Unconditional Offers When Buying a House, and Losing The Deposit

Kassa on 08/05/2023 - 09:02
Last edited 08/05/2023 - 10:06 by 1 other user

Many might disagree, but I think, we should not lose our deposit, if a sale of property didn't go through due to an unsuccessful mortgage. Every Real Estate agent request us to put an "unconditional offer", and their reasoning is that they have to find another buyer or change the Auction date. So cost of changing the Auction date is around $100,000 ( these days a house cost one million)

BTW, I am not a risk taker, so that's why I am still hunting for a house, just don't want to lose all my savings and I am refusing to put an unconditional offer.

If it is 1% of the property that would be at least ok.

Financial

Comments

  • MS Paint on 08/05/2023 - 09:07
    +21

    *losing, lose, loser.

    Just get all of your finances and pre-approved limits sorted before you go to purchase.

    • Kassa on 08/05/2023 - 09:21

      True, , many are losers

      • 87percent on 08/05/2023 - 09:27
        -1

        loosers

        • altomic on 08/05/2023 - 10:26
          +4

          "the goose is loose"

          • altomic on 08/05/2023 - 11:41
            +1

            @altomic: some one negged me. english is my 2nd/3rd language. "goose is loose" is how I remember which one to use/pronunciation

    • HeWhoKnows on 09/05/2023 - 08:45

      yes thats the norm
      Only disorganised losers get stuck with this and there arnt many of them so why is OP making an issue about this?

      How about OP looks at this from the vendor's point of view.

      They want a sale for several reasons
      They may have purchased elsewhere
      Why should the vendor pay the penalty because someone is disorganised

      • MS Paint on 09/05/2023 - 08:47
        +3

        How have millions of people purchased houses successfully under these rules with no issues in the past - they did their homework.

    • knobbs on 09/05/2023 - 08:46

      Pre approval is not a guarantee of being lent that much, likely but not 100%, depends on the property and changes from when bank does the assessment then and now. I would definitely not be putting in an unconditional offer

  • holdenmg on 08/05/2023 - 09:08
    +10

    No. You can't unilaterally redefine what "unconditional" means.

  • skid on 08/05/2023 - 09:10
    +8

    Get a pre-approval from the bank before putting in an unconditional offer.

    • Kassa on 08/05/2023 - 09:22
      -1

      I have the pre approval etc..

      https://www.news.com.au/finance/real-estate/buying/weird-det…

      • MS Paint on 08/05/2023 - 09:46
        +11

        Lol. They didn't do any research, struggled to get a $320k deposit together and attempted to purchase a $3.2m home. What a bunch of blame shifting loosers losers.

        • Kail on 08/05/2023 - 10:06
          +2

          Despite seeing no "subject to finance" clause, not only did they not bother to get pre-approval, they didn't even go into the bank for a quick chat!
          A 10 minute "hey bank we're thinking about buying this house, we're still eligible for the loan scheme right" conversation would have saved them six figures.
          Absolute madness.

        • Gunnar on 08/05/2023 - 10:12

          This! If you do all your home work (such as getting all your building/pest/strata inspections, reading your contract, obtaining advice from your conveyancer and broker before signing) you won't have an issue.

          Buying a house is stressful enough experience, especially when it's a hot market but make sure you have done everything, and spoken to everyone before you sign and you'll be fine.

          I remember reading that article when it was first published and thought "yeah you did nothing except save money, you're an idiot'

      • brendanm on 08/05/2023 - 10:28
        +3

        They didn't have pre approval, they assumed a lot of things they shouldn't have assumed. That issue is all on them, not a "loophole".

        • Almost Banned on 08/05/2023 - 11:05
          +1

          You know what happens when you assume…???

      • freefall101 on 08/05/2023 - 11:11
        +2

        Mr Gayed had put his household income into a loan calculator and assumed he would be eligible for the same type of loan he had used to purchase his first home

        Wow, nice. Online calculator says a-ok!

        Mr Gayed frantically tried to get together cash for the last five per cent of the property, which amounted to $160,000, as well as a further $160,000 due on stamp duty for settlement day.

