August 02, 2016
*** The following is written specifically to assist customers in Western Australia. Small components of the process vary somewhat from state to state, though generally the process is largely similar. Likewise, it is intended as a general list of tips based on our experience, and should not be taken to constitute legally qualified advice. We always recommend taking the advice of a settlement agent or a lawyer. ***
So, you've spoken to Mortgage Choice in Kingsley, you're confident there's a good chance you'd qualify for finance and you're ready to get serious about buying a house.
What happens next, and when do you need to involve your broker?
The short answer is that:
a) when you have a contract of sale signed by yourself and the seller, that's when you need Mortgage Choice in Kingsley to get to work for you, and
b) if you keep us up to date with every step of the process, we can jump in and provide guidance and advice along the way. After all, helping you through the process is what we're here for!
The longer answer is really about the virtues of a preapproval, how and when to make your offer on the property and when we can start the ball rolling with a lender.
Should I get a pre-approval?
In our experience, these days a pre-approval doesn't really achieve anything that we can't achieve for you on the spot in our appointment anyway.
Making an offer
When you've reached a point where you're ready to make an offer on a property, the real estate agent (or the seller themselves if they haven't engaged a real estate agent) will likely be ready and keen to whip out the paperwork and sign you up!
It should be straightforward to follow along with them at that point, but there are a number of things we think you should be considering at the time:
1) When you make your offer, you do so by signing a Contract for Sale by Offer and Acceptance (commonly referred to as a CoS (Contract of Sale) or O&A (Offer and Acceptance)). If the seller accepts your offer, they do so by signing it as well (usually within a few days), at which point the clock starts ticking to sort things out.
2) When you make your offer, make sure it's subject to finance approval! If for some reason your finance application is declined, the finance clause is what gets you out of the contract and your deposit refunded to you.
If the finance clause isn't included and your finance is declined, not only does the seller get to keep your deposit, but the contract still says you're buying the house, which you might not be able to do, which opens up the possibility for the seller to take action against you.
We'd only recommend waiving the finance clause if you already have all the cash you need in the bank, and don't want a loan! Again, please take advice from your settlement agent around such issues if you're concerned or thinking about waiving the finance clause for any reason.
3) Variables such as the purchase price, the amount of your deposit (and how long you have to pay it), how long the finance clause gives you to get finance approval, how long after that until settlement occurs, and any other conditions that are added, are something to negotiate.
We think you should be trying to find a "win-win", ie a set of conditions that is favourable to the buyer and the seller, so that everyone is happy to proceed. For example, some sellers would prefer a longer settlement period so they have time to find another house, while others need a quick settlement as they've already got another one they need to move into.
Based on such motivations, they may be willing to compromise in other areas of the agreement. We think the best way to figure this out is to discuss the matter with them or their agent, and find out what is going to work. If you need to include a condition such as "this offer is conditional on the seller fixing the toilet and removing the rusty old caravan in the back corner of the yard" or anything else then that's fine as long as both parties agree to it.
4) There is a place on the contract to specify who you will be using as a settlement agent. The real estate agent will often be recommending one (and sometimes be financially remunerated for doing so), and will sometimes recommend them to both the seller and the buyer.
If both parties accept that recommendation, it means there would be one party representing both sides of the transaction, which can become a problem if something goes wrong. Ideally if something goes wrong, you want your own representative fighting only for your side!
For that reason, we'd recommend not using the same settlement agent as the seller. Delta Settlements are located right next door to us in the Kingsley Professional Centre, and we have a long history of them looking after our clients, so we're happy to recommend their services. Plus, it can be pretty convenient having us both in the same place.
Getting the ball rolling with a lender
When there is a contract of sale that is fully executed (signed by both the buyer and the seller), then that's the point where we need to act quickly.
Usually the finance clause will say something to the effect that there are 21 days (sometimes more, sometimes less) from the date it was signed by the seller to get finance approval.
The lender needs the contract of sale to do a valuation of the property and understand what they are taking as security for the loan, so we need the contract in order to submit a loan application.
So when your offer is accepted, get hold of the fully signed contract and get it to us as soon as you can. At that point, we'll walk you through the process and sort it all out!
With so many steps, the home buying process can often seem daunting! But it really doesn't have to be when you have home buying experts like Mortgage Choice in Kingsley on your team. We will help you each step of the way, even after settlement! Give us a call on 9309 4780 today to make an appointment.
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