Browse Forums Home Finance 1 Aug 17, 2009 3:46 pm Hi All, My partner and I are first home buyers and are trying to get our heads around everything! We have found a house we love and have pre-approval on our finance. The house is supposed to go to auction next month but the vendor may accept an offer before then. We have received advice from our broker and conveyancer that if we make an offer and the offer is accepted, we have to make a 5-10% deposit as we are "taking the house off the market". Then the bank evaluates the property. If the value is lower than what we have applied for, then we need to either come up with the difference (either cash, credit or a personal loan) or we will lose our 5-10% deposit. The house will sell for approx. $490k so we will be laying alot of money on the line. Has anyone else been in this situation? How did you handle this risk? Is it worth the risk?? HELP! Re: Putting in an offer before Auction 2Aug 17, 2009 4:51 pm If you make the offer subject to finance then you shouldn't lose your deposit, you should get it back 'A bottle of wine contains more philosophy than all the books in the world.' Louis Pasteur Vegie garden: viewtopic.php?f=19&t=27637&start=0 My Backyard Adventure Re: Putting in an offer before Auction 3Aug 18, 2009 2:51 pm You may want to talk with your broker who could then hold a discussion with the bank as to who they use for a Valuer. The broker could then give you the valuer's contact details and they could do a drive by valuation of the property (This would be at your expense) This should then give you some comfort around the valuation. I hope this helps Trent Bartels Residential & Commercial Finance Broker A & B Financial Solutions ...Solutions for your future info@abfinancial.com.au http://www.abfinancial.com.au Re: Putting in an offer before Auction 4Aug 18, 2009 5:14 pm Hi Miss-Build-A-Lot When buying at an auction you're signing an unconditional contract to purchase. This means there is no finance clause, no build building & pest inspection clause, & the deposit terms will be stated prior to the auction. They will usually have a contract there for you to peruse prior to the auction. Sometimes you can negotiate with the terms with the agent prior to the auction meaning that if you are the successful bidder, they will override the standard conditions & replace them with those agreed with you. For example you may ask for a reduced deposit or extended settlement term. In putting in an offer before auction you can chose to put whatever deposit suits you, & make it subject to finance &/or building & pest inspection. You may however find the vendor reluctant to sign a contract subject to such conditions if they feel they have a good chance of an unconditional contract at the auction. One way to get around this depending on how soon the auction is, is to make it so those clauses have to be satisfied before the auction date - that way if you dont satisfy the contract terms in time they could terminate your contract & proceed with the planned auction. In regards to low valuations. This is actually the case with any property purchased. If you have a contract to buy & the valuation comes in below the purchase price then the bank will seek to reduce the loan amount in accordance with the Loan to Valuation Ratio they have approved for you. In some cases they will increase the loan amount for you providing it remains within bank policies. The first is the more common scenario. Valuations have become more of an issue in the past 12 months thanks to the financial crisis. It has caused valuers to be more conservative in their approach. This is one of the reasons that agents are pushing vendors towards auctions as it is difficult for valuers to dispute the market value of a property when it has been established at auction. It's important for your own piece of mind to do your own research so that you are comfortable with the price based on what else has sold in the area. If you are like most first homeowners & are putting most of your savings etc into the purchase then I would strongly suggest that you try & make an offer prior to settlement but with the comfort of a finance clause so that you have an exit from the contract should things not work out. I hope this helps! Re: Putting in an offer before Auction 5Aug 20, 2009 11:11 am Thanks very much for your responses! After much careful consideration, we have decided not pursure this property as it is a little bit too much risk for us at this point in time and that we have really been outbid by another couple who we think are paying too much. We really don't want to go over our limit... DIY, Home Maintenance & Repair Are you doing this with a building permit? Conversion of a non habitable room into a habitable room requires building permit. 3 17291 Been in a similar position and we decided to let the builder go. Some of the PSA money goes to engineering so we at least got those documents and they actually refunded us… 2 6014 I am in the same situation, would you be able to give some insights in to this? I am in SA 8 17005 |