Buying a house - Real estate agents

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Smpl Mnmlst
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#1404542 12-Oct-2015 17:40

tdgeek:
eracode:

So what would happen if a prospective purchaser just did nothing - i.e. Did not apply for finance anywhere - and waited for the finance date to come around. How is the vendor going to compel the purchaser to go ahead with the transaction? My understanding is that the finance clause is solely for the benefit of the purchaser and the vendor cannot enforce anything.

In that case it may as well just be called a "30 Day Buyers Offer" and have no meaning at all. IANAL but I am sure there would be something in the contract to cover that. I will try and find out, unless there is a lawyer or agent here?

That's pretty much it. If a vendor is having trouble selling the house, or if it's a really good price for the vendor, they will go along with it. If they have two similar offers, one with a finance clause and one without, they'll go with the non-finance offer. The vendor doesn't have to accept a conditional offer with a finance clause if they don't like it.

Not normally as long as 30 days - more like 5 or 10 working days.

Sometimes I just sit and think. Other times I just sit.

eracode

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#1404546 12-Oct-2015 17:54

Jaxson: The solution to this by the way is to specify finance that is 'acceptable' to you.
That wording gives you a way out if required.
You can pretty much always get finance from a dodgy back alleyway dealer, so it's not strong enough to save you if pressed for proof.

Yep - the finance clause should say 'acceptable to the purchaser' and 'this clause is solely for the benefit of the purchaser'. Then you can pretty much always use a finance clause to let a conditional contract lapse for any reason if you want to.

Sometimes I just sit and think. Other times I just sit.

tdgeek

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#1404553 12-Oct-2015 18:12

Hopefully we wil get a correct statement on here. But I can't see the finance clause being the easy way out. Clauses are there to provide suitable options, not easy exits. I'd expect the enforcement to be, your bank faxes us to say an application for a loan, with deposit was made to the value of the contract and it was declined. I'd also expect that the period of the finance clause will have a date as mentioned, and on that date it goes unconditional. And if you can't fulfil the contract, which already existed once both parties signed, and you cannot show reasonable attempt to secure finance, I see penalty payments, such as a $ figure, interest until its sold, perhaps even a topup if it fails to meet the price that was breached. I've studied law as part of a finance degree, Company, Partnership, Torts, and the law is reasonable. Its not about creating easy out loopholes IMHO.

tdgeek

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#1404555 12-Oct-2015 18:15

eracode:
Jaxson: The solution to this by the way is to specify finance that is 'acceptable' to you.
That wording gives you a way out if required.
You can pretty much always get finance from a dodgy back alleyway dealer, so it's not strong enough to save you if pressed for proof.

Yep - the finance clause should say 'acceptable to the purchaser' and 'this clause is solely for the benefit of the purchaser'. Then you can pretty much always use a finance clause to let a conditional contract lapse for any reason if you want to.

If that went to court, the court will decide what is reasonable. Is a 1% finance on 500k reasonable? What reasonable efforts were made? A bank decline is reasonable, but if that happened there is no breach of contract as the buyer bought in good faith and he can really on the out clause, that is what it is there for.

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#1404556 12-Oct-2015 18:18

This doesnt cover the finance clause we are discussing but a good short read

http://www.propertygenie.co.nz/property-and-the-law/property-settlements

eracode

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#1404557 12-Oct-2015 18:19

tdgeek:
eracode:
Jaxson: The solution to this by the way is to specify finance that is 'acceptable' to you.
That wording gives you a way out if required.
You can pretty much always get finance from a dodgy back alleyway dealer, so it's not strong enough to save you if pressed for proof.

Yep - the finance clause should say 'acceptable to the purchaser' and 'this clause is solely for the benefit of the purchaser'. Then you can pretty much always use a finance clause to let a conditional contract lapse for any reason if you want to.

If that went to court, the court will decide what is reasonable. Is a 1% finance on 500k reasonable? What reasonable efforts were made? A bank decline is reasonable, but if that happened there is no breach of contract as the buyer bought in good faith and he can really on the out clause, that is what it is there for.

I don't think it could ever get to court because the contract would never get to an unconditional state.

Sometimes I just sit and think. Other times I just sit.

tdgeek

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#1404559 12-Oct-2015 18:22

Subject to finance

Clause 8.7 of the ADLS Agreement provides that the party for whose benefit the condition has been inserted 􏰀shall do all things which may be reasonably necessary to enable the condition to be fulfilled by the date for fulfilment.􏰁

If the ADLS Agreement was not used, then the Court would imply a term that required reasonable efforts be made.

