28 is the new 21. No, I’m not talking about age (I missed the boat on 28, big 3-0 now!), I’m talking about finance clauses, as I contemplate the 7th contract I’ve sent off this month with a 4 week finance clause.
I’ve written before about the fact that finance timeframes have been blowing out for a while now, with a 2 week turnaround almost impossible, 3 weeks an optimistic stretch and even 4 weeks occasionally hopeful when it comes to getting a bank’s stamp of approval on your purchase.
Waiting a month to know whether or not your dream home/land/investment is going to be yours is stressful enough as a buyer, but what about looking from a seller’s perspective?
In more settled times, with less urgency in the market a 2-3 week conditional period is a more accepted rule of thumb, and in the scheme of things a reasonable timeframe to have a property tied up. Within the first 14 days of an offer being accepted you would know whether its going to happen or not (within reason) and worst-case scenario, recommence marketing without too much time lost.
With 4 weeks of contract conditions now frequently a bare minimum, and a good chance of a finance extension request (or two!), there is an added level of risk that might give some sellers pause. In 2020, a month is a loooooong time, and a lot can change. As much as the market continues to show unexpected strength, 4-6 weeks is a long time to be out of the game to then come back in and hope for the same level of interest as week 1. So how does a seller decide whether to take an offer and what conditions are reasonable?
Outside of a very lucky few, the vast majority of contracts are going to be subject to finance, so its hard to avoid this one. What you can do though, is have your agent spend more time drilling into a buyer’s individual circumstances before closing the deal. Do they have pre-approval, are they borrowing more than 80% of the property value, has their income been affected recently? It might seem rude to ask, but these are important questions and as a buyer, its worth recognising that being upfront might be more in your favour. After that it just comes back to the headline – take the risk, to hopefully, reap the reward.