Looking to buy but worried you might miss out on that dream house if you don’t rush in with a cash offer? This is understandable given the current market at the moment – however, this can be fraught with danger if you don’t do your homework first!
On a fairly regular basis now, buyers are feeling the squeeze to put in ‘clean’ offers on a house with no conditions – without getting written finance approval or understanding the dynamics of their approval.
This often leads to mortgage advisors rushing to clean up the mess when clients have misunderstood their approval and have placed a cash offer, only to then find the banks have pulled the pin or are wanting additional information to get the purchase confirmed.
Some of the issues that arise from an uninformed cash decision are that buyers don’t have their finance fully approved, or the house has building issues which have not been investigated thoroughly.
So, to minimise getting yourself in deep water with a cash offer make sure you:
- Obtain any approvals or ability to go unconditional on a house offer in writing first. Technically a bank cannot approve a sale and purchase until after a deal is done, but they will check the draft sale and purchase disclosures and give you the green light – assuming nothing changes after it is all signed up!
- Even when you get the go ahead in writing as per the above point – make sure there are no other conditions lurking such as needing a registered valuation.
- Make sure you know the property is insurable before you bid unconditionally, if there are any exclusions in the policy, let your bank or mortgage adviser know before bidding.
- Have your lawyer check the title – make sure you know if there are any defects or other quirks you and the bank may need to be wary of.
- Be 100% happy with any building inspections and due diligence before you bid. Cover off any disclosures on the sale and purchase that could cause concern to the bank before you bid!
- Ensure you have access to pay the agent the deposit/down payment when going unconditional. Remember there can be delays accessing KiwiSaver funds if relying on that as a deposit.
- If in doubt, get legal advice from your lawyer before going in with an unconditional offer.
In addition to your lawyer, your Craig Pope Mortgage Adviser will help guide you through this process, reduce the stress, and let you know which banks will help make this process more seamless.