        So they didn't even have the 10% deposit because they didn't think about stamp duty either.

        I get real estate agents are shitty, but there's clearly one person to blame here. You don't make a $3.2m purchase without doing any kind of due diligence.

  • parsimonious one on 08/05/2023 - 09:11
    +6

    Just put in an offer “subject to finance”

    I thought that was a pretty standard clause

    Won’t work for auction though

    Presumably you have got pre-approval for a loan though?

    • Kassa on 08/05/2023 - 09:12

      Not really, Agents does not accept "Subject to finance" offers

      • jjjaar on 08/05/2023 - 09:13
        +2

        Technically it is the vendor not accepting those offers but your solution is to work with other agents.

      • pegaxs on 08/05/2023 - 09:47
        +1

        Then find another house/agent to deal with. That's the best part of contracts, if you dont like the terms, you either change them… or find someone who will offer the conditions you agree too.

      • AngoraFish on 08/05/2023 - 14:24
        +3

        Subject to finance is a completely standard clause. When we were looking for a house we put in about 8 offers, all subject to finance, before being successful. The real estate agent didn't bat an eyelid in a single case.

        If the vendor wants to miss out on the best offer price simply to avoid a subject to finance clause, that's on them.

        But yeah, won't work for auctions. Auctions are a crock, avoid them.

    • ihbh on 08/05/2023 - 15:07

      Just put in an offer “subject to finance”

      Agent's reply. "Yeah, whatever. If someone else comes in with an unconditional offer, do you expect me to hold it for you or sell it to them?"

      • parsimonious one on 08/05/2023 - 15:26
        +1

        Of course seller will prefer unconditional but OP isn’t in a position to make an unconditional offer

        So it’s either offer subject to finance (which is pretty standard) or don’t even make an offer 🤷‍♂️

  • deme on 08/05/2023 - 09:12
    +4

    Auction date

    You know auctions are unconditional?

    • Kassa on 08/05/2023 - 09:14
      -3

      Yes, This is just me thinking, I think it needs to be changed.. People loosing $100,000, if worse case happened.. If it is like 1%, at least OK

      • deme on 08/05/2023 - 09:17
        +8

        loosing

        losing
        adjective
        suffering, resulting in, or relating to defeat in a game or contest.

      • Bargainitis on 08/05/2023 - 09:44
        +4

        FFS - Muzeeb already reminded you the typo in the first reply and you do it again…

        How hard is it….

      • mikekiwimike on 09/05/2023 - 07:43

        Why does it need to be changed? Guess what would happen if there was no cost for bidding on something that you decided to not complete? All of a sudden there would be auctions going off all over the place where buyers would pull out if they didn’t want to complete the purchase.

  • jjjaar on 08/05/2023 - 09:12
    +5

    Changing an auction date is $100k? Where did you hear that?

    If agents won’t let you put in conditional offers, then those properties are not a good fit for you and you’ll need to adjust your search accordingly.

    Why are you so concerned with unconditional offers? If you have preapproval, and you are conservative with the amount of money you want to spend (that is, your pre approval is for a $800k loan on a $1mil property, but you only offer up to $900k properties so that you need a loan of $700k) then you have more than enough buffer in case interest rates change and banks change their tune.

    • Kassa on 08/05/2023 - 09:16

      I am not just talking about me,, Yes I got my pre approval etc.. But recently heard about people loosing their full deposit, because they could not complete the transaction on time etc

      • jjjaar on 08/05/2023 - 09:24
        +1

        They likely:

        • didn’t accurately assess their borrowing power.
        • didn’t give themselves enough settlement time.
        • offered too high for what they could afford / didn’t leave enough buffer for interest rates etc.
        • purchased something with not enough of their own deposit and required a valuation that was lower than the purchase price, meaning the bank wouldn’t loan them the pre-approved amount.

        These things are all risks, absolutely, but manageable if you think about them in advance.

      • onetwothreefour on 08/05/2023 - 09:28
        +5

        *losing

        • pegaxs on 08/05/2023 - 09:51
          +9

          It's literally giving me a headache every time I read OP say "loosing". Is this the new "advise" when they are asking for "advice"?

