Vendor Is Only Accepting Non Conditional Offers- Advice on How Best to Proceed

lockmc on 11/04/2018 - 14:17
Last edited 11/04/2018 - 14:23 by 1 other user

Hi guys.

I am trying to purchase a home with my partner.
We've found something we absolutely love (the only thing we've really found in the past year of looking), however, the owner is not accepting offers that are subject to finance.
My understanding is that he has had 2 offers in the past and had the finance fall through. He is also sick and as such is not willing to entertain any offers subject to finance (I see his point).

What options do we have to go in having some level of confidence that the bank will give us the money?

Few things to note:
- The RE is checking with the owner to see if he is open to having a valuation by the bank done on the property. This would give me confidence that the valuation is roughly what I would pay and that the bank will give us the required money
- My parents have offered to put one of the investment properties that they own up as collateral for a loan in case our finance falls through. I suppose this does give us some level of confidence
- Anything else that could be thought of?

Obviously, our worry is that we are gambling a lot of money on the bank saying yes or no.
We have no reason to believe the bank would knock us back- we have a perfect record, earn a decent wage between us and have pre-approval.

Any advice?

Financial

Comments

  • theguru1 on 12/04/2018 - 07:44
    +5

    The owner is quite entitled to ask for unconditional offers, if they choose. It doesn't necessarily mean there is anything wrong with the property.

    Every Auction sale is unconditional. Just do all your checks and financing approvals, then make your offer.

    Your loan situation should be all sorted prior to even considering properties. Why fall in love with a property and not know if you can buy it?

    Good luck with the purchase.

    I am a Real Estate Agent too for nearly 40 years

    • SnoozeAndLose on 12/04/2018 - 10:03

      Don't listen to what the REA say it what I heard most of the time.

      Owner entitled to ask for unconditional offers, REA can also able to change the owner to accept conditional offer.

      At the end of the day REA only care if the property being sold and commission get paid.

      • SlickMick on 12/04/2018 - 13:40

        it's easy to hate on agents, but this one was giving good advice.
        On the other hand, if OP listens to you he won't be getting this house.

        Yes, OP can put in any offer he likes. But he isn't going to waste his time when he knows seller is also entitled to reject any offer he likes, and will reject an unconditional offer. That was established a long time ago if you read this thread.

  • [Deactivated] on 12/04/2018 - 10:11
    +3

    Don't fall in love with a house until you have bought it.
    Love makes you blind and liable to do something silly.

    • SlickMick on 12/04/2018 - 13:47
      +1

      It's good advice to make rational decisions based on fact not emotion, but you first have to fall in love with the house before you bother looking at facts.

      Who wants to spend all their time and money with something they feel "meh" about?

      I've bought a few houses, the most recent the first with no emotion. I'm slowly finding things to appreciate "hmm it actually has a nice view of sunset over mountains" - if I didn't find those things I'd be forever thinking "gosh I paid a lot of money just for a roof over my head".

      I will never again buy a house I don't love. This one is like trying to make an arranged marriage work vs falling in love and appreciating what I have every day.

  • jhmtaylor on 12/04/2018 - 13:53

    I support the caution expressed by some above and would suggest you call around and talk to the neighbours. You would be surprised what you can learn from such an approach. I would also put any questions you have in writing to the agent and see what the reaction is. I would also mention concerns about why the past deals fell over and the fact that there appears to be problems with the house. If they hedge their comments, walk away.

  • tonsta on 12/04/2018 - 16:39

    get a higher paying job.. banks don't care about collateral.. they care about your ability to service the loan (your income), collateral is just the banks insurance. You can have a empty block of land in point piper but if your unemployed they wont lend to you.

  • ra3m3 on 12/04/2018 - 16:58

    You can get a free valuation report from CoreLogic using NAB property valuation tool. If there is nothing around that sells/sold at a comparative price, it is very hard for the property to get valued as much in the lender's valuation. You may also use this information to negotiate the price/force to order a valuation if the owner is not willing to do it beforehand.

  • Penalty boxer on 12/04/2018 - 16:58

    I purchased without conditions. It is quite common with auctions as well. You could also agree on a non-refundable initial deposit (e.g. $2,000) to demonstrate seriousness.

  • syousef on 12/04/2018 - 17:13
    +1

    I'd walk away personally.

  • MoonlapseVertigo on 12/04/2018 - 17:58
    -1

    sounds dodgy. I'd go with subject to pest and build inspection at a bare minimum. if he says no, yell "see ya later, mack. Here's my number if you change your mind" and onwards and upwards.

    If he really wanted to sell like a normal vendor, he would follow buyers due diligence processes….something's up.

  • dufflover on 12/04/2018 - 18:15
    +2

    +1 to all the comments that mention auctions - at least in Victoria they are pretty much all non-conditional where people just big with a gesture, never naming a condition.
    So all these thoughts something dodgy going on is a bit of a false assumption as I'd say overall unconditional is more the normal than not. So yeah just do the due diligence as mentioned; if it's a non-auction sale you always should do the building and pest anyway as you have more time to get that stuff sorted and to organise with the vendor to have it done.

