When Finance Falls Through On a Property
Sometimes when purchasing an investment property finance can fall through. If you are unable to secure the finance when trying to secure a property what can you do to bounce back and maybe still secure that property.
0:00 – Introduction
0:53 – How Simon’s finance fell through
3:05 – Getting the right mortgage broker
3:47 – Why finance fell through
sometimes when purchasing an investment property everything doesn’t go to plan and one of the things that can happen is your finance can fall through or you’re unable to secure the finance in order to purchase the property this can be very difficult to go through very stressful can cause you to lose part of your deposit if you’re not careful and this recently happened to simon everingham the buyer’s agent over at pumped on property when he was looking to buy one of his own properties so i thought we would chat quickly today about what can you do if your finance falls over and what can you do to protect yourself in case your finance might fall over on a property deal so hey simon thanks for coming on today no worries at all getting a little bit personal today eh yeah it’s never a good thing to hear that your finance fell through uh oh no obviously it’s extremely stressful so do you want to start by telling i guess give a little bit of the backstory about how your finance fell through and then we’ll talk about what you can do when it does happen and i guess some of the things you can do to protect yourself in case it happens for sure so you know finance is a big thing and you know this year i wasn’t planning on buying a property so i wasn’t really setting myself up setting up my account setting up my uh finances in a way that we’re going to look attractive to the banks because that’s what you really need you know you need to look attractive to the banks you need to look like you can service the loan you need to look like you’ve been saving a lot of money you need to look like your expenses have been really low but i wasn’t planning on buying a property this year so like none of that was taken care of which is you know a bit of a bummer so basically in a nutshell i just wasn’t ready i was probably about three months too early before being able to do something and decide to pull the trigger anyway and go you know let’s give it a crack because up here in queensland you can put a finance term in your contract i wasn’t buying it options i wasn’t immediately committing to the property i had 21 days to secure finance and i even requested an extension after that 21 days because i couldn’t get it and basically just had to move through the motions um throughout that that month and i’ll tell you it was probably one of the most stressful months i’ve had throughout my investment journey so far yeah so we talked a little bit about in one of our previous videos where you talked about buying your third property in the chat that we had so i’ll link up to that down below but basically the story from my understanding is that you’re looking to buy your own home a joint application with yourself and your partner and then it fell through because of you know coronavirus and the situation with her employment at the time and so it fell through you were told that okay we could get probably get a loan from a bunch of lenders even on jobseeker didn’t happen if you when you went to them they basically said no we’re not going to do that and then finance fell through eventually you actually went back and renegotiated on that property after it fell through under your own name is that basically summarize it yeah in a nutshell so i went through four different mortgage brokers throughout this process and only one of them was able to get the job done so you know a mortgage broken b can be an absolute amazing asset but in this case two of the four mortgage brokers wouldn’t look at anybody but the four top tier lenders so that kind of put a bit of a a mark on it because i wasn’t able to finance through the big banks but these guys weren’t even telling me that there was second and third tier lenders that would look at the application so that was the first um sort of red flag so i had to kind of find somebody that is a bit of a spell specialist in these tricky situations and go through them but in a nutshell we got the property under contract i approached my mortgage broker secure finance both myself and my partner tay were on the contract together and at the time she was working with virgin and at the time they were all stood down on job seeker now i’d heard stories of people securing finance whilst on the job seeker so i was like oh cool there’s banks that are going to look at it but there’s a big asterisk next to that one which is it’s only certain industries and because it was the airline industry that had been dramatically affected because she couldn’t get a letter from her employer stating that she will be back to full-time work on this date none of the banks were willing to look at her though then we had to kind of look at other options with other brokers that were willing to look at these second or third tier lenders then when we started to get a little bit of information there there was a few banks that were willing to look at the application um it was coming down to the wire and unfortunately it wasn’t going to look like we were able to go we’re going to be able to secure it it was the employment um from virgin australia and the uncertainty of what was going to happen at the time because this is all the way back in june when they still didn’t know if somebody was going to be buying them out and so did you so you said you had 21 days in terms to get finance does that mean you had a 21 day cooling off period essentially on the property um i i don’t i don’t really want to say that um nah because it the cooling off period is done in only the five days afterwards but i put a 21 day finance clause in there which meant that if i couldn’t secure finance i could walk away and still get my initial deposit of 5 000 transfer back so basically didn’t lose any money at that point in time okay so this is an extra clause that you put onto the contract onto the offer for the property that you’ve added in this finance clause yeah and i would 100 recommend putting that one in there no matter what if you’re buying a property out here up here in queensland you know put a finance clause in there even if you’ve got pre-approval you know you need you need to make sure that you can safely secure finance for the property so you know 21 days past wasn’t looking like we could get it so we extended it by one week