There have been cases when, as a seller of a piece of real estate, you encounter one big disappointment. Your agent calls to tell you that the buyer's loan has been rejected by the bank and it happens right after price has been set and the contracts have been finalized after several weeks. And the worse part could happen once the buyer becomes MIA and the sale becomes unconditional.
According to Domain, this disaster happened to one Yarra Valley resident as the sale of a three-bedroom house got left hanging because the buyer was not able to get a loan. The nightmare went on as the "buyer" kept postponing their promise to secure a letter from the bank, which would end the contract. Moreover, the seller who wants to remain anonymous, shared that the buyer gave $1000 to secure the property just before Christmas, however things became amiss as the buyer was not able to pay the deposit after the "cooling off" period. Their house had to stay in the market for weeks sitting on the contract.
"We don't know where we sit, what happens if it comes January 22 and legally she has to buy it," the anonymous seller. Then added, "I don't [want] to go down the road of taking her to court to get the money."
According to Domain, sales director Arch Staver of Nelson Alexander say that this has been highly observed among many vendors in the Melbourne market. He attributes the "subject-to-finance sales fall through" with the change that banks have made with the lending conditions. There have been instances when a buyer who received a pre-approval in the middle of last year may be surprised to find that the bank had revised down that offer.
According to Michael Hendricks, general manager of credit risks, "In the last eight to 12 months, all the major lenders ... had been working closely with the [Australian Prudential Regularity Authority] to ensure that lending standards don't deteriorate when we have a combination of record low interest rates and house price growth.
"And so part of those processes have been looking at how banks take into account, and make assumptions around, living expenses and types of non-stable income - bonuses and overtime - so really making sure that we maintain a good focus on affordability."
