'subject to finance' clauses and OTP contracts

Viewing 7 posts - 1 through 7 (of 7 total)

JAQ2000
Member
@jaq2000
Join Date: 2012
Post Count: 2
June 11, 2012 - 4:37 am
sorry to ask what might seem a silly qn, but can anyone clarify a qn that's come up about 'subject to finance' clauses related to OTP contracts?
my understanding was that this meant that, if at time of valuation (ie, 3-6 months from settlement), a bank/lender does not finance the contracted amount (eg, contract = $500K, valuation = $420K), you had a way 'out'…
however, a family member has told me that she believes the subject to finance clause in a OTP contract only relates to the initial contract phase – ie, you're required to show in principle/pre-approval within about 2 weeks – but after that you're bound to the contract unconditionally (ie, regardless of final valuations).
can anyone clarify? thanks …
(And actually, totally different qn but it just occurred to me while typing … what's not to stop the developers offering their own finance to "bind" ppl in (ie, no excuse – and probably at crazy interest rates … (eg, like car financing?))
boybramley
Participant
@boybramley
Join Date: 2012
Post Count: 5
June 11, 2012 - 4:37 am
Hi fellow investors.
New to the website and this blog. PPOR is Sydney and I’m looking at Muswellbrook, Singleton as an investment. Strategy really is to buy well, undertake some quick TLC such as polished floor broads, new kitchen, and/or maybe new bathroom. Rent out asap as a +ve cash flow, or almost +ve.
I’ve taken note of the varying contributors who suggest furnishing is a good idea, as many mine employees are new to area and may not have furniture.
Looking at 3 bed houses, in good areas. I guess I am after the perfect investment, good potential for capital growth and as near to +ve cash flow as possible.
Be keen to hear of anyone’s views on this strategy and my proposed areas.
Best
David
Jamie Moore
Participant
@jamie-m
Join Date: 2010
Post Count: 5,069
June 11, 2012 - 4:53 am
Hi jaq
Welcome aboard.
Your friend is right – you can’t have a subject to finance clause for an OTP purchase. I doubt any developer would allow this.
OTP (particularly in the current environment) comes with risks – obtaining finance being the biggest one.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone Me
Mortgage Broker assisting clients Australia wide Email: [email protected]
Jamie Moore
Participant
@jamie-m
Join Date: 2010
Post Count: 5,069
June 11, 2012 - 4:54 am
Hi David
Welcome aboard as well.
You’d be best off starting a new thread.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone Me
Mortgage Broker assisting clients Australia wide Email: [email protected]
boybramley
Participant
@boybramley
Join Date: 2012
Post Count: 5
June 11, 2012 - 4:56 am
Just realised I needed to start a new ‘thread’.
Cheers Jamie.
Brand new to the site !
JAQ2000
Member
@jaq2000
Join Date: 2012
Post Count: 2
June 11, 2012 - 7:39 am
great – thx for that clarification jamie.
gibbo1
Participant
@gibbo1
Join Date: 2008
Post Count: 152
June 11, 2012 - 8:58 am
Hi Jaq,
At best with a OTP, you may have a 7 day cooling off period but they do become pretty water tight once the offer has been accepted.
Regards
Gibbo