that’s 28 days of finance now which is generally plenty of time for a mortgage broker to work on it but because of the tricky situation it wasn’t going to work out we got to the 28-day phase and it wasn’t going to happen so we actually had to walk away from the contract now this is where i use some negotiation skills with the agent because at that point in time we had got finance approval we’ve got conditional finance approval but it wasn’t going to be in place before the finance unconditional was due to expire so i needed an extension which the real estate agent wasn’t willing to give the extension so i had to walk away from the offer completely and then renegotiate the deal back together completely and um you know at this point in time we i ended up going for with with my own name on the on the contract because this is what one of the banks looked at they were like you know we’re not going to touch it with both your names on the loan um but there is an option um if simon goes on the loan just by himself so i obviously went forward with that option managed to renegotiate there was about a two day period there where i wasn’t sure if they were going to accept the offer but managed to you know convince the the real estate agent to keep the deal together convince the seller to accept my second offer which i had to give him an extra five thousand dollars i initially had it under contract for 555 and then i had to increase it to 560 to get the deal done which to me was fine because i feel as though i still bought the property about twenty to thirty thousand dollars under market value so i knew i was still buying at fifteen to twenty five thousand dollars under market value which is completely fine with me yeah so i think one of the biggest things in there is that finance clause that you added and people can talk to their solicitors about how to do that and how to add that into their offer on their properties as well so obviously get advice on that and how you should go about doing that but basically for you what that meant was because you’re unable to secure finance you’re able to walk away from that property and you didn’t lose your deposit is that correct that’s correct yeah that’s exactly right um so then i’ve got the contract i’ve renegotiated a contract completely brand new contract so um you know it was new terms and everything and um then we were able to secure finance and push forward so it all worked out in the end but it was a bloody stressful situation yeah it sounds super stressful so yeah you do need to be careful because if your finance does fall through if you don’t have those stipulations in your contract you could lose your deposit or part of your deposit so you need to be really careful with this sort of stuff what are some things simon that you think you could have done ahead of time obviously you weren’t intending to buy but let’s say you were intending to buy what would you have done differently to get yourself in a position where finance is less likely to fall through number one i would have never taken the money out of super um that was you know some that was a mistake on my behalf um and you know that that put a little bit of a black mark so you know if you’re not ready to buy you’re not ready to buy you should wait until you are in a position so you know if you’re not in a position where you can secure finance then you shouldn’t really be looking at buying a property so you know that was a big lesson but what i’ll be doing moving forward is is you know not rushing into things you know i’ve had a very aggressive 18 months and i’ve done exactly what i needed to do a lot faster than i was i was expecting to do it but moving forward i’m going to be a lot more strategic with my purchases i’m going to make sure that i get a pre-approval in place before i begin looking in the property market so what a pre-approval is is it’s going to a mortgage broker or a bank and actually getting them to commit that yes we will finance you up to a certain amount so that you can freely go and look at properties up to that and purchase properties up to that amount of the pre-approval yeah so pre-approval generally means that they will give you a loan assuming that the property comes in at value assuming your situation hasn’t changed and all of that sort of stuff so that’s kind of the bank saying yep if you go ahead it’s going to be a lot easier for you to get finance and a lot more likely if you have pre-approval in place and then obviously some things you mentioned earlier as well is having a good savings history so you look good to the banks not having a lot of you know personal debt or things like that keeping your expenses low as well because some lenders and some banks look really closely at what your outgoing expenses are and that will determine whether or not they will lend you money so if you’re spending lavishly in the months leading up to trying to buy a property and your expenses look extremely high even if they’re not that high regularly you know that can set you back whereas if you have a good savings history and a good low spending history then that can really help you is there anything else you would add to that um not really you know that’s that’s in a nutshell like once you talk with a with a bank uh or a mortgage broker they’re going to be able to tell you where you sit um you know they’re going to be able to educate you on where you can tidy things up um and you know that that’s kind of a sort of a line in the sand situation you know understanding exactly where you can finance up to and then doing what you need to to get in place to buy something but yeah you know having those savings accounts looking tidy you know reducing those expenses as much as you possibly can um you know it’s you know that’s all more free stuff when you’re budgeting and things like that um but yeah once you get the pre-approval phase you know you need to have everything everything sorted if you don’t you end up having a super stressful six months so yeah finance can fall through but there’s some things that you can do to prevent it and there’s also things you can do to protect yourself if it does happen so thanks so much simon for sharing your stressful story of what happened and hopefully you out there can learn from this so you don’t end up in a similar situation i’m going to link up to the video that i did with simon talking about how he bought three properties in 18 months which is super amazing we just kind of had a chat about that and his most recent purchase i’ll link up to that go ahead and check it out otherwise until next time stay positive