and pest inspection condition but not a subject to finance.

        • dcep on 11/04/2018 - 15:15

          much harder to get away with b&p condition

          it has to be substantial

        • jhaley3180 on 12/04/2018 - 08:25
          +1

          @phunkydude: entirely depends how you word the clause. I always include a clause along the line of- this purchase is subject to a building a pest inspection report/s. Such report/s must be entirely to the purchaser's satisfaction…. Etc.
          Incidentally I always put a valuation clause in and electrical clause in too.
          You could have the clause say whatever you like; as a genuine purchaser I would be concerned if a vendor just said don't bother with conditions. Maybe suggest to the agent that they include a special condition that allows the vendor to terminate the contract at any point for any reason without penalty until your conditions are met. This allows them to continue to sell the property to others whilst you get your finance and inspection completed (which they would likely do anyway if a significant larger offer were made anyway). That would significantly reduce your risk. If they didn't accept that I would walk away. The vendor has something to hide

          Also never allow the RE agent to word your clauses, as they will write in favour of the vendor. Speak to your conveyancer or solicitor before you finalise the sale document and any special conditions. This ensures the special conditions meet your needs.

        • [Deactivated] on 13/04/2018 - 12:17

          @phunkydude: Yep, because they can just agree to fix it and you're still on the hook.

          For finance you have to be legitimately rejected for finance as well, you can't just decline to proceed because you feel like it.

          I'd be ok to make an unconditional offer, but only after I had finance approved and had my own independent building inspection conducted.

        • dcep on 13/04/2018 - 12:24
          +1

          @Bargs:

          "For finance you have to be legitimately rejected for finance as well, you can't just decline to proceed because you feel like it"

          No.
          I worked in legal firms before and i've seen lots of things.

          4pm of the day before going unconditional, client called to pull out - Change of mind.
          Fax letter to seller's solicitor - "Failed to obtain finance.. Proceed with refund of deposit"

      • CLoSeR on 13/04/2018 - 14:08

        No, you just lose your 0.25%. Buying property doesn't come without some financial cost.

  • tsunamisurfer on 11/04/2018 - 15:32

    The finance part is the lesser problem, it seems you have it under control.

    But I would not buy a property where I cannot put it condition upon clear termite inspection, structural inspection etc.

    • [Deactivated] on 13/04/2018 - 13:02

      I've bid in auctions before where I've just had to front up to pay for an inspection before the auction knowing I might not be the successful bidder. Worth it. Since you can't buy at an auction pending inspection etc an auction with a dodgy inspection conducted by an inspector appointed by the seller is a great way to shift properties with issues.

  • Meho2026 on 11/04/2018 - 16:00
    +11

    Almost everyone puts a condition on an offer. Forget what the REA is telling you.
    Put your offer in subject to whatever you want. The REA is obligated to present all offers.
    You can tell the REA that you are suspicious that the vendor has something to hide by saying they won't accept conditional offers. It's possible that the REA will give the vendor that feedback.
    Don't waste your time and money getting your own valuation. The bank will have to do their own valuation to approve your loan so it's a pointless exercise.
    It's prudent to make your offer subject to finance by specifically stating a particular bank. A vague subject to finance might not get you out the contract if you're preferred lender declines your loan.
    You could consult a conveyancing solicitor before you make the offer too.

    • lockmc on 11/04/2018 - 16:21

      The REA did meet with the vendor this morning and the vendor won't even consider offers that have subject to finance clause as they have been burnt twice already (and the vendor is sick so he doesn't want to get burned again). The valuation is provided by the bank - I spoke to them before- they said they can do a valuation and that would be the valuation that is used if we were to go ahead and take a loan out from them- so not a pointless exercise.

        • chumlee on 11/04/2018 - 18:43
          +2

          Why not just have your finance sorted before you make an offer?

          Only time finance falls through is if you have little or no deposit. Don't buy a house if you don't have at least 20% saved.

          I've sold 2 properties and neither were subject to finance and i wouldn't have accepted a clause on being subject to finance.

          Just tyre kickers

        • lockmc on 11/04/2018 - 21:23
          +1

          What did I say to upset you mate? Have read my comment multiple times and can't see any issue with my response

        • lockmc on 11/04/2018 - 21:26
          +3

          @chumlee:

          Ummm did you read my question? Finance is as sorted as it can be prior to actually signing the contract. A lender won't give you 100% confidence that they will approve the loan until after you're offer has been accepted, valuation done etc. That's not true about it being the only time finance falls through. I would say most of the time finance falls through is when the valuation is under the amount the person pays.. Then they can't make up the shortfall.

