Browse Forums Home Finance 1 Jun 11, 2012 2:35 pm sorry to ask what might seem a silly qn, but can anyone clarify a qn that's come up about 'subject to finance' clauses related to OTP contracts? my understanding was that this meant that, if at time of valuation (ie, 3-6 months from settlement), a bank/lender does not finance the contracted amount (eg, contract = $500K, valuation = $420K), you had a way 'out'... however, a family member has told me that she believes the subject to finance clause in a OTP contract only relates to the initial contract phase - ie, you're required to show in principle/pre-approval within about 2 weeks - but after that you're bound to the contract unconditionally (ie, regardless of final valuations). can anyone clarify? thanks ... (And actually, totally different qn but it just occurred to me while typing ... what's not to stop the developers offering their own finance to "bind" ppl in (ie, no excuse - and probably at crazy interest rates ... (eg, like car financing?)) Re: 'subject to finance' clauses and OTP contracts 2Jun 11, 2012 2:50 pm From my understanding(and rules change with lenders)initial contract phase that is when you can have a clause included,subject to finance.Not my latest build,two previous builds the clause l included was suject to obtaining own finance,that stops developers offering their own.A phone call will clarify. Re: 'subject to finance' clauses and OTP contracts 3Jun 12, 2012 4:12 pm There's generally phases with them - for example, mine was subject to finance for the first 30 days, and the unconditional at which time there was a 90 day settlement (for the land). Building a Delta 21 at Craigieburn - http://homeofzero.blogspot.com.au/ Deposit: 26/02. Contract: 22/05. Settlement: 29/05. Site start: 18/10. Re: 'subject to finance' clauses and OTP contracts 4Jun 12, 2012 8:02 pm I bought 'subject to finance'. There was a date stipulated, and if I didn't have finance organised by that date, I could a) withdraw my offer, b) take the risk and let it go unconditional or c) ask for an extension to the date. I took option b - sort of - since I had approval from the branch lending manager but they hadn't finalised paperwork. It worked out OK. In my case, I had enough cash to pay the full deposit though. When we sold, the buyer was borrowing above 95% and couldn't pay her deposit until her finance came through. It got delayed several times and we repeatedly got a phone call last thing on Friday from our lawyer saying a fax had arrived requesting an extension for another week. If we, the seller, refused to grant the extension, our buyer would have pulled out of the contract. As a seller, I would be very reluctant to go that route again; it was an absolute PITA and that buyer continued to be a PITA to deal with. Gah. Land settled May '14. Building the PD Hoffman39: 5/11=site start, 13/11=slab pour, 26/11=frame complete, 10/12=roof on, 12/12=bricking started. Blog: http://jyndeira.net/blog/ Re: 'subject to finance' clauses and OTP contracts 5Jun 22, 2012 1:34 am akashra There's generally phases with them - for example, mine was subject to finance for the first 30 days, and the unconditional at which time there was a 90 day settlement (for the land). That's correct. There is a short initial time period attached to the subject to finance clause, or at least should be. Though in today's market, it wouldn't hurt to ask the developer for a clause which allows a subject to finance of unconditional approval close to the settlement date. Seen a lot of cases of people buying OTP purchases getting stung by low valuations at settlement meaning they need to come up with extra funds in a hurry to meet settlement, or risk losing their deposit. It's one thing purchasers should be made aware of when buying OTP. MBA and HIA both have sub contract agreements, check them out 2 7317 Industry type domestic contracts are prepared by industry bodies for the benefit of the builders. This means that if you are the owner watch out. One of the points is… 0 3235 you were just referred to get advice from your solicitor. This is a legal matter. Separately, why would you use a buyers agent for a house and land package? 3 57620 |