Buying Property (in NSW) Subject to Finance.

A question for the experienced NSW property investors.

I see NSW has a mandatory 5 day cooling off period when buying property privately (not at auction).

If you wish to purchase a property subject to finance, is it normal practice to rely on this cooling off period (and extend as needed) in order to lock in bank finance ahead of going unconditional. Or do you just insert a ‘subject to finance’ clause. Even with pre-approval locked in, 5 days is not enough time to lock the bank in unconditionally.

What is general practice?

Include a ‘subject to finance clause’ with a 10 day period? (Assume pre-approval has already been obtained).

 

Hi Harry
In NSW generally it's just the cooling off you hear for 5 days or 10 days (5 days is standard, so you may either negotiate 10 days on the front end or have your solicitor request for an additional 5 days).

 

Thanks all for the responses. That is very helpful.

I think I will ask for a 10 day cooling off period from the date of signing.

A final question. What deposit do purchasers in NSW normally put down on contract signing. In Victoria, I have normally put down $x,000 on contract signing (generally $1-2k), the remainder of the 10% deposit at the 10 day point (or date contract goes unconditional), with the remainder of the 90% course coming at the settlement date.

Is that normal practice?

 

0.25% on signing with 5-10% at end of cooling off.

 

Finance clauses are not common in NSW but can be used.
You can also have a special condition about the cooling off period so that you don't lose any money if you pull out.

 

Thanks Terry. I see you would ordinarily lose 0.25% if you pull out during cooling off (absent special conditions). So, $2,500 on $1m purchase.

My thinking is you need to ask for 10 days to lock bank in (even with pre-approval).

 

Some banks are really quick atm, CBA for instance. Could be just a few days

 

Perhaps a benefit of the slow down in credit applications. We should get quicker processing times.

 

I should also add, I was speaking to a real estate agent in NSW today, ringing around as you do, and made mention of the issue of needing contracts to be ‘subject to finance’ to provide time to lock in the bank.

He says to me, ‘Ah mate, you obviously don’t know anything about NSW. The Property Law Act here provides that the bank must accept the price you pay for the property as the valuation. If you have pre-approval, you are all good. Nothing to worry about’.

Is he correct?
Was he wrong but arguably just mistaken in his view (hey, the law is complex)?
Was he outright lying to me?

 

There is no property law act in NSW!

 

In Victoria, when buying property, you can ask for what’s called a s32 (Sale of Land Act), which is a comprehensive list of various details and relevant documents on the property (dimensions, title docs, etc). It must be provided to the purchaser ahead of signing any contract of sale. There seems no equivalent document in NSW, certainly nothing so comprehensive.

 

No, it is different here

 

Usually easier to do in dead or slow markets or trouble properties OR if your offer is a great one. The current markets in Sydney should be alot more receptive given the overall state of the broader Sydney market.

 

I am looking around the western suburbs of Sydney at the moment. Market is down even compared to around Christmas last year. Certainly off at least 20% compared with peak in ~2018.

 

Hah, it isn't completely wrong as depending on the purchase price & LVR% there are a couple of lenders will use the contract of sale as acceptable evidence of valuation. That is completely misleading though, high chance you wouldn't be using one of those lenders. As a general rule don't rely on real estate agents for finance in the same way you wouldn't rely on your doctor to do your tax return.

 

The expectation and norm is that you can have your finance unconditional by the time your cooling off expires, put 10 days in when sigining the contract, make sure you have at least pre-approval first and it should be okay.

It's not unusually to extend the cooling off a few days if the valuatuon has been delayed.

 

Thanks so much two bobs worth.

So, the approach would be 1) Get pre-approval ahead of purchase 2) Pay 0.25% deposit on contract signing, 2) Contract a 10 day cooling off period, 3) Balance of 10% when contract goes unconditional.

I see logic of 0.25%. That is what you lose if deal does not progress.

 

Yes definitely do this. Also even though you'll have STFA, still flaunt with confidence to agents your finance is pre- approved and ready to go, as though the money is available at the drop of a hat.

 

Yes, good point. Important to show agent your seriousness and clear intent.