My brother is in Perth and dealing with a broker that is also a sales agent. The broker has signed him up on a house and land package that now looks like it is a big fat lemon and my brother wants out. Basically the broker arranged a loan through their bank, however, the val on the new property came in short. The broker told my brother that the val on his property had in fact come in short and he would need to pay the shortfall. My brother didnt have the money so said sorry cant do it. the broker said no worries we will get you a personal loan. My brother said no thanks. The broker then comes back and says congratulations the developer has reduced the price so you can proceed.
A couple of things here. My brother feels that he has been lied to, the property is a dud, and now does not trust these people. Secondly he has only signed the COS documents and the home loan application. He has not signed any form of disclosure document for the broker nor been advised of his commissions etc. Is this acceptable. He has never signed any document giving the broker authority to act on his behalf.
Also as the finance was not approved by the due date an extension was asked for, however, the request was never dated when signed by my brother. Is this document nul and void?
The conditional fax from the bank also states "variance between purchase land & construct value and actual valuation held is >10%. The consent from applicants required to proceed with application" he has signed no such document.
The broker obviously has a large interest in this deal being approved as they also sold the house and land and is telling my brother "tough luck your buying the property there is no way out".
Can someone please advise?
Hi there
Just because the finance has been approved at a lower figure than the initial purchase price does not mean you brother has to take it up and settle on the property. Normaly the finance needs to be approved on Terms acceptable to the Purchaser whereas in this case this was clearly not the case.
Normally within the letter of offer the terms of remuneration for the Broker will be outlined although the Broker also has a duty of disclosure to advise the client upfront of how he or she will be getting paid.
Personally i would never deal with a Broker who is related in some way to the selling agent or in this case the same person as there has to be a conflict of interest.
Easiest thing to do is to get your Brothers Solicitor to write to the Sellers Solicitor and advise him that he is NO longer proceeding. Then personaly if i was your brother I would be getting an altenative Mortgage Broker to look at his finances independantly and advise him away from the confines of the selling agent, display home etc.
A Broker should be acting for you the purchaser and have no beneficial interest in the sellers activities.
All sounds a bit close to me.
Hope this helps.
Richard Taylor | Australia's leading private lender
I agree with Richard
Your brother's bank has said no. This means that the finance clause (if there is one) has not been met and the contract can be cancelled. If the developer has now reduced the price, this means that a new offer is on the table. An contract cannot be amended unless both parties agree to the amendment, even if it is a reduction in price. Any extension of the finance clause is irrelevant. If finance is not approved then it is not approved.
Your brother only has to say that he is not interested in signing the new contract. That is the end of the story.
Cheers
K
perpetrator wrote:The broker told my brother that the val on his property had in fact come in short and he would need to pay the shortfall.
Also as the finance was not approved by the due date an extension was asked for, however, the request was never dated when signed by my brother. Is this document nul and void?*snip*
The conditional fax from the bank also states "variance between purchase land & construct value and actual valuation held is >10%. The consent from applicants required to proceed with application" he has signed no such document.
First things first, check the finance term in contract for sale. No point guessing.Secondly, don't let your brother near a RE salesperson unescorted.
It sertainly sounds like there ia a multitude of things wrong with this transaction.
I am pretty sure that the first thing required to be signed in WA is the Finance Brokers Contract and authority to act. Everything elst that follows without that signed is contrary to the finance broking laws of WA.
In addition, the above points are excellent ways to exit the contract. You can't just drop the contract price. The loan will need to be completely re-assesed by the bank, and the valuer will have to issue a new Valuation report noting the correct contract price. Your brother would have to (as mentioned above) sign the new contract, or at lease initial the amendment. Without agreeing to the amendment, their is no valid contract.
I just went through a similar situation with a client of mine but in QLD (the contract issue, that is).
Best of luck.
I fancy if you begin to mention 'solicitors' and 'legal advice' then your brother might find a direct path out of this mess.
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