          • onetwothreefour on 08/05/2023 - 10:03
            +4

            @pegaxs: Yep, keeps doing it even after they have been corrected.

            Oh well, I'm not going to loose any sleep over this. You win some, you loose some.

      • DashCam AKA Rolts on 08/05/2023 - 11:07

        losing
        adjective
        suffering, resulting in, or relating to defeat in a game or contest.

        As per @deme

    • freefall101 on 08/05/2023 - 11:26
      +2

      https://www.news.com.au/finance/real-estate/buying/weird-det…

      They were just daft, they never got pre-approval and never had the funds to begin with to even pay for stamp duty.

      https://www.9news.com.au/national/queensland-couple-lose-dre…

      The bank repaid them and the laws in Queensland have since changed, there is a 5 day period to work through settlement. That wouldn't solve the unconditional offer problem though, they had approved financing. What went wrong was the bank didn't pay on settlement day, different issue.

      https://www.afr.com/wealth/personal-finance/bidders-losing-h…

      I recently purchased a house, the bank made it absolutely clear that the pre-approval was only for the interest rate specified. Pretty sure they called me every month anyway to check in and we discussed the interest rate.

      It was a bit nerve wracking, signing a contract without final approval for financing in place. Not because of any of the above issues, but if I lost my job somehow or was in an accident meaning I couldn't work between signing and finance day it could go wrong. But your fear is getting pretty irrational if you think those articles are relevant to most people.

  • garetz on 08/05/2023 - 09:29

    Everything you do in this life is a risk, the agents job is to mitigate risk to their client, the seller. In a market like this the seller has the advantage. When you are in a bear market then the buyer has the advantage.

  • terlalu on 08/05/2023 - 09:30
    +3

    Doesn't help that the first post wasn't very clear , but I get where this is coming from.

    Say you agree to purchase a house for $1m and sign a contract. But the vendor doesn't take a deposit.
    If you do end up backing out of the contract, the vendor has every right to recover damages from you. The argument being that damages (costs of re-listing, costs for new auction date, legal fees, costs for additional rental etc.) aren't necessarily worth 10% of the house, and the vendor in this case wouldn't be able to sue you for $100k, probably only much less..

    However, because you've signed a contract, you are bound by the terms of the contract. It's easy - if you won't like the terms for a 10% non-refundable deposit, then don't sign the contract, or negotiate.

  • capslock on 08/05/2023 - 09:43
    +4

    Your view is a little selfish.

    Think of the seller. They have non refundable costs for holding the auction. They might have also purchased a new house and have to settle by a certain date. If the sale of their house gets delayed then there might be huge consequences for them. They might need the money urgently for healthcare or other things. It's not fair to put their life on hold indefinitely because house buyers can't get their finances in order.

  • netbies on 08/05/2023 - 09:45

    It depends on states. Some can be subject to finance, but some dont. NSW does not support this condition.

  • Bargainitis on 08/05/2023 - 09:48
    +5

    Is this a joke?

    if you can't get your finances together, thats your problem. The seller / vendor has every right to keep your deposit. You think sellers are in this for fun? its time, money and costs to run a campaign so when you stumble at the end because you can't get your finances together, think about it as costs that they collect for potentialy 6-8 weeks of time wasted and costs to them.

    its an expensive lesson to learn for anyone but a "sorry" doesn't get you out of jail sometimes.

    p.s. almost certain in NSW, its 5% the vendor can keep, not 10%.

  • Seraphin7 on 08/05/2023 - 09:52
    +2

    Many might disagree, but I think, we should not loose our deposit, if a sale of property didnt go through due to an unsuccessful mortgage.

    Cool. Thanks and noted.

    But seriously, it's a commercial negotiation like any other. Why should the vendor have to accept the risk that you can't get your finance sorted (or allow you to just use that as the excuse to get out of it when buyer's remorse kicks in)?

    If you don't want to make an unconditional offer, then don't … but understand that no one is required to accept a "subject to" offer either.

