Real Estate Purchase - Extending the Finance Condition

We are regularly asked by clients to arrange for "an extension of finance".  This is where the client has signed a Contract of Sale of Real Estate, usually with the "assistance" of the friendly real estate agent, and the loan condition has not allowed enough time for the lender to approve the client's loan application.

It is NOT simply a matter of asking the other party or the real estate agent to change the loan approval date.  Sure, this can be done, and it may even result in a quick agreement to extend the approval period.  But in most cases it creates an "instant death" problem.

If the request is made, but the response is not receive until after the contract has become unconditional, a purchaser can find that they no longer have the right to end the contract if finance is refused.  This can result in the breaching of the contract, forfeiture of the deposit and even court action to recover the full sale price.

To obtain a finance extension safely it is necessary to give formal notice to the other party that finance has not been approved, and to confirm that consequentially the contract is at an end.  The other party can then be advised that if they agree to allow the contract to be amended so as to allow more time for finance approval, the purchaser will agree to reinstate the contract, with the finance approval date amended.

Of course, it is possible that the vendor may not agree to reinstate the contract, and the property may even be sold to someone else.  This is a risk to be considered when seeking the finance extension.

Need more information on this issue?  Contact us.