In Connor v Pukerau Store Limited4 there was a contractual obligation to 􏰀arrange suitable finance􏰁. The Court held that reasonable efforts had not been made by the defendant to achieve finance after he made only one unsuccessful enquiry with a potential lender.

In the recent Court of Appeal decision of Purewal BS & JK Ltd v Connell Street Limited5 the finance condition was expressed as 􏰀conditional upon the purchaser arranging finance in terms of those particulars on or before the finance date.􏰁

The purchaser had two properties under contract for sale that required titles to be issued before it would be in a position to settle with the vendor. The purchaser sought and obtained finance shortly after entry into the agreement. However, settlement (which was 12 working days after issue of the purchaser􏰂s titles) was delayed significantly because of the delay in obtaining titles. When titles were eventually issued, the National Bank􏰂s original offer of finance had lapsed and the lending criteria had changed as a result of the global recession. The purchaser was unable to obtain finance from other lenders.

The Court held that clause 8.1 of the ADLS Agreement refers to finance being arranged on or before the finance date: it does not say that the finance must be available on the settlement date. Accordingly, it was for the purchaser to ensure that it enters into suitable arrangements so that the finance will be available of settlement. Once finance is arranged, the purchaser, by virtue of clause 8.7(2), is bound to notify the vendor that finance is arranged.

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eracode

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#1404561 12-Oct-2015 18:23

tdgeek: This doesnt cover the finance clause we are discussing but a good short read

http://www.propertygenie.co.nz/property-and-the-law/property-settlements

That's right - but it's talking about what happens if you don't go ahead and settle on an unconditional contract. What we have been talking about just above, is a conditional contract - conditional on finance.

If you fail to settle on an unconditional contract, all hell breaks loose. I know because I have been there and done that as a purchaser - and succeeded.

Sometimes I just sit and think. Other times I just sit.

Batman

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#1404562 12-Oct-2015 18:24

tdgeek: Hopefully we wil get a correct statement on here. But I can't see the finance clause being the easy way out. Clauses are there to provide suitable options, not easy exits. I'd expect the enforcement to be, your bank faxes us to say an application for a loan, with deposit was made to the value of the contract and it was declined. I'd also expect that the period of the finance clause will have a date as mentioned, and on that date it goes unconditional. And if you can't fulfil the contract, which already existed once both parties signed, and you cannot show reasonable attempt to secure finance, I see penalty payments, such as a $ figure, interest until its sold, perhaps even a topup if it fails to meet the price that was breached. I've studied law as part of a finance degree, Company, Partnership, Torts, and the law is reasonable. Its not about creating easy out loopholes IMHO.

You obviously haven't bought a house. You can put whatever clause you want. Whether the vendor accepts it depends on his situation, or he may counter with some conditions of his. No finance when there is a finance clause means deal's off. Period.

tdgeek

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#1404564 12-Oct-2015 18:26

eracode:
tdgeek:
eracode:
Jaxson: The solution to this by the way is to specify finance that is 'acceptable' to you.
That wording gives you a way out if required.
You can pretty much always get finance from a dodgy back alleyway dealer, so it's not strong enough to save you if pressed for proof.

Yep - the finance clause should say 'acceptable to the purchaser' and 'this clause is solely for the benefit of the purchaser'. Then you can pretty much always use a finance clause to let a conditional contract lapse for any reason if you want to.

If that went to court, the court will decide what is reasonable. Is a 1% finance on 500k reasonable? What reasonable efforts were made? A bank decline is reasonable, but if that happened there is no breach of contract as the buyer bought in good faith and he can really on the out clause, that is what it is there for.

I don't think it could ever get to court because the contract would never get to an unconditional state.

No. It is already a contract. It is written, it has an offer, and acceptance, and consideration (The bucks) . It is already a legally binding and enforceable contract. It also has conditions. So both parties need to fulfil their obligations, if one doesnt or wont or can't then the other can take action. It is the conditions that will be tested in court, not the contract.

