House does not permit, bank refuse home loan

Hi all my friends,

I live in Melbourne, I bought the house that is not permit for one bedroom extra, I didn't know about this until the bank informed me that 30 squares extra does not permit and they refused the loan for us (the bank called and checked with the council). We signed unconditions in the contract so that maybe I will lose the deposit money when we cannot settlement on time. However, some people say that, the contract is invalid because the house is illegal. The bedroom extra does not allow by the council so I can get back the money.

After the bank refuses the home loan with the main reason that the house does not permit, I want to cancel the contract but the conveyancing didn't want to do that. Today we overdue the settlement and the vendor issued the letter penalties us per day and will terminate the contract within 14 days if I cannot settlement within 14 days. Before that, the vendor promised extend 2 weeks for us but they didn't and they penalties us.

I find another banks but I really worry they do not approved on time. I don't know what to d if I lose the deposit. I am waiting a results from another bank. Anybody on here can help me, can give me some advice. I and my wife couldn't sleep at night. Can we refund the money as somebody say the house is illegal and the contract is invalid.

I came Australia few year ago and English is not official language, if I have a mistake please ignore.

Thanking in advance for your help.

Do you mean, the house has an extra bedroom extension which does not have planning permission from the council, so the bank will not lend? Did you add a clause subject to finance on your offer? If you did, then you should be able to pull out as you cannot get the finance approved.

Yes usually the contract is 'subject to finance' - we pulled out a contract on that basis. If not then I'm not sure there is much you can do - how much money are you talking about? Worth getting a lawyer involved?

Hi AJ,

That correct, that mean what I want to say. Now I applied another bank but still waiting a result. In the worst situation, if the second bank continues refusing, can I get the deposit money or not. I and my wife really worry, it is a big money that we have for many years

We deposit 10 percent - around 60,000 Aud

Hi AJ,

 

That correct, that mean what I want to say. Now I applied another bank but still waiting a result. In the worst situation, if the second bank continues refusing, can I get the deposit money or not. I and my wife really worry, it is a big money that we have for many years

It all depends on your contract, no-one here can really advise you without seeing that. A 'finance clause' is something that is added to a standard contract but is very usual for someone that needs a mortgage. If there is no finance clause then it may not be straight forward, but the the amount of money you are talking about it would be worth getting a lawyer.

First thing to do is speak to the real estate agent and tell them your finance has been declined as the re-modelling does not have a permit. Tell them as your offer was 'subject to finance' you are withdrawing. They will soon tell you if there was no finance clause in your contract.

I am concerned you have not been well advised as paying $60,000 at this point is an awful lot - I think our initial deposit was $1000. This suggests the real estate agent may have seen you coming & used your lack of understanding of the Australian system to pass off a difficult to sell house to you. Has the house been on the market some time?

I think they have bought unconditionally probably at auction and paid the 10 percent which would be standard

I think they have bought unconditionally probably at auction and paid the 10 percent which would be standard

I guess there could be state difference too, auctions were not so common when we were in Perth.

I've had a look on a consumer affairs website in Victoria - if it was an auction it looks pretty bleak as it states that finance clauses cannot be added to the contract.

It also says to get independent advice on legal & building matters before bidding.

https://www.consumer.vic.gov.au/housing-and-accommodation/buying-and-selling-property/buying-property/buying-property-at-auction

[h=2]About auctions[/h]If you are the successful bidder at auction:

• you will be offered a contract in the same terms that was on display before the auction

• you cannot make the contract subject to any futher conditions (for example, obtaining finance or having a longer settlement period) unless the vendor agrees to them

• there is no cooling-off period.

Before you bid:

• research the market, search the internet, attend auctions, speak with several estate agents and monitor auction results

• get independent, expert help on legal, finance and building matters.

[h=2]About auctions[/h]If you are the successful bidder at auction:

• you will be offered a contract in the same terms that was on display before the auction

• you cannot make the contract subject to any futher conditions (for example, obtaining finance or having a longer settlement period) unless the vendor agrees to them

• there is no cooling-off period.

Before you bid:

• research the market, search the internet, attend auctions, speak with several estate agents and monitor auction results

• get independent, expert help on legal, finance and building matters.

It will depend on whether you should have known this from the contract. Conveyancers are not lawyers and you need to see a lawyer and take the documents with you. It may be that the contract showed the extra room had no permit. Or the extension may have been a long time ago and so the person selling it did not need to tell you about whether or not there was a permit.

If you cannot settle because you cannot get a loan then there is a serious chance that you will lose money. Please see a solicitor. It is not really a hard problem but they need to read your contract. A conveyancer is not allowed to give you legal advice.

If you need the name of a lawyer call the Law Institute of Victoria and they will give you a name nearby. If you would be more comfortable discussing this in another language the Law Institute can recommmend a lawyer who speaks that language. That can be easier when you are stressed.

Also speak to the local building authorities and see if you can have building approval granted retrospectively, it is not rare. Buying a house in Australia does carry risk and 10% deposit is mad, you could have secured with just $1.

I would seek legal advice.

S

Hi all my friends,

First thing, let me thank you so much to all members who comments and gave me some advice.

Today, I went around everywhere from lawyer to another lawyer and bank and finally I got a call that I obtained a loan approval today.

The real estate and the vendor are not good, before I buy, I ask the agent staff and they told me that house have the permission but finally they didn't. When I saw the lawyer, he called to conveyancing of us, conveyancing of vendor and the agent staff. Maybe my conveyancing made a mistake because she didn't realize the permission of the house (I deposit 10 percent after 2 weeks after I down $1,000 for agent and enough time for the conveyancing read everything in the contract) and the agent also related. When the lawyer sent email to her, immediately she phoned again (maybe she does not want reply by email).

Today we late the settlement 7 days, and the total day we late maybe 10 to 14 days, we intend to settlement this Friday or Monday next week. We will pay the cost about $3,000 for the vendor penalties us but at an end this night we can sleep better than others.

Once again, on my heard, I really want to thanks to all for your help. Maybe, English is not my official language so that I cannot say everything that I thinking but I hope you can understand what I say.

I am please to hear that you have a way forward - an expensive lesson but not as bad as it could have been.

I would definitely be getting retrospective planning for the re-modelling otherwise you may have problems when it comes to you selling.

We made a lot of mistakes when trying to buy a house and then building - Financial Advisers are sales people in Australia and we were very badly advised, we were used to a system in Scotland where contracts are drawn up & dealt with by your own lawyer, you do not even put in a verbal offer without speaking to a lawyer so we found the whole process very stressful and it cost us dearly to the extent that I became physically very ill. And English is my first language so I can imagine how hard it is for you.

I hope this is a minor bump in the road and you ae able to get on and enjoy your new home.

I am so pleased to hear that you sorted it out. It is great that you can still settle on the house you like. Don't worry too much about $3000 even though it is a lot of money to find. Remember in Melbourne at the moment your house will quickly recover that $3000 for you! Don't let this spoil the experience of getting your house.

Hi Minh123,

When you say bank, which bank you are talking about? Have you tried to approach more than 1 bank?

I am a finance broker and can tell you that there are so many properties in Australia that do not have appropriate council approvals, but many lenders are still able to lend money for purchases of these properties.

You will not be able to get out of this contract without losing your deposit, and vendor can also chase you for more money to compensate his loses.

I would recommend to do everything you can to settle.