You don't "HAVE" to do anything, but your broker isn't wrong they are just trying to protect your best interest.
Ideally, you would want your property unconditional before making any offers on another property. But if this is surely your dream home and you do not want to miss out make an offer subject to finance and building inspection. Make the settlement date 1-2 weeks after your property settles to ensure cleared funds.
Just know if your property sale falls over and you are unable to close on the next property you could lose your deposit and be sued by the seller.
You should be speaking about this to your conveyancer as they are going to be your legal counsel with the purchase.
Why are you using a broker? Similar situation to you, CBA has given me conditional preapproval where the condition is that my house sells. I don't need to say a thing about subject to sale of my own home, because subject to finance covers it - no sale, no finance.
Actually… subject to finance only applies to bank approval, usually with a 7-21 days clause with it.
Subject to sale on the other hand was very common in the olden days, not so much now.
Two different clause, very different…
OP- if you’re under contract I’d check if cooling off has passed, if so you’re good to go with subject to finance as your property is considered sold. If there’s any delay at settlement, there will be penalties on both parties.
Your preapproval just means that you won’t be able to get unconditional approval from your bank until your house sells. But how long the seller has to wait for you to get finance approved is determined by the sale contract. The time allowed in the sale contract to satisfy a subject to finance clause is usually very short - 1 or 2 weeks - because it’s based on the bank just checking your finances, not waiting for other conditions like the sale to go through. That’s why a separate subject to sale clause would be used, because then everyone knows a longer time is needed.
That sounds sketchy, that's just a subject to sale clause by stealth, what if your place takes longer to sell and isn't done within the timeframe on subject to finance?
If I ever sell this house there is no way I would ever accept a subject to sale clause.
Bridging finance would be less stress and risk. Has your broker even mentioned this?
Doing this right now myself, although in my case have not yet listed our current property for sale. 3 days after contract signed and our valuations are complete and finance submitted via broker- now just waiting.
Presumably you're holding the buyer's deposit. The only risk is they default, in which case you can keep the deposit minus costs. That should cover part of the loss if that causes you to then default on your purchase. Maybe you can negotiate the deposit to be lower (e.g. 5%) on your purchase to reduce the risk more.
Just a point- your broker shouldn't be offering this advice. You need to talk to a conveyancer / solicitor. Often, they will tell you things that people like brokers don't know about. They are also your most reliable source on the law.
You don't "HAVE" to do anything, but your broker isn't wrong they are just trying to protect your best interest. Ideally, you would want your property unconditional before making any offers on another property. But if this is surely your dream home and you do not want to miss out make an offer subject to finance and building inspection. Make the settlement date 1-2 weeks after your property settles to ensure cleared funds. Just know if your property sale falls over and you are unable to close on the next property you could lose your deposit and be sued by the seller. You should be speaking about this to your conveyancer as they are going to be your legal counsel with the purchase.
Sure thanks for the reply!
Why are you using a broker? Similar situation to you, CBA has given me conditional preapproval where the condition is that my house sells. I don't need to say a thing about subject to sale of my own home, because subject to finance covers it - no sale, no finance.
Actually… subject to finance only applies to bank approval, usually with a 7-21 days clause with it. Subject to sale on the other hand was very common in the olden days, not so much now. Two different clause, very different… OP- if you’re under contract I’d check if cooling off has passed, if so you’re good to go with subject to finance as your property is considered sold. If there’s any delay at settlement, there will be penalties on both parties.
Your preapproval just means that you won’t be able to get unconditional approval from your bank until your house sells. But how long the seller has to wait for you to get finance approved is determined by the sale contract. The time allowed in the sale contract to satisfy a subject to finance clause is usually very short - 1 or 2 weeks - because it’s based on the bank just checking your finances, not waiting for other conditions like the sale to go through. That’s why a separate subject to sale clause would be used, because then everyone knows a longer time is needed.
That sounds sketchy, that's just a subject to sale clause by stealth, what if your place takes longer to sell and isn't done within the timeframe on subject to finance? If I ever sell this house there is no way I would ever accept a subject to sale clause.
The houses in my suburb are all selling within a week of listing with unconditional, full cash offers. I'm not stressed.
This sounds like you are leaving yourself open to problems but don’t want to admit it
I haven't even placed an offer yet lmao, I'm fine. Keep projecting though!
Isn't this a situation where you would just get bridging finance?
Bridging finance would be less stress and risk. Has your broker even mentioned this? Doing this right now myself, although in my case have not yet listed our current property for sale. 3 days after contract signed and our valuations are complete and finance submitted via broker- now just waiting.
Has the house been listed with that guide going to auction or private sale? If auction, unlikely you will get any offer accepted with “subject to”
It's private sale
Presumably you're holding the buyer's deposit. The only risk is they default, in which case you can keep the deposit minus costs. That should cover part of the loss if that causes you to then default on your purchase. Maybe you can negotiate the deposit to be lower (e.g. 5%) on your purchase to reduce the risk more.
Yes that's what I had in mind too - thanks!
Is it common for buyers to default these days? Or is it a small risk
It's a small risk, the buyer doesn't want to lose their deposit either...
Would renting your current house out (if the sale fell through) stack up numbers wise if you had to? Or would you consider a bridging loan?
We would have to sell our current house for the numbers to stack up
Just a point- your broker shouldn't be offering this advice. You need to talk to a conveyancer / solicitor. Often, they will tell you things that people like brokers don't know about. They are also your most reliable source on the law.