The purchase of a home can be a very complicated affair. If you've never done this before, it's likely that you will need help in order to ensure that everything goes as smoothly as possible. In particular, you need to ensure that you have as many options open as possible when it comes to finance. This may sound as if it's intuitive, but many people cause problems for themselves at this stage. What do you need to be careful of?
Specifying a Financier
Whenever two parties are interested in buying and selling a home, a contract needs to be drawn up with many different conditions therein. A buyer always has the option to say that they will use a specific financier. It could be that they have found somebody who offers a great rate, or might have another type of relationship with that individual or organisation. Be careful in this situation, however, as limitations could be imposed.
If you do put that condition into a contract before making a formal application for financing on the property in question, a problem could arise. A certain issue may be attached to the property meaning that the financier is not able to actually approve a loan on the building, or may not be able to do it within the timeframe laid out in another contract clause.
The Big Risk
When this happens, a buyer does not have the automatic right to terminate a contract. In certain circumstances the buyer could, in fact, be found wanting and to be in breach of the associated residential contract. It could be said that they are liable here, because they had not formally received approval for the financing from the entity, even though they included the name in the special condition. The law will almost always determine that the buyer should have taken the proper steps before signing.
A Can of Worms
There may be other issues, as well. Normally, the seller has limited options to terminate any contract due to actions of the buyer. However, if they weren't effectively preapproved for a loan the seller may be able to terminate the contract and might also be able to keep an associated deposit, with any interest it may have earned. In the absolute worst case, the seller may also pursue damages for loss of opportunity or time.
The Moral of the Story
Always ensure that you have written notification from any financier to tell you that a loan will be extended on a particular property and within a certain time frame. Never leave this to chance, as you could lose access to more than just your dream home.
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