Purchased at auction.. bank won't finance now. How to cancel?

Call the agent that sold the corner lot for 20% more, if that buyer managed to obtain a valuation at purchase price find out who they obtained finance from and find a broker who can rush an urgent application through.

 

Actress Toni Collette and her hubby were sued when they pulled from a contract. She argued she found something better and basically wanted her deposit back. Didn't happen. Then the vendor wanted her to pay for their loss for selling to another buyer for less when market fell. She was found liable for the vendors loss as the new buyer paid substantially less that her bid. She lost far far more than the deposit + legal costs

Toni Collette to pay up over failed house purchase

I have heard of a buyer who kept three deposits all forfeited when buyers couldnt settle. You have no right as the bidder to enquire into how the vendor determines their loss.

 

I'm happy to be corrected, but I believe it is all states.

Generally, damages in contract law seek to substitute for the performance of the contract. So if Bob contracts to buy a property (or a car or a lemon) for $500k and renegs then the vendor is entitled to the difference between the contract price (+costs) and the resale price.

 

They might be prepared to bend over backwards to get you a good deal except they're a bit risk averse when it comes to valuation time.

 

Really? So when the vendor claims $10m in damages because they were unable to buy their usual lotto ticket (that would have won) because they didn't have the funds you can't question it?

 

You may well be right. I've seen this happen in WA for non auction house purchases.

 

Which state is the property in?

If you cannot settle you stand to lose deposit and will be up for costs. You could end up losing more than $100k.

The first thing to do is seek legal advice. There are a number of ways you might be able to pull out of an unconditional contract. It may be defective. Something may be missing from the contract which may enable you to terminate - but there are time limits on these things so you need to find them quickly and then make a decision.

At the same time keep trying different lenders which allow valuations up front. Or lending based on contract price would be better.

Seek private loans from family members. Get them ready just in case. Any cars or other assests you could sell?

Seek legal advice on whether to let the agent know and when or whether to ask for an extension and when. There are merits in asking for an extension immediately but it may also be better to just ask before settlement. What sort of vendor is it?

 

http://www.domain.com.au/advice/backing-out-property-purchase-cooling-off/

"Your contract for sale will outline the consequences of withdrawing from the binding agreement. They are likely to include default penalties and compensation for any losses experienced by the seller, along with your own legal or conveyancing fees, and building valuation and inspection costs. Talk to your legal advisor about the ramifications of breaking a legally binding contract."

@dublin_101 it's a bad siuation and there is a lot of doom and gloom on here. You have 4 weeks up your sleeve and from what you say serviceability isn't an issue. Get moving on a 100% re-finance (if possible) on the house you have equity in, who cares what the interest rate is, your looking at losing $50K + if you can't find that extra $100k.

Ask for extended settlement, offer a lease back for their mother as sweetner, get a loan against your cars, get a personal loan, ask family for money, do whatever is within your power to stop a bad situation turning into a catastrophic one and do it today!

 

And start compiling a list of comparable properties - only the sales that have settled will count.

 

Pre-approval is more that you are able to service a loan for $800,000 and not buy any house for $800,000.

There is always a risk when buying from auction and if you ordered a valuation upfront you would of known what price the bank will assess it on but as Peter says 99.99% of the time it will come through as the contracted price.

Seem you are part of the 'lucky' .01%.

 

Ordering up front before the valuation can be tricky too as there is no price to go on. It is very likely these valuations will come in low. Then after the valuation you would have to go back to the valuer and convince them to increase it.

but it can be good in picking up if there are any issues such as high risk ratings etc.

 

It's the valuation that's the issue - not the bank.

Cheers

Jamie

 

A couple of other options if you need:

1. Ask for Vendor finance for the extra money, if your bank allows. Vendor may be ok if you pay them the rest of the deposit in instalments if it helps the sale go through and you can offer a 2nd mortgage (vendor wants the good price you paid).
2. On-sell the house to someone else same price, but you'll need settlement extension. You could contact the 2nd bidder who lost to you at the auction. Check stamp duty rules if you do this
3. Sell another property.
4. Personal loan. But may wreck your serviceability.

All are not good.. But may be better than losing 50k.
Try for better valuation and finding more cash.

 

Been a similar situation with the valuation piece.
Generally i find that trying to argue with the valuation company results in nothing.
Where I've had success is getting a different bank to reval.
For example, if Bank A uses Valuer A and you received a bad valuation from Valuer A, go to Bank B. However if Bank B also uses Valuer A, then just cancel it and move onto Bank C, who hopefully will use a completely different valuer.

 

I believe in this critical moment, you better cross your existing property with this one and un-cross it down the track. Otherwise you are looking at potentially coping a loss of way more than $50k of hard earned money.

 

No need for this. He has 4 weeks, plenty of time to get it done structured correctly as long as he doesn't waste too much time.

 

Am I right in thinking to setup a LOC in the other property with equity, pull the cash out to fund the shortfall, wait for the other properties in the area to settle and have those sale prices recorded then do another val hopefully the valuation is high enough to get the LOC repaid?

 

Yes

 

You beat me to it Paul.

@dublin_101 - nothing harsh or unconscionable about retaining the deposit and damages/losses upon forfeiture.

It is the vendor's contract conditions that you have agreed to not the other way around.

You might need to seek out an 2nd tier lender for the balance until you can refinance.