{"id":12922,"date":"2017-08-03T03:00:31","date_gmt":"2017-08-02T17:00:31","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=12922"},"modified":"2017-08-03T03:00:31","modified_gmt":"2017-08-02T17:00:31","slug":"knowing-when-your-finance-is-ok-andrew-mirams","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/knowing-when-your-finance-is-ok-andrew-mirams\/","title":{"rendered":"Knowing when your finance is OK – Andrew Mirams"},"content":{"rendered":"

Many property buyers think that \u201cfinance pre-approval\u201d is the same as \u201capproved finance\u201d, leading some to come unstuck.\u00a0\u00a0 We sort out the differences with Andrew Mirams.<\/strong>
\nTranscript : <\/b>
\nKevin<\/b>:\u00a0 It\u2019s such a confusing issue for buyers sometimes to understand exactly where they are with their finance approval or their finance request when they\u2019re going to buy a home. Andrew Mirams from Intuitive Finance joins me to talk about pre-approval versus subject to finance.
\nGood day, Andrew. Nice to have you on the show again.
\nAndrew:<\/b>\u00a0 Hi, Kevin. Yes, great to be with you.
\nKevin:\u00a0 <\/b>Now explain to me the difference: what is the process, and how can buyers get caught out with this issue?
\nAndrew:\u00a0 <\/b>Yes, those are a great couple of questions and ones that often get very confusing where people talk about approvals subject to finance and then a pre-approval. This also varies across state to state, where in Victoria and Queensland you can negotiate terms and have subject to finance or pre-approvals, whereas in New South Wales, let\u2019s say, once you exchange there\u2019s no subject to.
\nI guess the key difference between the two is often someone who will negotiate subject to finance probably hasn\u2019t done their finance approvals in advance. They\u2019re walking down the street and they see a property and they go, \u201cOh that looks okay,\u201d and all of a sudden, they find themselves in negotiations. Or they\u2019ve had the thought about property or finance and then something comes at in the last minute and they think, \u201cHey I\u2019d like to be involved,\u201d but they haven\u2019t done any of their due diligence with their finance. Are they applicable? Can they borrow? Can I borrow that amount? What terms, etc.?
\nIf we look on the other side with a pre-approval, that\u2019s where we\u2019ve already done most of that due diligence. So, there\u2019s been some work done on what a comfortable borrowing capacity is, what sort of purchase price you can target, what type of LVT \u2013 are you looking at 60%, 70%, 80%, or beyond that? Are you looking at principal-and-interest payments or interest-only payments and the rate differentials between all of that?
\nThere\u2019s a lot more due diligence going in to it with a pre-approval, and you know they\u2019re all subject to just the property being acceptable and an evaluation being performed, that it\u2019s fairly reliable that you can proceed with that purchase.
\nKevin:\u00a0 <\/b>So, in the event of someone going to bid at an auction, they have to go all the way through. The bank has to be quite clear about which property you\u2019ve going to be bidding on.
\nI always think that a pre-approval is where someone sits down and they look at you as an individual, your income, and your ability to repay a loan. But then to go one step further, they then have to verify that you\u2019re not paying too much for the property. Is that a fair assessment, Andrew?
\nAndrew:\u00a0 <\/b>Yes, it is. Probably 999 out of 1000 that go to auction, they\u2019re bought on the market. So, if it\u2019s in competition, the market dictates a property\u2019s value, and unless that\u2019s really run out of control \u2013 and there are circumstances where that can happen \u2013 a valuation will generally come in on and around that number that\u2019s being competed at auction.
\nWhere you have a private sale, and even if the property is on the market and it\u2019s negotiated off market, that\u2019s where you can sometimes get some differentials between a valuation and what a property\u2019s actual value is or what a client has paid for it.
\nBut yes, you\u2019ve done most of your due diligence. If it\u2019s for an investment let\u2019s say, as long as the numbers in rent return are within those boundaries that are set with your pre-approval, you can reliably proceed at an auction or with a purchase.
\nKevin:\u00a0 <\/b>I guess most buyers would want to put themselves in the strongest negotiating position, which is really where they don\u2019t have to have any conditions on the contract. It can just be a cash unconditional contract.