SheriffNZ

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#1404565 12-Oct-2015 18:27

tdgeek:

Subject to finance
Clause 8.7 of the ADLS Agreement provides that the party for whose benefit the condition has been inserted 􏰀shall do all things which may be reasonably necessary to enable the condition to be fulfilled by the date for fulfilment.􏰁
If the ADLS Agreement was not used, then the Court would imply a term that required reasonable efforts be made.
In Connor v Pukerau Store Limited4 there was a contractual obligation to 􏰀arrange suitable finance􏰁. The Court held that reasonable efforts had not been made by the defendant to achieve finance after he made only one unsuccessful enquiry with a potential lender.
In the recent Court of Appeal decision of Purewal BS & JK Ltd v Connell Street Limited5 the finance condition was expressed as 􏰀conditional upon the purchaser arranging finance in terms of those particulars on or before the finance date.􏰁
The purchaser had two properties under contract for sale that required titles to be issued before it would be in a position to settle with the vendor. The purchaser sought and obtained finance shortly after entry into the agreement. However, settlement (which was 12 working days after issue of the purchaser􏰂s titles) was delayed significantly because of the delay in obtaining titles. When titles were eventually issued, the National Bank􏰂s original offer of finance had lapsed and the lending criteria had changed as a result of the global recession. The purchaser was unable to obtain finance from other lenders.
The Court held that clause 8.1 of the ADLS Agreement refers to finance being arranged on or before the finance date: it does not say that the finance must be available on the settlement date. Accordingly, it was for the purchaser to ensure that it enters into suitable arrangements so that the finance will be available of settlement. Once finance is arranged, the purchaser, by virtue of clause 8.7(2), is bound to notify the vendor that finance is arranged.

Nice to have someone jump in with some facts.

tdgeek

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#1404567 12-Oct-2015 18:32

joker97:
tdgeek: Hopefully we wil get a correct statement on here. But I can't see the finance clause being the easy way out. Clauses are there to provide suitable options, not easy exits. I'd expect the enforcement to be, your bank faxes us to say an application for a loan, with deposit was made to the value of the contract and it was declined. I'd also expect that the period of the finance clause will have a date as mentioned, and on that date it goes unconditional. And if you can't fulfil the contract, which already existed once both parties signed, and you cannot show reasonable attempt to secure finance, I see penalty payments, such as a $ figure, interest until its sold, perhaps even a topup if it fails to meet the price that was breached. I've studied law as part of a finance degree, Company, Partnership, Torts, and the law is reasonable. Its not about creating easy out loopholes IMHO.

You obviously haven't bought a house. You can put whatever clause you want. Whether the vendor accepts it depends on his situation, or he may counter with some conditions of his. No finance when there is a finance clause means deal's off. Period.

Um I've bought a few houses, first when 19. Sold one the other day, this one soon, buying next year. The issue here is not about a finance clause its about what effect does finance clause have. If there is a finance clause, then you have to carry out reasonable efforts to get finance, if you don't, you lose. That starts with your deposit, usually 10%. You then pay interest until its sold. As one of my copy and paste posts show, you can also be liable for reduced property values if the value goes down. And any other costs that the vendor has lost by not recieving the settlement on settlement date.

But tks for the condescending-ness if there is such a word. Re read. Its about what do you have to do to exit a subject to finance clause.

tdgeek

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#1404577 12-Oct-2015 18:40

eracode:
tdgeek: This doesnt cover the finance clause we are discussing but a good short read

http://www.propertygenie.co.nz/property-and-the-law/property-settlements

That's right - but it's talking about what happens if you don't go ahead and settle on an unconditional contract. What we have been talking about just above, is a conditional contract - conditional on finance.

If you fail to settle on an unconditional contract, all hell breaks loose. I know because I have been there and done that as a purchaser - and won against the vendor.

Ok. The contract on day one is legally binding. It has conditions, so it is unconditional, but that doesn't not make it a legally binding contract. Conditions are good. They serve a purpose. Finance being one such purpose. If you seek finance to a reasonable degree, and fail, the legally binding contract ceases to exist. It automatically lapses, that would occur when such evidence was accepted by the vendor, such as documentation. I am sure that in the real world, lawyers and banks manage this. If you don't reasonably attempt to secure finance, you may feel the contract lapsed, the vendor wont. And ultimately the court will decide if it went that far. In real life I expect both lawyers would hash this out and seek a compromise, otherwise the judge will decide if the condition was met or not met

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#1404580 12-Oct-2015 18:42

tdgeek:
joker97:
tdgeek: Hopefully we wil get a correct statement on here. But I can't see the finance clause being the easy way out. Clauses are there to provide suitable options, not easy exits. I'd expect the enforcement to be, your bank faxes us to say an application for a loan, with deposit was made to the value of the contract and it was declined. I'd also expect that the period of the finance clause will have a date as mentioned, and on that date it goes unconditional. And if you can't fulfil the contract, which already existed once both parties signed, and you cannot show reasonable attempt to secure finance, I see penalty payments, such as a $ figure, interest until its sold, perhaps even a topup if it fails to meet the price that was breached. I've studied law as part of a finance degree, Company, Partnership, Torts, and the law is reasonable. Its not about creating easy out loopholes IMHO.

