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Buying a house ranks right up there as one of the most stressful times in a person’s life. Although you might have breathed a sigh of relief when you found ‘the one’, stepping into the negotiating ring with the agent immediately signals round two of the nerves. But armed with the right information, you’ll feel more confident making an offer that will end with the best possible outcome – a house you love at a price you’re happy with.
Here’s what you need to know.
1. Home loan pre-approval
A pre-approval is a home loan approval that has been given by the lender – in principle –
before you find a house. Your application will be assessed for affordability, so you know where you stand on your finances when you start house hunting.
A pre-approval saves time, which creates leverage for you if there are other buyers interested in a property. After all, vendors love buyers who can tick all the boxes to make a contract unconditional as quickly as possible. It could also give you the option of buying at auction where contracts are signed on the day of purchase.
We have you covered on all stages of your property journey
Knowing your budget will also make the house hunt easier, with less wasted time looking at houses that end up being out of reach. Get your weekends back sooner!
Pre-approvals are generally valid for up to three months, but this may change from bank to bank. They are not a guarantee of formal approval, so don’t fall into the trap of making an unconditional offer because you have pre-approval. Home loan finance isn’t usually approved until the property has been independently valued. If the lender thinks it’s over-priced or unacceptable in any way, they won’t approve your final loan application.
Speaking to your mortgage broker ahead of time means you can have a pre-approval in place quickly. Keep in touch if the search takes longer than expected so your pre-approval can be updated if needed.
Useful article: Home Loan Approval: How Much Should I Ask For?
2. Conditions of sale
Making the contract subject to conditions is a common property purchase practice. There are standard conditions that feature in most contracts, as well as others that might be a little more uncommon. These non-standard conditions are usually specific to the needs of the vendor or purchaser.
Finance clause – This clause sets a date where finance will need to be officially approved for the contract to proceed. This date is usually set relatively early in the contract period: sometimes you have as little as seven days to have this arranged. Vendors often want the finance clause confirmed as soon as possible because it’s a common reason why contracts fall over.
Useful reading: This is Why ‘Subject to Finance’ is important
Building and pest inspection – This clause is usually only included if you intend to obtain a building and pest inspection for the property. These types of inspections may pick up issues that you haven’t seen in your general walk-through. You may decide to go-ahead or withdraw depending on the contents of the reports. If you include this clause, you’ll need to confirm you’re happy to proceed by the date listed on the contract.
Specific conditions – The vendor or the buyer may request specific conditions that suit their circumstances. These are listed on the contract, and both parties will need to agree with the terms. These could include:
- Longer or shorter contract term and settlement date
- Purchase subject to the sale of the buyer’s property
- Agreement to lease the property back to the vendor
If the conditions of sale aren’t met, you may be able to withdraw your offer.
Some buyers purchase properties with no conditions. This makes the contract unconditional once signed, and the purchase is required to go ahead.
3. Withdrawing your offer
Once both parties have signed the contract, it becomes a legally binding document. But, sometimes that dream house may look like a bit of a nightmare once you’ve done your due diligence, and you want to withdraw your offer. It’s possible, but you may be charged a percentage of the purchase price to back out of the deal. If your cooling-off period has passed (these vary from state to state), you could be in for serious financial penalties. Buying a house is a big deal – make sure you seek appropriate legal advice.
Tips for making your offer:
- Do your research
- Know your limits
- Stay calm
- Try to remove the emotion
- Be prepared for negotiation.
Making an offer is nerve-wracking, even to the most experienced property buyers. But, use this list to your advantage, and you’ll be in your new house before you know it. Speak to a Yellow Brick Road mortgage broker to get your application started.