  • Donaldhump on 08/05/2023 - 10:06
    +3

    1.) either put down finance as a condition or

    2.) lose your deposit if you breach contract. Why should someone else lose money for your breach? You also would be sued for any negative difference in subsequent sale.

    so do option 1. and word it to your advantage.

  • netjock on 08/05/2023 - 10:42

    Unconditional offers for auctions yes it is true because it reduces the risk for the real estate agent and seller because they get good compensation if it doesn't work out.

    Also true is the cost of auction isn't 10% a lot less than that but they don't want to tell you think because they want your 10%. Think the marketing was around $10k for a $1m+ property and 2.2% commission including GST (realestate.com.au is around $3k apparently, we got the board, also photos insides etc)

    REA really push you to sell at auction because they make you feel like it is all the buyers who will ever want to buy and it is easier for them to score their commission running a 1 month campaign that they haven't done that much work (seller pays all marketing expenses remember). Unlike private sale there is no back and forth and they get you in and get you out. None of REAs act like it is a long term relationship, they is why a lot of them aren't in the business for long because they soil their own name.

    I have been both buyer and seller. If you don't like auction there is still people who sell private sale. If you know the value you just need to take time to fish around. Sometimes it is chance and luck. Don't get frustrated because you don't want to burn those bridges with egotistical REAs, not just yet.

  • Ocker on 08/05/2023 - 10:42
    +6

    Always someone else's fault.

  • JIMB0 on 08/05/2023 - 11:14

    Legally they still have to present your offer to the vendor. Chances are they will reject it if close to action day and they've had significant interest in the property.

    The bank could still pull out at the last minute. Safest option is to pay cash.

  • hoey888 on 08/05/2023 - 12:28

    Also been a buyer and seller on both sides.

    As a seller, you want unconditional offer/auction as you are effectively guaranteed a sale. Generally you don't want subject to 'XYZ' as these can complicate and increase potential costs associated with sale of property. If offer before auction is reasonable, seller may consider selling before auction and removing the auction.

    As a buyer, you want to pay the absolute minimum and low ball the seller. Obviously do your usual checks on property before committing to 'unconditional contract.' Otherwise you'll be effectively buying property 'as is;' and any problems/defects associated (caveat emptor). Bear in mind it is literally impossible to properly inspect a property in the 30 minute real estate open for inspection window.

    House values are generally based on the land component. You could almost think of getting the house (physical structure) for free. Obviously some will be in better condition than others. Would definitely recommend working through a sale cost breakdown to understand what it costs to buy property.

  • MrMarket on 09/05/2023 - 08:39

    if properties is up for auction and you want to buy before the auction it usually unconditional for the vendor to seriously considered else they just push ahead with the auction as it already in train and see what they can get.

    if you buy a properties without auction I usually put a subject to finance clause, I have always put that in just to be sure the off chance some process went wrong along the way

    most seller don't have an issue if they sense you are genuine and has the capacity to acquire the properties, I always tell them I got 30% deposit which is always the case, I only need to borrow 70% and that assure them I can get finance

  • Mugsy on 09/05/2023 - 10:12

    OP… don't buy from an auction if you want your conditions considered.

    Approach all the agents servicing the area/s you want to buy in and ask them if they have any off market listings.

  • 2esc on 09/05/2023 - 13:11

    Lets say the bank has pre approved you a loan amount of up to $1,000,000 you dont have to borrow $1,000,000 just borrow $500,000 or $600,000. Do you have to have a house worth x amount or in a sort after area. By borrowing less you have a buffer zone if something goes wrong. Less stress about repayments and you have the ability to pay the loan down quicker.

  • Emcaljoe on 09/05/2023 - 17:11

    Always put a condition on if buying privately. Bought a brand new property last year well within what bank was prepared to lend me, all pre approved and good for 3 months. Still got subject to finance condition… mainly because the lenders, on the whole, are unreliable and take an age to get anything moving… and it buys you a week or two to make sure you're 100% happy to follow through.

  • FrugalDealHunter on 09/05/2023 - 17:25

    Get unconditional approval from your lender. That’s what I did with nab.

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