No funds? Don’t buy. Simple.

You know how that saying goes... “I’ve said it once, I’ve said it a thousand times...”

 

Buying and selling real estate is serious.  It’s seriously legal stuff.  It’s one area where contract law issues can cause big problems for ordinary folk.  Not unlike when one hears of businesses having a legal fight over breaches of contract.

 

In simple terms, if two parties validly enter a contract and one party breaks the contract, that party is liable to the innocent party for the loss the innocent party suffers as a result.

 

Like most lawyers, when acting for a property buyer, one the first questions I ask is whether they have the funds, either cash or an unconditional loan approval, to pay for it.  If they don’t, either don’t buy, or at least don’t commit to the contract before funds are secured.

 

It’s not uncommon for buyers intending to finance, at least in part, their property purchase from the proceeds from their sale.

 

The premise is, always ensure you have binding sale contract with your buyer (eg. where your buyer’s cooling-off rights have expired) before you’re committed to your purchase.  Otherwise, if you commit buy in the expectation your sale is about to happen and it doesn’t, you could be left with a financial disaster on your hands.

 

Sounds logical, doesn’t it.  Yet it happens far too often reported in this high profile case involving actor Toni Collette and her husband.  Their breach is reported to have cost them $800,000.  They reneged on their purchase contract when they couldn’t sell their own home.  The seller suffered huge loss when they couldn’t re-sell their property for the amount Collette had originally contracted to buy it

The numbers in that case were big.  Even so, even when we’re talking of more typical average Sydney outer suburban home prices, a $10,000, $20,000 or $50,000 liability can cause financial pain.

As the reporter states:

“...get your finances approved before you buy, and if you’re selling and buying in the same market have a contingency plan.”

There’s often much pressure when trying to get the timing right when dealing with simultaneous sale and purchases.  More reason, I say, to ensure you have your solicitor on board to help you though these minefields.