Conditions of bank lending

Andrew and Donna reached their goal and had saved enough money for a deposit on their first home.  After a month of searching through real estate agents listings and attending open homes, they finally found what they were looking for.  The property was a 2 bedroom standalone dwelling with a garage.

The couple contacted their solicitor and had them review the agreement before making their offer.  They had already had the property checked by a builder, and their solicitor had reviewed the LIM report.  Andrew and Donna decided that the only condition required would be a finance condition.  The settlement date was set to follow shortly after the finance condition was due to be satisfied. 

Andrew and Donna met with the bank and received a letter of offer.  They emailed their solicitor to confirm they had received finance approval and wanted to declare the agreement unconditional in all respects.  Andrew and Donna’s solicitor complied with their request and advised the vendor’s solicitor accordingly.

After a few days, Andrew was reading through the paperwork for their new property.  He suddenly realised the letter of offer from the bank was not unconditional.  The bank required certain conditions to be met for the finance to be approved.  One of the bank's conditions was for Andrew and Donna to obtain a valuation of the property.  Andrew panicked and quickly began calling registered valuers in the area to arrange for a valuation to be carried out on the property.  Unfortunately, the turnaround time to have the valuation carried out and the report completed was approximately 5 working days.  From here the report would then need to be sent to the bank with enough time for the report to be considered.

Andrew and Donna discussed the issue with their solicitor.  Their solicitor's concern was the timing in which the bank could provide their approval and issue loan documents.  There was also the concern that the bank may not be happy with the outcome of the valuation.

It is essential when obtaining bank lending that the letter of offer is unconditional before you satisfy the finance condition.