Still want to buy property in Victoria? Here are 3 essential “legal” tips.

We live in unprecedented times. How quickly all our lives have changed in the last two weeks. And yet there are still people ready, willing and able to purchase property. Here are some tips for them.

These tips are aimed at Victorian property, but they may be applicable in other States too.

Tip 1: 21 days for “subject to finance approval”
Unless you already have 100% of the purchase price as cash, ready to go, you must make any offer subject to 21 days unconditional finance approval. No more buying at (digital) auctions or unconditional offers please. All the banks and lenders are now very slow with processing new loan applications, so the safest thing is to include a 21 day finance clause, just in case. You don’t need to wait out the full 21 days if you don’t end up needing it. And please insist on not paying more than $1,000 deposit until finance is unconditionally approved first.

Tip 2: At least 60 days for settlement
The settlement period must be a minimum of 60 days. This is to ensure there is enough time for the banks to be ready to settle. Some banks, such as Westpac, are currently experiencing severe delays with the issuing of new mortgage documents. Settlement can always be brought forward earlier if everyone is ready earlier and agrees. Better to build in prudent buffer time than risk defaulting.

Tip 3: Insist on special conditions
Insist on specific special conditions to advantage the purchaser. These could include (where relevant) no land tax apportionment, and specific financial penalties (by way of adjustments to the settlement amount) if fixtures (like TV brackets and light fittings) are removed prior to settlement, or rubbish isn’t removed. Don’t, under any circumstances, let the agent draft any special conditions: insist that the purchaser’s lawyer will provide the wording.

The power has now dramatically swung to purchasers: use it wisely - and keep well!

P.S. This is not legal advice.

 

What's your thoughts on the advantages and disadvantages of subject to sale clauses at this point in COVID-19 time? I've a property for sale and a keen buyer who needs to sell their property. They're downsizing by alot so I'm thinking they're good for the finance although that's an assumption based on their age, career prospects and the business sector they are in?

 

No way hoezay

 

What about a clause for finance being pulled after becoming unconditional?

There was a thread where a seller got stiffed by his conveyancer on here recently.

 

Nope. That’s what default is for.

 

Default?

 

If the purchaser fails to get finance after a contract is unconditional, and they don’t pay at settlement, the default process in the contract determines what happens.

 

I am looking for any advise on when stamp duty is payable in Victoria ? Is it at settlement or within 30 days.
Finally , If i have pre approval for $473,000(including stamp duty ) and sign a contract for $450,000 and pay 10% deposit from my funds ,the settlement balance will be $428,000.00 including stamp duty .Can I ask the lender for the un utilised funds of $45,000?.Its an IP

Other than the usual cost of buying ie conveyance fee ,building inspection etc ,what other govt fees and charges should I be aware of ?and how much .thanks

 

Within 30 days in VIC - but a mortgagee won't allow settlement to happen unless duty paid.

If you use cash to settle you can get back un-utilised loan proceeds. But there will be tax issues. Interest won't be deductible on this portion and you will have a mixed loan.

 

Can you elaborate on "the default process in contract determining what happens". Is there a way to NOT lose deposit if finance pulled after going unconditional?

 

With PEXA, stamp duty must be paid at settlement. No 30 days grace anymore.

 

Stamp duty must now be paid at settlement - a requirement of electronic conveyancing.

Land transfer fees and PEXA fee are also payable at settlement, along with any stamp duty.

 

If all else fails: probably not. Try getting a second finance opinion (different bank/broker/valuer); request an extension to the settlement date.

 

Great! So any left over or unutilised funds ,once stamp duty,land transfer,adjustments,mortgage registration is paid , at settlement, will be deposited in to my nominated account
Thanks

 

There’s a very real risk for borrowers now that previously approved finance can be pulled by the lender prior to settlement - they are doing employment checks and asking for new docs to allow settlement to complete.

To avoid a default situation, can the subject to finance clause be as long as the settlement date? Obviously not really palatable for the seller, but the buyer needs to be protected when uncon approval really isn’t, anymore.

It’s always been a (very) small risk, but significant in this environment.

 

Yes it could. A general finance clause could be inserted and another clause allowing withdrawal if the approved lender pulls out up to settlement.

 

It then goes from Unconditional to conditional up to settlement .How many vendors be willing to accept that ? Is it happening more frequently now ?

 

You never know your luck.

 

There’s always a first time for everything! Can’t imagine a vendor agreeing to that though.

 

I recently moved a settlement forward by 2 months, mindful of the risk of the bank doing further checks and potentially changing policies. Negotiated a adjustment in the price to reflect time value of money. Probably best decision I made.