Changes to the finance condition for home buyers

In the past, it’s been relatively easy to get out of buying a property, based on the finance clause being included in a sale and purchase agreement. If the finance condition couldn’t be met, the vendor would accept it without questioning the solicitor, and everybody would move on.

That’s no longer the case.

Tightening up on the finance clause

Under changes to the standard sale and purchase agreement used by most real estate agents, the buyer will need to furnish a confirmation of their finance being declined. Legally if the buyer has not stipulated a specific lender, then the vendor might expect them to have a decline from multiple lenders, including more expensive non-bank lenders. And what about if your broker and real estate agent work together?

If you are unsure about a property, use a due diligence clause which allows you to cancel for any reason and affords lots of protection. Agents typically don’t like these clauses as they are too weak, but we find they generally work if you keep the timeframe down to five or less working days. However, these clauses won’t work in a hot market where agents have multiple offers as vendors prefer certainty when looking at offers.

If you use a finance clause, just be more specific. Make it ‘subject to bank finance.’

At Squirrel our Advisers are paid salaries

Squirrel is unique. We are not owned by a real estate firm, and our advisers are paid salaries not commission. We are independent and our advice model is intentionally impartial.

It should be obvious but as a homebuyer, you need to be a little more cautious when working with brokers who work in an office with real estate agents. That can become a conflict of interest when it comes to navigating your way out of a sale and purchase agreement.

In most cases, I’d like to think the best agents simply refer because they genuinely want their buyers to have a great experience. That goes for any referrer relationship between service providers.

The opinions expressed in this article should not be taken as financial advice, or a recommendation of any financial product. Squirrel shall not be liable or responsible for any information, omissions, or errors present. Any commentary provided are the personal views of the author and are not necessarily representative of the views and opinions of Squirrel. We recommend seeking professional investment and/or mortgage advice before taking any action.

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