Auction without pre-approval?

Hi everyone,

My partner and I have our eyes set on a very suitable property that is going on auction. Only issue is that ANZ’s estimated response time to our loan application is a couple of days after the auction. Our broker is trying to escalate with the bank to push through our application but apparently pre-approvals are given low priority so no promises.

So just wanted to seek everyone’s advice on whether it is prudent to bid without the pre-approval considering the following:
- we are both salaried employees with large organisations
- loan serviceability based on the revert rate is ~2.4x our after-tax income
- LVR is ~80%

My understanding is that a pre-approval is intended to mitigate funding risk, not completely eliminate it. Given our situation it seems our serviceability risk should be fairly low from the bank’s perspective. I will also confirm with the broker the availability of alternative lenders that will provide the same limit (ANZ is the highest among all big 4s). But I just wanted check with you all to see if there are any risks with going to an auction without a pre-approval that I might have missed.

Thanks in advance.

 

I would never reccomend going to Auction unless you have a pre approval in place.

You need to have the confidence that a lender is going to give you the money if you win and the amount your approved for.

Anz don't have any room for escalations, especially pre approvals, we've had signed contracts for a purchase and they still wouldn't escalate it, therefore I suggest try looking for another lender that has a quick turnaround time.

 

So the risk is that the lender won't lend, and that would be if you pay too much.

If you don't pay too much you might get away with it? If you pay a premium there might be a problem ........

Perhaps do I / don't I should be about paying too much rather than participating. Pity things are a bit hot right now .....

 

Get a conditional approval at a lender with faster turn around. Macquarie or Suncorp or Firstmac or NAB or anyone, really......... You can always refinance to ANZ later on, if you wish. Crazy to go to auction without some form of conditional approval in place, though.

Also, you should note ; a conditional approval is NOT an unconditional approval, but from the limited information you have outlined, you appear to be a strong candidate for finance

Also, get your broker to run a valuation on the property, based on 10% above what you expect it to go for..... several lenders offer free up front valuations via brokers

 

Thank you everyone for your responses.

Thanks Tony, I will check with my broker on Tue to see if there are other viable options. Are you able to share if you know of any lenders who can turn an application around within a week?

Thanks rolf.

What other data do you need? Happy to share as much as I can.

Assuming the purchase price is at our max limit then no, we won't be able to tip in additional equity. Just for my understanding, would the bank refuse to lend the full amount requested if the valuation is 10% below given LVR is ~75% (it's actually 75% not 80%, my bad)? Is it because the resulting LVR from the lower valuation breach the 80% threshold thus requiring LMI?

Thanks euro. Do you know if the lenders you mentioned are able to turn around an application within a week?

 

Suncorp are at 5 business days for escalated deals.... so probably not
Firstmac are at 3-4 business days, so probably yes
Macquarie are almost always quite quick....

 

Mac Bank dont do fully assessed pre approvals

It's just a system pre approval. Which at times not worth the paper it's written on.

 

The problem at the moment is lenders fall into one of the following categories:

* They're simply not doing pre-approvals as they're too busy processing live applications.
* They automate pre-approvals. This simply looks at the metrics of the application and your credit report, then issues a letter. It's quick, but really just a placebo.
* The bank will do a fully assessed pre-approval, but you'll wait between 3-6 weeks for them to process it.

The statistics show that less than 40% of pre-approvals actually proceed to full loans before expiring. It's a lot of work with no real result. Hence when things get busy, pre-approvals are given a low priority.

Talk to your broker about their assessment of how likely there is to be a problem. In some cases people have a large deposit (20% or more), huge servicing (compared to what they want to borrow) and very straight forward payslips. In these cases the outcome is a given with plenty of backup options. A pre-approval really isn't necessary.

 

If its a very simple deal:
- Get your broker or you to get a copy of your credit reports. If clean, great sign.
- Most pre-approvals aren't human verified - so plenty of buyers will be buying without fully assessed ones.

In situations like this, talk to your broker to understand your risk position before bidding and what comfort limits you're in. If they say its risky and not to bid, then wait it out for a fully assessed one.