\nHow often in your experience, does that actually happen, though, Andrew?
\nAndrew:\u00a0 <\/b>What you find, Kevin, with a pre-approval, it actually allows a lot of our buyers to negotiate. If you have two contracts sitting on your table to sell your property, Kevin, both at the same price, but one\u2019s happy to go unconditional and one\u2019s happy to sit conditional subject to finance \u2013 because still, things can go wrong with that one \u2013 which contract are you going to choose?
\nKevin:\u00a0 <\/b>Yes, what are you going to do?
\nAndrew:\u00a0 <\/b>You\u2019re going to take the unconditional every day, aren\u2019t you?
\nKevin:\u00a0 <\/b>Yes, it\u2019s like a bird in the hand, isn\u2019t it?
\nAndrew:\u00a0 <\/b>Absolutely. And this is where it\u2019s a great tool to be able to negotiate. You can negotiate your terms. You might be able to negotiate a slightly lower purchase price. In that circumstance you might be able to negotiate $490,000 as the purchase price unconditional versus the $500,000 over there but there\u2019s no guarantee. If that falls over, it\u2019s very hard to get that other purchaser back in the market.
\nSo, like you said, a bird in the hand is better than the one in the bush, Kevin. So, that\u2019s where it can be a great tool knowing that you are pre-approved within those limitations.
\nKevin:\u00a0 <\/b>Yes. Just getting off the subject a little bit, but helping once again with negotiation, we talked there about finance and how powerful that can be if you have your finance in place. Time of settlement, is that varying much around Australia in terms of how quickly someone can settle if all the finance is right?
\nAndrew:\u00a0 <\/b>Yes. Settlement can happen, if you\u2019re paying cash, as short as seven days if everything can be done within that time. That\u2019s probably unusual. We\u2019ve been involved with some that have done 14 or 21 days with getting loan documents out and back, etc.
\nFairly traditional in Queensland is a 30-day settlement. Everything is negotiable but that would be the norm in Queensland. In New South Wales, the norm would be a 42-day or a 6-week settlement. And in Victoria, it ranges everywhere from 30, 60, 90, we\u2019ve had a 12-month settlement, 180 days, so six month settlements, all sorts of things.
\nThere seems to be a lot more flexibility in settlement terms in Victoria than probably the other couple of states. It\u2019s not to say that they can\u2019t be negotiated; everything in life is negotiable, Kevin.
\nKevin:\u00a0 <\/b>Absolutely, mate. It certainly is.
\nAndrew, it\u2019s always great talking to you, mate. Thank you very much. Andrew Mirams, of course, from Intuitive Finance. And we had a really good look there at pre-approval versus subject to finance. We also took you in to some settlement periods as well.
\nAndrew, great talking to you, mate. We\u2019ll catch up again real soon.
\nAndrew:\u00a0 <\/b>My pleasure, Kevin. Have a great day.
\n <\/p>\n","protected":false},"excerpt":{"rendered":"

Many property buyers think that \u201cfinance pre-approval\u201d is the same as \u201capproved finance\u201d, leading some to come unstuck.\u00a0\u00a0 We sort out the differences with Andrew Mirams. Transcript : Kevin:\u00a0 It\u2019s such a confusing issue for buyers sometimes to understand exactly where they are with their…<\/p>\n","protected":false},"author":176692471,"featured_media":11726,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[2,34,10,11,13,36,25],"tags":[101],"class_list":["post-12922","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-andrew-mirams","category-finance-topic","category-kevin-turner-sponsored-channels","category-kevin-update","category-latest-story","category-property-investment-topic","category-sponsored-channels","tag-podcast"],"yoast_head":"\nKnowing when your finance is OK - Andrew Mirams - Realty Talk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/channels.realty.com.au\/realtytalk\/knowing-when-your-finance-is-ok-andrew-mirams\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Knowing when your finance is OK - Andrew Mirams - Realty Talk\" \/>\n<meta property=\"og:description\" content=\"Many property buyers think that \u201cfinance pre-approval\u201d is the same as \u201capproved finance\u201d, leading some to come unstuck.\u00a0\u00a0 We sort out the differences with Andrew Mirams. 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