Pay land deposit with approval in principle

Hi guys. We are stuck in the middle of our builder metricon and our finance broker at the moment.

We are buying a house and land 'package'.

Metricon have requested the 5% land deposit and have given us the real estate nomination form through our conveyencer.

Heres the problem. Our broker is saying do not pay this until we have full unconditional approval from the bank eg they have to do valuations etc..

Problem with this is the bank needs to see a land contract + building quote or contract which will be at a fixed price.

We still havent even been to studio M to choose fittings, bricks, colours etc so anything other then standard there will come out of our pockets?

No idea what to do as our broker is saying just choose all standard stuff because of metricon wanting land deposit now we have to lock in a price now for house and land.

Metricon is saying just pay deposit and get full bank approval once house contract is done and studio M is done. If bank evaluation isnt right we will be 12k out of pocket for land deposit?

First home builder/buyer and last by all this stress!

If you are paying the 5% deposit towards the land and not to your builder it is alright. get your solicitor to prepare a contract having a clause " Entire 5% deposit refunded if bank dosen't provide unconditional approval", contract subject to finance approval....., thats what we did.

Make sure you don't pay anything to the builder, untill you have your land settled, construction loan approved,

Hi There

I don't think you can have a finance clause when when there is a nomination form involved. You should still be able to get a copy of the land contract though as your builder will already have this (when there's a nomination form basically it means your builder is on-selling the land to you at the same price they bought it at - they cannot charge you more for the land than they paid for it when this is the case so the contract for the land will say that the Builder and it's nominees "insert your name here" are purchasing the block) they should send a copy of that contract to your conveyancer.

Just ask to speak to someone at the builder (who hopefully is educated on this i.e in their H&L depertment) to advise them that you want a copy of the land contract forwarded on to your conveyancer so you can arrange approval and therefore payment in a timely manner - the beauty is you don't have to rush to get the FHBG as it has been extended so just keep insisting.

I hope this helps!

Sorry I can't really help you with the situation as such with the Nomination form etc - I did just want to say that DO NOT just pick 'standard' items because your broker says it's easier - easier for them, but means you wont get your 'dream' home. We are building with M & we upgraded a reasonable amount (and we didn't go overboard by any stretch of the imagination, we are (were) working to a budget. Anyway, even after we had our finance approved, we still have variations coming & going from M partly because of Council requirements, which we will have to pay cash for at the end of the build.

And yes, M do things a strange way... we got finance after our contracts were drawn up, but we had to have our Studio M appoint after the contract signing so we had umpteen variations coming though adding to the contract price.

Good luck with it all

Assuming you haven't signed your construction contract yet you could ask M to include provisional sums in the contract for your electrical and StudioM selections (these are two separate variations). This way it will be in the contract your bank will see. The provisional sums will then be deducted from the variations later, after you have done your StudioM and electrical appointment.

There are other things you may need pay "out of pocket". Unforeseen council requirements, penalties for delay, upgrades to your tiles/flooring selection (in NSW this is paid direct to the supplier, DiLorenzo). Then after your build there are your landscaping, driveway, connections to services (water/gas/electricity), TV antenna, etc. Make sure you budget for these as this won't be covered by your bank loan.

DKP

There needs to be a subject to finance clause, and the bank wont give you a unconditional until they have the contract. Depending on the dates and timelines you may get the contract to the bank before you pay.

I did this 4 weeks ago.

5% deposit, subject to unconditional approval with westpac only!

thanks everyone for the helpful replies! We have a copy of the land contract etc. We have a plan of action. Our Metricn rep has drawn a quote variation with a studio M allowance on it so hopefully the bank will accept that into the quote for full approval. Finance guy didnt have much to say about paying deposit with condition to finance. So we are going to:

submit land contract and quote to CBA for full unconditional approval. Then once approved we will pay the 5% to met for the land. Then do studio M etc with the extra allowance in the quote to spend there.

Hope this is the right thing. I rang CBA they said to do what broker says and if it comes to it we cant choose what we want house wise then speak to bank