47sqm apartment anyone?

Saw this not long ago too.

It's disappointing for the young guy, but hopefully shows others the importance of due diligence and talking to a broker. Hopefully he will be compensated for it all or is in the process of seeking advice from another lender to get it over the line if it's not too late.

 

A timely warning to anyone thinking of buying a one-bedroom apartment. If it's too small, you may not receive finance.

Private sale: Never buy without a 'subject to finance' special condition, so your bank can obtain a valuation.

Auction: Show the contract to your bank before the auction so they can check the size.

Off-the-plan: factor in that the size could reduce slightly before completion and that you won't get unconditional finance approval until completion. Be risk averse!

An email from a bank manager is not unconditional approval; a formal letter from the bank on letterhead is.

And NEVER sign a contact without getting legal advice first.

 

Wow!

"Ms Tashevska then received a phone call from the bank at 4.30pm the day before settlement saying the bank manager who had been handling the loan had "resigned" and that it was the bank's policy not to lend to properties under 50 square metres."​

You don't think that not letting him know there was no loan until 4.30pm the day before settlement was a bit wrong? I do. Of course we know that without loan docs there is no loan but how is a FHB supposed to know that?

I agree the vendor should give him a chance to find a new lender but I don't agree the original bank did nothing wrong.

 

No, you know why, because we do not know if there was a formal pre approval or if there was a conditional approval or anything else, like why or if there was a call & who was buying it ?

I could go to a bank or broker, they can say oh yeah, you should be able to get a loan etc etc, but unless I have a conditional approval or formal offer, meet the conditions, I would not go unconditional on any contract, I mean you just can't, seems this person may have. Anyone doing the conveyance would advise this.

Let me be very clear, you can only make a judgement either way if you have all the facts, we have zero facts, so I am not going to say the bank is bad or done wrong, nor the buyer or anyone else. I simply do not know. I do not think anyone does.

So far he said, she said....

I am not sure they would listen to us anyway, the court of PC forum

 

I agree although I would not take legal advice (i.e. when to go unconditional) from a conveyancer

But yeah, it seems perhaps he might have jumped the gun on going unconditional. Possibly he thought he had a loan approval and went unconditional on that basis.

Revisiting the article:

Mr Tashevski-Beckwith said he was approved for the loan for the 47-square-metre, one-bedroom apartment in a series of emails and phone conversations between himself, his mother Marika Tashevska and a NAB bank manager in December.
​

Whether there is any wrongdoing by the bank will come down to the contents of those emails.

I find it a bit alarming that a person would think an email is a loan approval. A person studying at uni should be more financially literate than that. What are they teaching kids in school these days?

 

More in this article. Looks like he formed the view that the loan was approved but without a formal offer or loan docs in writing. I don't think I would go unconditional without loan docs. Actually, I wouldn't. I have had a formal letter approving my loan from a bank that subsequently failed due to GFC and the banks insurer changing their policy. I advised the REA that I had a formal approval but I did not go unconditional on the contract without loan docs.

Anyway, it looks like the deal might not be dead after all.

The parties have been unable to reach an agreement, with Mr Tashevski-Beckwith insisting that the bank entered into a contract with him through its employee and must now uphold its end of the deal. There may still be time to rescue the sale, but the clock is ticking.
​

Tick tock. I wonder if he has heard of finance brokers?

What really alarms me is this:

“From where I’m looking, I had a loan,” he said. “I just want them to give me what they promised me.”
​

From my point of view he never had a loan. Without a signed formal loan offer there is no loan as far as I can see.

 

I highly doubt he will have a leg to stand on legally, you do not go forward without an amount of risk without a formal offer with all conditions met. If he has an approval/offer with this property, then that is different, will have to wait and see.

I have done it a couple of times when buying at auction, but I knew there were many lenders out there I could go too.

Your conveyancer is right to advise if to hold back, that is part of the gig in my eyes, but these days a lot say nothing.

Instead of crying to the media and pointing fingers, he should be working on the problem and not get side tracked - I know that is tough talk, but it is the harsh reality, but maybe there is a lot more to the story. Wonder if we will ever find out.

 

Maybe going to the media is part of the strategy.

 

Yeah, you may be right, to try and get them to change policy for this instance.

 

Good point, I made an assumption. I made the mistake to assume.
You know what that means?
Means it's makes an ass of u and me

 

On a side note, if you currently own a 1 bedroom unit under 50sqm and you go to a bank sometime this year to refinance to renew the interest only period, could you get stuck out like this poor chap? My feeling is yes as they reassess the property as though it's a new purchase.

 

Ultimately that's the problem here. People are generally clueless about the process and nuances of lending. The bankers tend not to educate borrowers because they want the whole experience to be positive so they can get an 8/10 review and get their bonus (part of bank staff remuneration is based on customer satisfaction and the threshold is 8/10).

The person in the branch probably told them, "No worries, you're approved to borrow $x". Just an opinion and they may have put it in an email, but it's not binding in any way. Borrower took it as an unconditional approval and went and bought an apartment.

He sends the documents to the person at the bank, who sends them to credit requesting full approval. The banker then leaves his job (doesn't matter why, but the article states the banker no longer works for NAB).

The banker leaving creates a disconnect as they haven't done a proper hand over. The borrower doesn't follow up on the assumption everything is okay.

In the meantime credit declines the file. There's no new file owner so it simply goes into limbo and nobody calls the borrower to let them know the bad news.

A few days before settlement, the borrower calls the bank because they haven't heard anything and are wondering how they'll get the money. The conveyancer hasn't said anything before now because there's no finance clause, their first interaction with the bank is booking the settlement.

As a result of all this, the problem is only identified a few days before settlement.



The real problem likely occurred because when the banker left, they didn't do a proper handover. It's a very difficult problem to rectify because people leaving a job have a tendency to let things drop because it's no longer their problem. Even if they leave under favourable circumstances, at 5pm on Friday, they're gone. If it's not all done by then, not their problem.

The irony is that I've often had bankers tell clients that they'll always be there, long after the broker isn't. I find it's usually the opposite.

 

When people are out of pocket they try to blame someone. If they don't get satisfaction, they often take their sob story to the media. At least in this case only a big corporation was named. I've seen individuals named and careers destroyed.

 

At CBA staff need 9/10 to meet the threshold.

 

Yep. It's an issue. I went back to top up a loan I had on a cottage (free standing house not an apartment) Valuer measured 49.5sqms. Assessor rings says no top up possible. Luckily when I had them escalate it to their manager it got done.

I also have 2 apartments under 50sqms. Time gone by the purchase was done on the contract, last refi (different bank) valuer measured and again caused issues. Was a bit of a shock, because rp data and council has it recorded as over 50sqms. Got it done, but things are getting harder lately.

 

Even a clause subject to finance would not help as normally there is a number of days from the contract day n can not last to settlement day??

 

Interesting to note.
As 1 bedders are quite popular in certain markets and have proved themselves as worthy investments.
It does however, add layers of uncertainty and paperwork when it comes time to refinance.
It may possibly slow down some portfolios out there.

 

An absolutely silly situation - the would-be borrower has a very poor understanding of the process and the person who handled his file didn't try to educate him on how it all works.

Clearly an under-educated banker themselves who was not aware of NAB's very clear, rigid and well documented policy.

On the flip side, this all could have been easily avoided and or resolved via a broker with a basic understanding of apartment financing. I would have been calling a broker instead of complaining to media.

 

CBA - they go almost everywhere and anywhere.

 

I heard that NAB gave in on this one and ended up funding it.