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11 years 7 months ago #25374 by DiDi
I heard a story (from the horse's mouth so to speak) the other day about a property where the purchaser had pre approval and on the day of settlement, the bank pulled the funding because the property wasn't signed off.

Since I heard this story I have spoken with some people who should be in the know who said "bollocks" in no other terms. So can anyone explain to me how a bank could pull funding on the day of settlement?

The obvious outcome for all concerned is onerous presuming that the seller had bought another property subject to whatever but I have not heard of it being subject to settlement day. Unconditional sure - but settlement day?

This is not me by the way but could and may affect us all in the future so what are your opinions on why this could or would have happened. Ta

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11 years 7 months ago #355395 by highgirl
From what I would understand, as far as the purchase goes, the purchaser is still legally obligated to follow through with the purchase, or pay any penalty.

The sale and purchase being unconditional is separate to the agreement the purchaser had with the bank as such. The bank can only work with the information it has, and if it finds out at the last minute that the banks conditions haven't been met, then they would be within their rights to not draw the loan down to the purchaser. They will not draw down a loan on a house that is not legal, nor one that is not insured. The fact that it wasn't signed off, would be it probably wasn't able to be insured, leaving the bank at risk.

It should have been up to the solicitor and purchaser to do due diligence and ensure all the i's were dotted and the t's crossed well before settlement date.

Does that sort of answer it? Or were you meaning something slightly different?

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11 years 7 months ago #355401 by reggit
Didi, what do you mean by the property not being signed off? The purchaser didn't meet the requirements of the bank loan as far as valuations/insurances...??

Take a break...while I take care of your home, your block, your pets, your stock! [;)] PM me...

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11 years 7 months ago #355412 by Jen - Featherston
have not read other replies, but having just done this here is what I know.

The bank will pre-approve you to purhcase, BUT this will have a number of conditions attached, ie that the house must have a code of compliance, the certificate of title must pass to you on settlement date (important one for subdivisions) you must have adequate insurance in place, and for us we had to move all our banking to the lending bank.

We were lucky in that nothing went wrong, as we did sign an unconditional agreement (subject to lim report only) that of course was not subject to finance

IF something went wrong ie we found out after wards that one of the conditions of finance could not be met, or if our financial situation had changed since getting pre-approval or something the bank is entitled to not provide finance we would still be liable to pay the purchase price on the date of settlement OR pay the penalty interest until we paid the purchase price

Sometimes its not only what you say, its the way you say it that counts.

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11 years 7 months ago #355449 by igor
Jen, we straight out refused to transfer all our banking business to the lending bank. They still gave us the loan we wanted then asked us if we needed to borrow a bit more for set up costs etc.

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11 years 7 months ago #355458 by DiDi
I meant to say a "Code of Compliance" rather than signed off. The thing is, when we bought this farm, for example, 22 years ago, there was no such requirement and we had a rather large mortgage. You got your builder mate in and from the Council part of it, you asked for a report (can't remember the name) that basically was the Council advising that there was nothing to their knowledge that was planned "for the area" that would affect your property.

The reality is that there must be hundreds of thousands of properties that do not have Code of Compliance throughout New Zealand. Without mentioning an area, a friend was told by a Real Estate Agent of long standing in that area that over 50% of the properties in that area, including his own, do not have a Code of Compliance.

Personally I suspect that the people did not comply with the Bank's conditions but without knowing the reason, I was keen to hear what others had experienced and/or knew about the current requirements.

I am wondering how anyone could sign off a Code of Compliance when the building is completed. How can they see through the walls to know how the framing was constructed etc and when it was altered and by which owner over the years. Any thoughts or knowledge out there?

Incidentally highgirl, having worked in Insurance (some time ago) the question of Compliance was never discussed nor asked so unless things have changed I doubt that is the reason but I agree with your other comments.

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11 years 7 months ago #355467 by Pumpkingirl
These days a code compliance (there's no "of", I know, it's weird) has to be done signed off within a certain timeframe, and if it's not, you either need to get council permission to extend the timeframe or you just don't get it granted to you. For example, if you got the house finished except for one bathroom and you couldn't afford to do it immediately, you may find the council might give you an extension, or they might grant you a temporary CC that expires in a certain amount of time to allow you the opportunity to finish the work.

The reason for a CC is exactly as you point out Didi, so buildings can't go on being changed and then changed again by owners.

