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WA Investment Property Contract - Will I Get My Deposit Back?

Discussion in 'Property Law Forum' started by Grace, 25 October 2014.

  1. Grace

    Grace Member

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    I recently signed a contract for an investment property purchase through an agent. The contract is subject to finance. However, the bank valuation for the property turned out to be much lower than the contract price. Therefore there might be the case that the bank will decline my loan application due to the shortfall as warned by my mortgage broker. If this happen eventually, which is what I prefered, could I decline the seller's possible advise of apply loan from different bank? Is it legal for the seller to withhold the initial deposit I paid for the property? Do I have to deal with the real estate agents pestering? Could the conditions listed in email from the agent be legal part of the contract? Thank you.
     
  2. Sophea

    Sophea Well-Known Member

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    Dear Grace,

    If the contract does not proceed because your loan is rejected, the deposit must be refunded. A subject to finance clause requires that you mustdo your best to obtain a home loan, however obviously within reasonable limits. It will also depend on how the clause is written, as some may suggest that if you are offered a loan then you have been granted finance and the sale then becomes binding. However if you don't want to have to agree to an unreasonable loan, you should talk to a lender about getting a loan before you make an offer on a property and to find out how long the approval process may take. You want to be sure that the terms of the loan such as the interest rate, fees and charges proposed by the financial institution are reasonable.

    Did you specify the financial institution you want to borrow from in the contract? If so, then obviously you won't need to take steps to seek to obtain a loan from another bank.
     
  3. Grace

    Grace Member

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    Hi Saphea,
    Thank you indeed for your response. Unfortunately I wasn't aware of the homework before signing the contract. So I didn't specify the name of financier. The Clause stated tha" the buyer must take all reasonable steps to to obtained approval". Does that mean i can not terminate the contract by decline the suggestion of anither loan application from different bank? Thank you.
     
  4. Sophea

    Sophea Well-Known Member

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    Not necessarily, you can still try to terminate and see what the agent says. You could use the argument that it is unreasonable for you to seek a loan from another bank because of some valid reason: ie they are not offering same terms or you wanted to go with that specific institution because your other accounts are with it or something. I've never tried those arguments before but I suppose they are worth a shot. Chances are though if your financial institution doesn't approve the loan for the reason you have stated, other financial institutions will be unlikely to either.
     
  5. Grace

    Grace Member

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    Hi Sophea,
    Thank you very much for your advise. I will say that I do not want to apply loan from different bank as I think it is very unreasonable to do so. I prefer this specific bank however was not able to get loan. I will get my settlement agent to terminate the contract and arranging the fully refund. Does that sounds feasible? Maybe not but i'll give a go....
    Good luck to me. Cheers Sophea!

    Grace
     

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