You obviously haven't bought a house. You can put whatever clause you want. Whether the vendor accepts it depends on his situation, or he may counter with some conditions of his. No finance when there is a finance clause means deal's off. Period.

Um I've bought a few houses, first when 19. Sold one the other day, this one soon, buying next year. The issue here is not about a finance clause its about what effect does finance clause have. If there is a finance clause, then you have to carry out reasonable efforts to get finance, if you don't, you lose. That starts with your deposit, usually 10%. You then pay interest until its sold. As one of my copy and paste posts show, you can also be liable for reduced property values if the value goes down. And any other costs that the vendor has lost by not recieving the settlement on settlement date.

But tks for the condescending-ness if there is such a word. Re read. Its about what do you have to do to exit a subject to finance clause.

My apologies. In my decadeof dealing with non commercial real estate, when someone can't get finance, the deal's off. I suppose the vendor is able to challenge what efforts were made to obtain finance etc if they wanted to, and, depending entirely on the wording of the contract. If it says finance that is acceptable to buyer, it favours the buyer. going 1 miilion into dept and living on $2 a day is definitely not acceptable to me. If it says buyer must show proof of rejection of finance from 4 big banks, then the outcome might be different.

The transcript you pasted I believe was a commercial one, and as such the stakes are higher, and the legal budget reflects that.

tdgeek

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#1404584 12-Oct-2015 18:54

joker97:
tdgeek:
joker97:
tdgeek: Hopefully we wil get a correct statement on here. But I can't see the finance clause being the easy way out. Clauses are there to provide suitable options, not easy exits. I'd expect the enforcement to be, your bank faxes us to say an application for a loan, with deposit was made to the value of the contract and it was declined. I'd also expect that the period of the finance clause will have a date as mentioned, and on that date it goes unconditional. And if you can't fulfil the contract, which already existed once both parties signed, and you cannot show reasonable attempt to secure finance, I see penalty payments, such as a $ figure, interest until its sold, perhaps even a topup if it fails to meet the price that was breached. I've studied law as part of a finance degree, Company, Partnership, Torts, and the law is reasonable. Its not about creating easy out loopholes IMHO.

You obviously haven't bought a house. You can put whatever clause you want. Whether the vendor accepts it depends on his situation, or he may counter with some conditions of his. No finance when there is a finance clause means deal's off. Period.

Um I've bought a few houses, first when 19. Sold one the other day, this one soon, buying next year. The issue here is not about a finance clause its about what effect does finance clause have. If there is a finance clause, then you have to carry out reasonable efforts to get finance, if you don't, you lose. That starts with your deposit, usually 10%. You then pay interest until its sold. As one of my copy and paste posts show, you can also be liable for reduced property values if the value goes down. And any other costs that the vendor has lost by not recieving the settlement on settlement date.

But tks for the condescending-ness if there is such a word. Re read. Its about what do you have to do to exit a subject to finance clause.

My apologies. In my decadeof dealing with non commercial real estate, when someone can't get finance, the deal's off. I suppose the vendor is able to challenge what efforts were made to obtain finance etc if they wanted to, and, depending entirely on the wording of the contract. If it says finance that is acceptable to buyer, it favours the buyer. going 1 miilion into dept and living on $2 a day is definitely not acceptable to me. If it says buyer must show proof of rejection of finance from 4 big banks, then the outcome might be different.

The transcript you pasted I believe was a commercial one, and as such the stakes are higher, and the legal budget reflects that.

Apology accepted, subject to my mood after watching F1 tonight! No doubt, aside from this thread the finance side is more detailed, and more than meets the eye. Te main issue in this thread was the ease of existing contract using it as an easy out. If I'd been declined by Westpac, just, and that was it, I'd fail. If I was way short of the mark, possibly one bank would do. With the oft rumoured Auckland bubble bursting, this might well become reality for an unfortunate few. Im not sure how that would work out for any contracts signed and not settled and prices fall. I read the other day that a certain foreign group of buyers have gone off AKL.

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