Most purchasers of real estate rely heavily on borrowing funds from lenders to complete the transaction. General Condition 20 of the standard contract of sale makes provision for a contract to be made conditional upon finance being obtained. This is, typically, done by completing the relevant portion of the Particular of Sale. Alternatively, the contract can be made conditional upon finance by adding a special condition to address the issue. Auction contracts are, unconditional as to finance. That is, if you buy at auction, you will be expected to have your finance in order and it will not be open to you to terminate the contract on the basis of not having finance available by settlement time.
Risks of buying unconditional as to finance
A purchaser who is unable to settle because they do not have funding in place by settlement time will be exposed to the risk of forfeiting their deposit, incurring penalty interest and being sued for damages. It is always our advice that a person not enter a contract unless:
They are certain that they have finance in place; or
They make the contract conditional upon them obtaining finance by a particular date (“the Deadline Date”).
Whilst the Deadline Date can, if the Vendor agrees, be extended, it is advisable that clients to insert a sensible Deadline Date that gives their lender a reasonable time to approve the loan. Anything less than 14 days is unlikely to be sufficient and most banks will typically require around 21 days.
Purchasing a property is often one of the most significant financial commitments that we can make. It is important to get the right advice early and not wait until it’s too late and a deadline is missed. Our office can assist you to navigate through the conveyancing process and ensure that your interests are protected at all times.
Contact us on 03 9450 9400 for a confidential discussion today.
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