    The agent I dealt with when making offers did the unconditional thing too when I talked about that stuff. In the end we reached an agreement where the sale was unconditional but verbally agreed that I could get the checks I wanted done over the fortnight. In terms of finance, whilst not guaranteed I thought there was this whole concept of banks giving provisional approval for loans if you had purchased? (and you gave them the property details beforehand)

  • rlay3 on 12/04/2018 - 22:52

    This is a hard one mate…I've been on both sides where I loved a property and played hard ball, tried to negotiate conditions and lost the property to someone else. On the other hand I've also bought at a heated market that was over the asking price.

    From my experience, you'll never know who's lying and what their motive is. But unless there is a lot of other competition, I've never met a seller who wouldn't agree to include a subject to finance clause as long as the expiry is reasonable - it's more time wasted for everyone if you end up not getting your finance.

    Do you love the property enough to take this risk? It's tough. My personal view is there is plenty of fish in the sea.

    Good luck!

  • TheNeo on 13/04/2018 - 00:41

    Just another thought; not sure whether it would help though :)

    You could present 2 offers…

    a) First offer subject to finance approval (from X bank @ y% or whatever); but for something more, on top of the price you presently have in mind (say +5K). Mate, if the seller accepts this offer, you would pay a little extra; but then, you are getting the property you have really wanted to… and this is the price you pay for your peace of mind, to be able to include the finance approval clause.

    b) The second one without any finance conditions, but go for something less that what you have in mind (say -10K, depending on what you think is reasonable). If the seller still goes for this offer, this is the price he is paying for, to have an offer without a finance approval clause. And, if this goes through, you still save 10K or so.. compared to what you would be paying otherwise. Seeing that you have studied this property/ area & your financial position/ loan serviceability reasonably well, there is a high possibility of loan getting through without any hassle. You also have your parents' investment property as a backup; so it looks like a risk worth taking. If you come up with a really low offer, you could lose the house to someone else; so work out a reasonable offer, as you are so keen on this particular property..

    Either way, do have the building & pest inspection clause in both offers. If the house is in good shape, there should be no reason why the seller would be worried about this clause. If he insists on taking this clause out, there must be something ugly you have not picked up yet. That might also mean that finance was not the actual reason why his last 2 offers actually fell through! You might want to walk away…

    Wish you good luck mate.

  • frozenkuku on 13/04/2018 - 04:25

    I dont see there's any problem with this. Get ur bank to approve the maximum amount of money u can borrow and put the money into ur bank account, show the seller ur bank balance, that way they know u have the money to pay. I did it in the past, easy if u have a good reputation with ur bank.

    • popcornready on 13/04/2018 - 06:43
      +1

      I love Ozbargain advice, especially when it’s so wrong it’s not funny

      • lockmc on 13/04/2018 - 06:55
        +1

        Haha great advice this isn't it?

    • chumlee on 13/04/2018 - 07:15

      The bank will need the title deed before they release the funds otherwise it's a personal loan

      • frozenkuku on 13/04/2018 - 12:59
        -4

        Then it simply means u suck, bank sees no value on you. I can easily ask bank to approve $1 million in my bank account within 3 hours.

        I dont care what u think, i just offer an advice to op that i have used before.

        • chumlee on 13/04/2018 - 13:12
          +2

          Cuckoo cuckoo

  • brawndo on 13/04/2018 - 06:25
    +1

    Is there a reason why finance has fallen through on the other two offers?

    Red flag to me, but there could be something about the property that's causing the banks to say no to a loan.

    Move on.

  • Burnz316 on 13/04/2018 - 08:26

    This could just be a tatic by the real estate agent..

    There could be something wrong with the property that a building inspection will uncover. A non conditional contract is the real estate agents way around this.

    Never trust anything the agent says, get advice from your bank and lawyer.

    • CLoSeR on 13/04/2018 - 14:05
      +1

      What's the stop the purchaser arranging an inspection prior to unconditional offer? That's how you have to do it at auctions.

      • Burnz316 on 13/04/2018 - 20:26

        Yes that would be an option. Guessing Bank would have to approve also before signing the contract.

        Only issue is in the time spent doing all this is someone else may come in and buy it.

        I personally would much rather sign something with a cooling off period.

        • CLoSeR on 14/04/2018 - 00:08

          That's exactly what the purchaser should be doing, using the cooling off period. I don't think the agent would be trying to hide something that will likely show up when inspection is completed; purchaser can still pull out of the sale under cooling off. Unconditional offer does not exclude your rights to cooling off period, the seller just doesn't want any ridiculous subject to finance clauses which for purchaser are an easy out. A decent lawyer will always advise against accepting such.