        • jhaley3180 on 12/04/2018 - 08:28
          +2

          @chumlee: finance can fall through if the valuation is significantly different to purchase price. This would then significantly change the loan to value ratio. Thereby effectively modifying your percentage ratio of the deposit.

        • chumlee on 12/04/2018 - 09:48

          @jhaley3180: if you do your homework and know the property market in your desired area you will be fine.

          If you overpay and don't have a sufficient deposit then you are a fool

        • SlickMick on 12/04/2018 - 12:30

          @lockmc:
          Honestly. Your answer is exactly correct. I think it answers your original question too?
          It's just a normal sale, except out of sequence for a non-auction sale. You need to get bank to do valuation before signing contract. Obviously you would want preapproval that you can service the loan before you spend money on a valuation.
          Then it's just a question of building and pest inspection: if they're also unwilling to that be a condition then you'd also need to do that in advance also.

          I can't see that the vendor would refuse the pre-contract valuation or inspections. If they did, then I would walk away.

          At least with this information, you can make an informed offer. With all the policing of real estate transactions, I don't know why it isn't law for the vendor to get a valuation and inspection and make it available to all prospective buyers.

        • roundnumbersonly on 12/04/2018 - 15:31

          @chumlee:

          This. If you're borrowing 80% (or less) the bank won't even bother with LMI/Valuation most of the time.

        • Mrs W on 13/04/2018 - 00:46

          @chumlee: I mean, that’s all well and good if you can afford 20% but in my area the average house price is around $750K+. That’s not a fancy house, that’s your average 3-4 bedroom house on about 300-400sqm of land. 20% is $150,000.00! Most of my clients who are purchasing normally do 10% with the rest financed and in this market that’s common.

    • coin saver on 11/04/2018 - 16:54

      I have used similar wording to this a few times ..subject to xxxx the purchaser receiving a {type of loan) loan from the xxxx bank for $xxxx at an interest rate of not more than xx% for a term of not less then xxyrs…As for a building and pest inspection the following…Subject to xxxx the purchaser receiving a report from an inspector of his choosing that satisfies his expectation of the property and all that it contains.Never just say a satisfactory report because the vendor or agent could say that they think the report is satisfactory

      • SlickMick on 12/04/2018 - 12:44

        Yes, that's the usual approach. But when the offer doesn't get accepted, you need a plan B.

  • s3n on 11/04/2018 - 16:10

    The fact is that when finance falls through the vendor has to seek commission back from the agent, the agent refunds the deposit etc. and go through readvertising and all the stress again so an unconditional offer will always be preferential

    If you must have a finance clause you may be able to negotiate a couple of things to come to an agreement (check with your solicitor or conveyancer):

    1) A non-refundable deposit that's a comfortable level to cover re-advertising costs (ie. $10,000), putting the finance risk on you and not on the vendor but capping your risk versus being unconditional and having the vendor take you to court for failure to settle

    2) Shorter settlement time to waste less of the vendor's time

    • lockmc on 11/04/2018 - 21:21

      I like the sound of point 1 and might suggest that to the REA . Point 2 I don't think will work as I believe a long settlement is preferable to them as they have a new place and need to wait for the tenants of that one to vacate.

    • snks2k on 11/04/2018 - 22:23
      +1

      Im not sure what state your in, but in ViC, but traditional estate agents are not entitled to a cent until the property is unconditionally sold and settled…

      • s3n on 12/04/2018 - 09:57

        I'm in VIC, and agents can take commission out of the deposit before the property is settles but you may be right maybe only when unconditional

        Nevertheless the point is that is a big risk for the vendor unless they can somehow see that you do have the capacity to pay

        In my case I did only have one offer on a property with finance 15 day clause and I took it and the couple were both working nice jobs so I always thought it was going to be ok

        Really 15 day isn't too bad maybe just increase your offer a little I suppose

  • MeesusEff on 11/04/2018 - 16:39
    -8

    Just because they are accepting 'cash offers' doesnt mean that you can't put in subject to Termite and building inspection, as that onus is on their end instead. My parents just made a cash offer on the house and easily requested to put in subject to building and pest inspection. Even though the BI has some minor issues like paint or water dripping, it wasnt a structural problem and something that can be fixed - fair enough.