My house was built under new regulations where the building consent had a very defined time limit (2 years, although I later found out I could have got an extension but the inference from council staff was that wasn't possible), and my entire house was inspected from top to bottom as it was built so they could say at the end of that 2 years, yes, we know exactly what this house is built of and that it meets the current standards.

Houses in a certain age bracket where a CC cannot be issued can go for a safe and sanitary certificate from council. You can read more about that here .

However, if a bank deal specifically states that you must have a CC, I don't see how you can get around it. It's a very specific piece legal document.

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11 years 7 months ago #355468 by Pumpkingirl
PS my previous bank manager told me always to put in the "subject to finance" clause when buying a property even if you were paying cash, as it always gave you an "out" if something happens and it would be almost impossible for the seller to prove otherwise.

Don't know how legal that is though!

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11 years 7 months ago #355473 by PeterNZ

Pumpkingirl;345692 wrote: PS my previous bank manager told me always to put in the "subject to finance" clause when buying a property even if you were paying cash, as it always gave you an "out" if something happens and it would be almost impossible for the seller to prove otherwise.

Don't know how legal that is though!

Yes we were told the same but by a real estate agent. But try to get this into a contract and the RE agents will almost refuse it. They will tell you that nobody would sign a contract like this. And I guess they will tell the seller this as well. They told us that we could then basically pull out in the last second and that this is unacceptable.

They are required by law to set up the agreement like you want it to be. But what they then discuss with the seller is a complete different story.

Cheers

Peter


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11 years 7 months ago #355475 by highgirl
No older houses built before building regulations (and maintained in original condition) wouldn't have code compliance. Through error of my own (or my builders) we made changes to our house (due to a fire). We were unaware the changes we made were enough to require a permit, which we never got. The council don't issue these in retrospect, so we ended up having to get it all checked out, and noted on the property file.

Didi, we were staying in a relocated home, which was still waiting it's final code compliance. I wasn't asked the question straight out by the insurance company, but I offered the information because I didn't want to pay for invalid cover. They told me it wouldn't be covered because it's not legally permitted - they would cover it if I could prove that most of the property details had been checked and it was only minor issues still to be sorted.

Even if the insurance company happily took your premium, I doubt they would pay out if the house burnt down, and it was due to a fault in the workmanship and the house had never had its final sign off?

I don't know though, all I know is from the bank perspective, as an interested party, they require it to be insured.

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11 years 7 months ago #355526 by max2
We were asked to get a CC for our 1980's renovated village house (franklin district) by purchasers Solicitor back in April for the sale that eventually fell through. Two Depts in Council argued as to whether it was them or not telling the potential purchasers of the requirement, with the end result we went ahead with inspections, paid $1000 for the resource consent, survey $700 only to lose the sale within days for no apparent reason and council informing us that our renovation was a ''non notifiable event''.

I have since found the people have moved to Huntly... they would not respond to txts, emails or telephone call messages, despite reassuring us the week before they were going through with the purchase.

Therefore my advise is to get Council opinion in writing before you list as to whether your property requires any sort of council sign off. Make sure its in writing though as our experience is the depts will contradict you with any info given to purchasers and its a stressful time trying to sort the matters out when a sale depends on the advice.

obtain a survey of the property.

but finally only believe half of what you are told. We ''think'' our purchasers couldn't obtain the necessary finance for our property and thus why they went in the other direction. Our Solicitor would not chase it up with the other solicitor either....[}:)]

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11 years 7 months ago #355537 by highgirl

PeterNZ;345697 wrote: Yes we were told the same but by a real estate agent. But try to get this into a contract and the RE agents will almost refuse it. They will tell you that nobody would sign a contract like this. And I guess they will tell the seller this as well. They told us that we could then basically pull out in the last second and that this is unacceptable.

They are required by law to set up the agreement like you want it to be. But what they then discuss with the seller is a complete different story.

Cheers

Peter


When buying and selling, the "subject to finance" clause has always been included, and advised by the real estate agent. Obviously this is only until the sale and purchase becomes "unconditional" (generally 10 working days from date of signing) Possession or settlement is generally 6 - 8 wks after that.

As a banker, I always advised our customers to still put "subject to finance" even if they were pre-approved, because generally pre-approval meets the financial conditions only, the bank still needs to check the property details. Never leave yourself open and vulnerable.

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