If you are considering buying property and finance is required to complete the purchase, we recommend making the Contract of Sale 'subject to finance'. 

A finance clause will state that the Contract is conditional and subject to the lender approving a minimum loan amount by a particular date.

If finance has not been approved by the approval date, a purchaser can request an extension of time from the vendor. 

Loan approval cautions

It is important that you are aware of your loan approval date, and if the finance is not approved by the approval date, to contact our office. We will formally request an extension of time from the vendor’s solicitor. We recommend you avoid dealing informally with the vendor or agent in this situation.

Beware that obtaining a ‘Pre-approval’ from a bank does not necessarily guarantee you finance approval. Those terms are only an indication from your financial institution that they are likely to approve your finance if everything else is correct. 

Risks of unconditional Contracts of Sale

You may find yourself being pressured by the selling agent to sign an unconditional contract. If you proceed unconditionally and finance is not approved due to a change in your financial circumstances or the lender is concerned about land you have purchased, e.g. Power lines on your land, you may find yourself being forced into proceeding with the purchase or losing your deposit monies and potentially being sued for damages.

A purchaser may end the Contract of Sale if the loan is not approved, but only if the purchaser:

  • Immediately applied for the loan;
  • Did everything reasonably required to obtain loan approval;
  • Serves written notice ending the Contract on the vendor within 2 clear business days after the approval date or any later date allowed by the vendor
  • Is not in default under any other condition of this contract when the notice if give.

The vendor’s solicitor may request a letter from your lender stating that a finance application was declined.

Remember, an unconditional Contract of Sale must proceed!