Contract of Sale – The Importance of Meeting Your Obligations Under the Contract:
In Queensland the conveyancing process begins once the Contract of Sale is signed by both parties. The execution of the Contract sets off a series of obligations that each party must meet on certain dates. It is crucial that as a buyer or a seller you meet your obligations by their respective deadlines in order to avoid facing any penalties or the possible termination of the Contract by the other party.
Most buyers require a mortgage in order to afford to buy a property and there is a standard condition in the REIQ Contract of Sale for finance. In most cases the Contract provides the buyer with a 30-day period from the date the Contract is signed to receive finance approval. This is not the day that you require the funds by, but the day by which the bank must approve your loan.
If you are obtaining finance it is crucial that you are aware this date, as you are required to notify the seller or their solicitor of the outcome of your application by 5pm. There are serious consequences for ignoring this date and failing to notify the sellers of the outcome.
Upon entering into the Contract a deposit is usually paid to the Seller and held by the Real Estate Agent. If the contract is terminated by the seller, due to the default of the buyer, then the seller is entitled to the deposit and it is forfeited by the buyer. A failure to notify the seller of the outcome of your finance application gives the seller the right to terminate the contract due to your default and therefore they are entitled to keep the deposit.
Not having your finance approved by the deadline does not mean there are no options. By this deadline you must inform the seller that:
- a) You have received finance approval; or
- b) Your application for finance was rejected and you are therefore terminating the contract; or
- c) You can request an extension to the finance deadline from the seller. It is at their discretion whether to grant this to you or not.
In most cases the seller will be agreeable to a short extension and will not impose a penalty as they are usually as keen to sell the property as you are to buy the property.
If your finance application is rejected and you are therefore required to terminate the Contract under this condition, then you are entitled to receive your deposit back, which is why it is so important that you notify the seller or their solicitor of this.