  • Kjjd on 13/04/2018 - 08:26

    Hi, I would also check that the property’s building matches what the council has on file. We had a pest and building check done and it ticked all the boxes. The builder we got in to do the renovation even remarked on how well built it was. It was on filing an application to install another bathroom we found the previous renovations had not had building approval. It only had planning approval. It cost us extra stress , time and money to get retrospective approval. Lots of dodgy renos out there. We were fortunate everything was built according to approved parameters. Owning a government built house is also not certain that all planning and builfing permits had been lodged as a tradie told me he found there was no plan lodged for his governtment housing property.
    The RE agent will only fall back that they trust the vendor when they ticked all the boxes

    • dcep on 13/04/2018 - 12:52

      the building approval thingy only comes to bite when you're selling to the next buyers who found out right ?

      • Kjjd on 13/04/2018 - 13:56

        Well if we hadn’t wanted to do renos we would have declared honestly that as far as we know all buulding approvals and y e, it would have come to bite us if we qanted to sell and someone more savvy did mor leg work and found this out.

  • dsp26 on 13/04/2018 - 13:36

    You can save yourself some trouble and ask why the previous 2 offers fell through on finance.

    For example, here in QLD, the previous property i looked at failed on finance because the property was within 100m of a high voltage powerline (40m to be exact) therefore no mortgage insurer will insure it, thus one would need. At least 20% deposit…

    The other before that was because it failed BPI on clause of structural damage… But without additional engineers report could not be proven and thus had a deposit penalty.. the only way out was to show our financier who happily failed it under finance clause at no penalty based on their own assessment of bpi

  • CLoSeR on 13/04/2018 - 14:06
    -1

    Not surprising, I won't accept subject to finance clauses either.

    Sign the contract and pay your 0.25%; you then have 5 (or possible 10 days) cooling off to arrange inspections and and unconditional finance, etc. If you can't get finance approved in this time you can pull out of the sale under the cooling off period forfeiting your 0.25%.

    If it's all good then pay the balance of 10% owing and wait for settlement.

    As a seller, a purchaser who asks for subject to finance clauses does not inspire confidence. Is is your LVR likely to be above 80%? What makes you think finance might fall through? Worst case if you follow above you will only lose the 0.25% plus cost of inspections which is a small cost of doing business; it might save you thousands if something unfavourable is found.

  • joka on 13/04/2018 - 14:34

    Congratulations on being in a position to buy your property!

    The bank should be able to provide you with a valuation report simply by telling them the address of the property.

    If the report comes back and the valuation is lower than what you are planning to buy at, it doesn't mean the bank will not finance you. The bank generally finances you on 80% of the value of the property. This means if the bank determines the property is worth $500,000, they will provide you with 80% of that ($400,000). The remaining 20% comes from your savings ($100,000).

    Two things can happen from here;
    1) You pay the difference in cash i.e. if you put an offer for $550,000, you have to pay an extra $50,00 to make up the difference ($150,000 in cash total), or
    2) You take out mortgage insurance (also known as LMI). This will cost you around $10,000 or so extra.

    Hope that help!?

    But in my opinion, if you don't have enough cash to make the difference then your're not financially ready to buy a property.

  • boostpak on 13/04/2018 - 16:10
    -1

    Definitely get a building & pest inspection. PM me if you want some info on a really good inspector. I've referred him many times to buyers (I'm a RE Manager) all clients have had very positive outcomes. I may even be able to get you an ozbargain discount haha

  • TheMindsetTraveller on 13/04/2018 - 16:18

    It is a buyers market out there so tell then vendor/RE to go bugger off if they are not willing to sell subject to conditions.

    To show you your seriousness, some contracts allow you deposit with a 5 day cooling off period, and usually can get your deposit back less 0.25% which is non refundable amount.

    So if you are keen, let them know that you are willing to take this step.

  • pandaoncoffee on 13/04/2018 - 18:28

    What state are you in? The laws are different in each state.

    I'm in NSW and I was in a similar situation.

    I paid a holding deposit to show how serious I am (this is common practice in NSW). I was happy to get a 66w certificate conveyed with a deposit which made the contract unconditional.

    You might be able to secure a deal if you are in NSW and so sure of your finances that you are willing to lock yourself into an unconditional contract by suggesting a 66w certificate. The repercussions could be high if it falls through from your own end.

    If you do this, make sure all the checks are done — pest, structure, strata, etc… and make sure you have a good chat with your lawyer for advice.

  • Zonty on 14/04/2018 - 10:28

    go to broker like mortgage choice and many others. They will check your financial situation and will get you pre approval an also help find lowest interest rate. If your pre approval match with your purchase price then no need worry. But not forget add stamp duty too. When you offer. Also consider if you have20% of diposit or something you can refinance like your parents house and take only80% mortgage you can avoid mortgage insurance which could cost $10000 plus.
    Good luck

  • sauce2k on 14/04/2018 - 13:23

    Don’t see the owner being a rat especially he had 2 bad experience in the past.

    I purchased my first place without subjecting to finance as I’m quite comfortable with getting the loan. If you absolutely love the place and the the price is within the pre-approval limit then go for it.

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