We explain the importance of finance pre approval when buying property in Brisbane. The property market in Brisbane is extremely competitive right now and you need to ensure you have a finance pre approval when buying a property.
The high volume of buyers searching for a property
now outweighing the number of properties that are available for sale. When there is a
supply shortage (ie: low listing volumes) in conjunction with high demand (ie: a large
vole of buyers), then ensuring an offer is competitive becomes incredibly important.
Brisbane is a market whereby the majority of residential property sales occur by private treaty. This
means a property is listed for sale on the major real estate portals, and once buyers have seen the
property, they can submit an offer to the seller to be considered. When there are multiple buyers
who are interested in the property, multiple offers may be submitted by a specific cut off time for
the seller’s consideration.
The objective of a seller is always to get the highest price, but they are also looking for certainty of
the sale. When offers are submitted through a private treaty sales process, many of the offers will
be subject to certain conditions, such as a building and pest clause or a finance clause.
A finance clause can be inserted into a contract of sale to enable a buyer to obtain a final approval
from their lender before the purchase becomes an unconditional sale. This usually involves the bank
sending a valuer to the property that has been purchased to ensure that the bank also values the
property at the purchase price. If the bank valuation comes in at the purchase price, then the
paperwork is finalised and the final approval can be issued. When a bank valuation comes in under
the purchase price, a buyer can cover the shortfall, contest the valuation, or withdraw from the sale
contract and get the deposit refunded.
To ensure that the post contract phase to obtain a final approval is fast, quite often a pre approval when buying property is
required. This means that the bank has assessed the majority of the documentation associated with
obtaining a loan for a property purchase and has provided guidance to a buyer in relation to the
amount that they can comfortably afford to pay for a property purchase.
Where we sometimes see things breaking down is when buyers don’t have a finance pre approval when buying property.
In the majority of circumstances, having a pre approval when buying property in place provides more certainty to buyers, which
in turn provides more certainty to sellers and their agents, as long as this is disclosed when making
Results from a recent study by Aussie Home Loans confirmed that 52% of property buyers do
not know where to begin to obtain a finance pre approval when buying property and 54% said they had missed out on a
property because they did not have a finance pre approval in place. These are very alarming
Sales Agents will often be asking buyers if they have a finance pre approval in place to ascertain the risk of
that buyer not following through with the purchase. When a contract is entered into, and a buyer is
not finance ready, then often requests for an extension of the finance clause can cause a purchase to
fall over. In a market where buyers who may have been the under bidders are waiting to hear if a
contract has crashed, there is a real risk to buyers who may not have a pre-approval in place if the
timeframe required to obtain a final approval pushes out.
The same survey by Aussie also revealed that 91% of buyers “feel stuck” which is holding them
back from making a property purchase. Reasons for this included current market conditions,
competition from other buyers or not being able to find the right property.
Of course progress is within reach if buyers do their homework and get organised in advance. When
a buyer can beat the competition due to having better terms in relation to an offer, it often puts
them in a more favourable position in a highly competitive market. If two offers are made at a
similar price, then the offer with the more favourable conditions is likely to be the one that a seller
Remember, sellers want certainty, and so do their agents. Having a finance pre approval when buying property ensures that when the right property comes along, a buyer is ready to make the move. It also ensures that the offer is more competitive than others whose terms may be less favourable when there are multiple offers that a seller can choose to accept.
Get in touch if you would like to know how we can help you.