Rising Tide Blog

Now that you are pre-approved, what’s next?

Posted by Sam Gawenda

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Now, this is where the real fun begins! From stalking realestate.com every night and going to home opens, to dealing with Real Estate Agents and bidding at auction – these are all a part of buying property. But, before you get too carried away, there are a couple of key things you need to remember.

How long does my pre-approval last?

Generally, your pre-approval will last 6 months. This is one of the reasons we suggest getting pre-approved if you are serious about buying in the next 6 months.

What’s the difference between a conditional or unconditional offer?

Making a conditional offer means you are offering to buy a house for a certain price – on the basis that certain conditions are met. Conditions could be anything (provided the vendor agrees to them) but the most common are:

  • Subject to finance
  • Subject to a building and pest inspection

If the condition/s cannot be met, the contract is ripped up and you can walk away from the deal without any penalty.

An unconditional offer means there aren’t any conditions attached to your offer. Generally, this makes an offer a lot stronger than one with conditions as the vendor doesn’t have to worry about the deal falling through. However, if you are unable to attain finance for any reason, and therefore cannot settle on the house, you will likely lose any deposit you have paid and may also be sued by the vendor.

In summary, unconditional offers are more appealing to vendors and could help you win a property but make sure you have done your checks and balances beforehand because they also expose you to additional risk.

Bidding at auction versus private negotiation

For some people, auctions can be intimidating and highly emotional. However, the great thing about auctions is the complete transparency of what other people are bidding on the property. Entering a private negotiation can be frustrating at times as you are dealing directly with the Real Estate Agent and there is no way of knowing if there really is “another interested party” or whether there really are “two offers already on the table”. However, the great thing about private negotiations is there is the ability to add conditions to your offer – so you maintain some level of control. When bidding at auction, you are essentially making an unconditional offer every time you raise your hand. There may be some flexibility on deposit amounts (standard is 10% of purchase price paid within a few days of auction) or settlement due date but nothing further to that.

Am I guaranteed to attain finance approval since I am pre-approved?

The short answer is no, you are not guaranteed. There are two main reasons as to why your pre-approval may not lead to a formal approval:

  1. Your financial position changes
  2. When the lender issues a pre-approval, it is based on the information provided at submission. If your position changes (i.e. change of employment, extra liabilities etc) it may negatively impact your application.
  3. The property you purchase is not an acceptable security
    • Lenders have a set criterion as to what makes a property an acceptable security. After all, this is the collateral for the large amount of money they are lending you. Some examples of property that may be deemed unacceptable are units under 40m2, farms, dilapidated/unhabitable dwellings.

There is a lot to take in, but the good thing is you are not alone. Make sure you reach out to your Rising Tide Lending Specialist today if you have any questions specific to your situation.