    When I was buying a house, I was advised to always put in a 'subject to finance' bid as if we change our mind or find something else, we can just say the loan wasnt approved. So can understand from the buyers POV why they dont want subject to finance as its basically a 'get out of jail free' card for the buyers.

    Maybe if you were really serious with the purchase, put in a large deposit, if you are sure you are going to get the loan and that you definitely want that house.

    • 87percent on 11/04/2018 - 18:57
      +9

      You're the reason why the seller doesn't want the 'subject to finance's clause in the contract (based on your 'if we change our mind or find something else's)

      • MeesusEff on 12/04/2018 - 00:16
        -1

        Lol assume much? I said that's the advice that got given to me by almost everyone, including my lawyer and even my mortgage broker. And I would say that's a fair reason why the house seller only wants cash offers so that the ball then falls in HIS court (ie .building and pest inspection) rather than a strangers chances of getting the loan.

        I didn't intend to change my mind, knew that my joint loan had a high chance of approval because we have good credit rating, so I said I will put down a $70k deposit to ease the sellers mind. Offer accepted 2 hours later.

        • SlickMick on 12/04/2018 - 12:56
          +1

          Seriously, a lawyer told you that clause could get you out of the contract? My lawyer would provide you the finance, and at a really unattractive (to you) rate if that's how you worded it.

    • lockmc on 11/04/2018 - 21:19

      I don't understand your suggestion. You want me to put a larger deposit on? What would that achieve? That means I loose even more money if the finance is knocked back. Or am I misunderstand you?

      • MeesusEff on 12/04/2018 - 00:34

        If you have a good job and a perfect record, banks will be champing to give you a loan. Because if crap happens, they get to take over the house anyway so they don't lose (unless the valuation is significantly lower than asking price) . And that your borrowing power has increased significantly due to it being a joint loan. Added to that, if your parents are going to put a house as collateral, it increases your chamces, after all, banks want your business.

        That being said, as I don't know the value of the house you're wanting to get, might be well into the millions. My reference to offering a bigger deposit (assuming you are confident your loan is going to be approved and that you really want to that house) was to make the seller consider to accept your offer on the condition of finance. If you put down a sum you arent going to walk away from, then seller can feel confident that you are going to go through with it or he has a free big pay day - a win win for him. Or put in a cash offer but a longer settlement date if seller willing. You might even be able to get a better price with cash offer.

        However, if not confident in loan approval, then don't do above and you might have to let it go. The best person to speak to will be your bank mortgage rep or a broker. Both of mine told me in the first 10 mins that my loan wouldn't be an issue, YMMV depending on your situation as I'm not too familiar with Melbourne's property market)

        • SlickMick on 12/04/2018 - 13:00

          Talk to the banks in Gladstone where they can't sell repossessed houses for enough to recover their money.

          I'm sure OP has preapproval and the only unknown is the valuation, which costs ~$400. It's preferable to have a signed contract before spending the money, but not an unconditional one.

          But there's no need to walk away. If the OP wants the house, he can get the valuation pre-contract. No big deal.

        • lockmc on 12/04/2018 - 13:16

          @SlickMick:
          Yep the valuation is happening tomorrow morning.

        • SlickMick on 12/04/2018 - 13:18

          @lockmc:
          Good luck and best wishes :)

  • yanhaot on 11/04/2018 - 17:01
    -1

    In all honesty, people should not even consider buying properties, if they have not consulted a mortgage broker or bank regarding their loan approval. Get your finance sorted out first and you won't even need that clause in the contract.

    • Quantumcat on 11/04/2018 - 18:34
      +5

      The bank still needs to do a valuation and can knock the loan back if the valuation isn't high enough. You can't know before.

    • lockmc on 11/04/2018 - 21:17
      +2

      What makes you think I haven't consulted the bank? My finance is sorted.. But no bank will give full approval without valuing the property and everything else that they do.

      • CLoSeR on 13/04/2018 - 14:10

        How much are your lending? More than 80%?

        • lockmc on 13/04/2018 - 19:02

          80%

  • WTF on 11/04/2018 - 18:52
    +7

    I am not sure if you need to worry so much if you do your due diligence.

    First, lots of people buy houses at auction where there are NO conditions (ie you buy as is). and Lots of vendors decline offers subject to finance.

