Buying a property “subject to finance”

You’ve signed a contract to buy your dream home subject to finance. Time’s now ticking on the finance approval deadline. The seller may end the contract if you don’t get your finance approved on time.

What does the contract say?

The standard-form contract used in WA, known as the Contract for Sale of Land or Strata Title by Offer and Acceptance has a fairly complicated finance clause setting out the rights and obligations of the seller and buyer in detail.  Under the contract you must:

  • immediately make a finance application and use your best endeavours to obtain finance approval; and
  • give the seller, or his real estate agent, an approval notice if you obtain finance approval or a non-approval notice if finance is declined.

The standard-form contract will specify the deadline for finance approval, defined as the “Latest Time” – usually between 14 and 28 days after the contract is signed.

What if I need more time?

If you’re still waiting on the finance approval to come through and you want to go ahead with the purchase, you should contact the seller or their agent and propose the deadline for finance approval be extended.  It’s worth doing this because the seller can generally terminate the contract any time after the Latest Time and before you give them an approval notice. Any extension should be formalised in writing.

If your finance application is declined, you can may seek finance approval from another lender, depending on the terms of your contract. If you don’t want to proceed with the purchase, you can send a non-approval notice to the seller to bring the contract to an end.

If you don’t need finance to purchase the property or if you have funds coming from another source, you can consider waiving the finance approval clause and making your contract unconditional.

And finally…

Remember to keep your settlement lawyer or settlement agent informed of developments.


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