Through no fault of Open Corp’s, we’ve had a rocky start this time. Our finance pre-approval, with me only recently back to work and the wife on maternity leave, was heavily scrutinised by the bank and was finally approved in mid-December—valid for three months, including the Christmas holidays. Dear wife then took her time finally agreeing to the commitment before we gave Open Corp the green light.
More recently, with our pre-approval due to expire within a week, I received a call from Open Corp telling us a larger buyer had come in and offered to purchase all remaining blocks in the development we were to buy in to—including all blocks with non-executed contracts. We’d signed the contract but it hadn’t yet been fully executed (signed) by the vendor. I’m not sure if it applies in the fullest sense to this specific situation, but I think we were gazumped.
Open Corp were helpfully able to secure another, larger block for us in a neighbouring estate (at a higher cost due to the increased land size—with the difference to be rebated back to us). They also had our initial deposit refunded from the original land developer and applied to this new property. The stamp duty will be about a thousand dollars more because of the increased sale price but I’m comfortable with that seeing as how we’ll be getting an extra 48sqm at minimal cost.
Given the timelines for the finance pre-approval, we were able to nominate Open Corp to sign the land and build contracts on our behalf (the property is in Victoria) and the mortgage broker was able to submit our finance application on the last day of our pre-approval… still without an executed land contract.
Land contracts just aren’t working out for us this time around. It’s now been two weeks since the final finance application was submitted and we’re still waiting on the executed land contract. I have no idea what the hold up is this time and apparently neither do Open Corp but it’s all slightly concerning—especially coming from where we’ve been with the first block. Will the same thing happen with the unexecuted contract being sold to a bulk purchaser? Is whoever does the signing at the vendor’s end out of town? In other words, what’s going on?!?
[Update (6 April): the signed land contracts finally came back late last week, which of course starts the clock ticking for the finance approval…]
Meanwhile, the bank seems to be moving the application forward without this seemingly important document and have ordered a valuation on the property and requested a few extra pieces of documentation from us. I have no experience how flexible the major banks are with the deadlines for their pre-approvals and I’d be very curious to know what happens next if this purchase falls over on the land contract.
All of this is unnerving and frustrating but we’ve never had any major issues buying or securing finance for our PPOR or the first IP and I’m hoping this will come good. I know finance is often the biggest hurdle for many buyers and it was certainly a relief to move forward from the point of unconditional finance approval with the first IP.
Compounding matters, the bank (a different lender to the one we used for the first IP—to avoid cross-collateralising) has flagged a possible issue approving a 10% LMI discount for us. Certain professionals are eligible to pay a 10% deposit instead on the typical 20% deposit before LMI kicks in and the wife, being a doctor, falls into that category of professional. The only problem from the bank’s perspective is the fact she’s not working… or more precisely, as I’d describe it: she’s on leave (maternity leave)—and she is therefore still employed. Unfortunately she has no current pay stubs to prove that to the bank and we’re waiting on a letter from her employer in the hope the bank will accept that.
I hope we’ll have a better view of both the land contract and the finance situation this next (short) week but I won’t bet on it.
I suppose a disclaimer is also worth posting: I'm just a guy, I'm not an accountant, lawyer, solicitor, tax agent, mortgage broker, banker, financial adviser, insurance agent, land developer, builder, government agent, or anything else so I disclaim your application of anything I write here is to be applied at your own risk. What I write may be incorrect and you are best to seek your own professional advice (tax, legal, financial, and otherwise) before entering into contracts or spending your money. Your situation is unique to you and what I write here reflects my experience only. This content is not professional advice and is not tailored to your situation. I'm learning too and expect to make many, many mistakes along the way.
Enjoy,
Michael
nice
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