    Second, if you have been looking for property for an year, you should have a good idea of the property value. You can also request a property report from most Banks free of charge or from the ANZ website which should give your a reasonable idea of what the estimated value is like. This is not a replacement for a formal valuation but gives a fairly good indication.

    Third, loan pre-approval means absolutely nothing. However, if you know what your borrowing limit is and you are prepared to stay 5-10% below the limit (ie you do not stretch yourself) and you have money for deposit then this is not something you need to worry so much about. Never stretch your fiances - your never know what will happen tomorrow

    Lastly, always get (1) a building and pest inspection; (2) Check with the council about easements, development etc; and (3) get your lawyer to check the contract beforehand. You can do these before making an offer. If the vendor refuses to give you access for a building inspection etc then WALK AWAY.

    Bottom line, if you do your due diligence and your are careful not to stretch your finances, you can protect yourself just as well as any 'get out' clauses in your contract.

    • SlickMick on 12/04/2018 - 13:03
      +1

      You say pre-approval is worthless, then say know your borrowing limit. Pre-approval is verifying your borrowing limit.

    • hoey888 on 12/04/2018 - 13:05
      +1

      Can agree with the due diligence part. Was about to put in an offer for a renovated house which was subject to a council special overlay. Agent was clueless about this.

      Did some further digging and spoke to council planning officer. Found property was in a flood zone. (ie subject to once in 100 years flooding due to a storm water pipe running underneath the street. Knowing that building insurance would have been subject to a flooding exclusion.

      I quickly walked away as result.

      • Mrs W on 13/04/2018 - 00:49

        You would be surprised just how many suburbs are in flood zones. Its something a lot of people don’t even thing about.

      • EagleKent on 13/04/2018 - 08:17

        All agents are "clueless" about things that negatively impact price. Just my general observation.

  • robbyjones on 11/04/2018 - 19:03
    +1

    Cash buyers for a house would make a sale harder. Do your due diligence with building and pest inspections. Just so that you know the banks valuation is likely to come in less than market value. We recently refinanced and the bank sent out a valuer and the valuation was about $300K less than market value. That may be why the last two contracts fell through.

    • dcep on 12/04/2018 - 00:14

      wow ? so property price drop 300k ?

    • SlickMick on 12/04/2018 - 13:15

      Okay, that's theoretically true because market value is whatever somebody is willing to pay. But you have to remove the outlier "idiot offers". The real market value is the bank valuation - it looks at what others have paid recently for similar houses. Why would you be willing to pay more than them?

      I would never pay more than bank valuation. In 8 purchases, I've never paid more than valuation. If a valuation ever came back below my offer, I would say "phew I dodged a bullet there", and wear the costs I've incurred as penalty for not doing my due diligence.

  • PAOK11 on 11/04/2018 - 19:48

    I bought a town house without subject to finance clause. It was extremely risky and could have turned out very badly. I would not recommend it to anyone. Why lose your deposit to something that is out of your control

    • PAOK11 on 11/04/2018 - 19:51

      The other thing is even if you have the clause but don't act quickly the contract will become unconditional regardless i'm pretty sure

      • SlickMick on 12/04/2018 - 13:20
        +1

        part of the clause is a date you'll have finance by. So by that date, you have to say you were unable to obtain finance, or the contract becomes unconditional on that clause.

    • SlickMick on 12/04/2018 - 13:22

      Are you sure you were only risking deposit? I think you can be forced to honour contract, or compensate seller if he gets less than your offer.

      • PAOK11 on 12/04/2018 - 13:24

        Your right, this would also be another consequence. The craziest thing happened where the developer wouldn't let the banks in to complete a valuation. Granted the bank had stuffed up and asked a week before settlement. I ended up having to sack my solicitor and I finally got it sorted

        • SlickMick on 12/04/2018 - 13:26

          ouch that would have been stressful. I'm glad it worked out in the end.

      • aleayr on 12/04/2018 - 15:40

        You can be risking more than your initial deposit sometimes.

        When I last bought a place, the vendor agreed with a 5% upfront deposit, but legally, my solicitor made me aware that the total deposit is still 10%, but split into 2 installments (5% now, 5% at settlement and the rest of the 90% at settlement also). Called deposit by installments.

        If I proceeded to an unconditional contract and then it fell through, I would have to provide the extra 5% deposit myself to the vendor.

        Certainly in the ACT, this is a standard contract term when paying with a less than 10% deposit. I had no issues as I had more than 10%, just wanted more money to stay in my bank account, but could be a trap for people who only have 5% plus costs.

        Fortunately, often in the ACT, contracts aren't exchanged until the bank gives unconditional approval (in exchange for then waiving the cooling off period), so the chance of this happening is pretty low.

  • TheBilly on 11/04/2018 - 20:39
    +10

    Ive bought a few properties, and I can tell you when somebody is non negotiable there is always another motive. Put in your offer, subject to finance and pest, if they don't accept, walk away. Unless you are getting a killer deal on the price, emotional considerations shouldn't come into it. The one time I didnt put in an offer subject to pest, the house had termites. Go figure ! They say you can sort it out during cooling off, but the reason they say this is because if you put in the condition then you can action this at any time in the sale even after cooling off, whereby they are trying to force you to make the decision to commit within the cooling off period. My offer was not subject, I found out about the termites and then had to make a decision in 3 days before cooling off expiry, so I threatened to walk and they accepted my requests. If 2 peoples finance fell through, thats enough fails to know something is up.

    • SlickMick on 12/04/2018 - 13:33

      or the seller has had 2 contracts fall through on the finance clause and doesn't want a hat trick. hmm could it be what we've already been told, or your speculation? hmmm.

      It depends what the market is like. If there are plenty of buyers, the house is likely to be sold on an unconditional contract. If buyers are sparse, the seller will have to make compromises.

      I just bought a house for $13,000 less than another offer, because I was only subject to finance and inspections, whereas the alternate offer was subject to selling their house.

      I've tried to buy in a seller's market, and kept getting offers rejected and missing opportunities until I learned the rules of the game.

  • snks2k on 11/04/2018 - 22:10
    +7

    Hi Mate,
    Im an estate agent myself in Vic. not exactly sure where you are from. But here are some something you can try.

    If you are just worried about the bank valuation to obtain your finance, you can put in an unconditional offer, but actually put on the offer (under special conditions) "this offer is only subject to a bank valuation to be completed by the purchaser with 5 days of the owner signing the contract of sale." or something along those lines. - Consult your conveyancer/solicitor

    Explain to the agent that all you want is a bank valuation to be done thats it. You cannot back out of the contract for any other reason then the bank saying it is overpriced.

    But obviously all this is great only if you beat the competition.
    Wish you all the best.

    • s3n on 12/04/2018 - 10:06
      +1

      Yes this is good advice and will work but your offer needs to be decent of course as suggested

    • SlickMick on 12/04/2018 - 13:36

      Hey, just want to say that's the most useful thing I've ever heard from a real estate agent.

      • snks2k on 12/04/2018 - 23:49

        Thanks mate. Good to know that I've been able to help in some way shape or form.

        See, we're not all that bad =) hahaha

    • lockmc on 12/04/2018 - 15:01

      Thanks. This is good advice. The valuation is happening tomorrow morning (State Custodians are great- spoke to them at 5pm last night and they worked hard to get the valuation done early). The agent has been nothing short of helpful. It isn't actually his listing- its another agent at the same company (I met this agent at another house that we didn't go ahead with).

      I have a few hurdles to overcome at this stage:
      1. Valuation coming in at a price im comfortable with
      2. Nobody falling in love over the weekend with it
      3. Us coming to an agreement on price

      I'm confident in #1 and #3..but not sure about #2. Murphy's law always bites me in the ass.. a property could be sale for months and months and then the week we like it, someone buys it. I swear that happens to me all the time. Wish me luck!

      • snks2k on 13/04/2018 - 00:03
        +3

        Sounds like you could be buying a house from a Barry Plant agent.
        But going through a fellow agent who is not managing the property can make it more difficult for you, as they are both fighting for the sale portion of the commission. And the managing agent always has full control.

        Just make sure now that when you put in your offer. Ask the agent what thier offer presentation process is.
        As this can change the end result dramatically.
        If they say its first in first serve, present it straight away.
        But if they say we need to wait 1 or 2 days to give everyone an opportunity to everyone who came to the Saturday inspection, then put in your offer last minute. This way there is no chance of the managing agent to know your offer and risk him telling his own buyers what your offer is.
        If you need to chat though, please give me call. PM me your number and I'll call you.

        That also goes for anyone in the OzB family. My way of paying back what I have saved over the last years =)

  • blitz on 12/04/2018 - 00:09

    Are you sure that the property is sound?

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