A short YouTube video (Aaron Whybrow with Judy Hogarth) explaining how brokers and conveyancers collaborate to make property exchange easier. Key points: get pre-approval before house-hunting to know actual borrowing and purchasing power; obtain unconditional/formal bank approval before exchange so the bank is bound to lend; cooling-off period is five business days (can be extended) to allow finance to be confirmed; banks perform borrower checks and a valuation before issuing formal approval; conveyancers and brokers coordinate paperwork and extensions to minimize client stress.
Welcome to part two on the easy way to exchange on a property. My name is Aaron Wybrow and I'm from Diagnostics and Finance.
And my name is Judy Hogarth and I'm from KLH Conveyancing.
We're talking about financial approval to be able to match up with the contract review, which was the previous video, to be able to exchange on a home. There's still one more video, so stay tuned to that. So with regards to financial approval, why is it so good for us to as conveyancers and brokers to work together?
Because we speak the industry jargon and as conveyancers, we have direct access to the vendors representatives.
And as a broker, I have direct access once the loan has been picked up, to the credit managers and the relevant staff to help me speed up the loan or get issues addressed fairly quickly.
So us speaking to each other ensures that it takes the stress away from the client. So, Aaron, why is it so important to go and see a broker prior to going looking for a property?
Yeah, so it's about control. So we want to control that you know exactly what you can borrow prior to you falling in love with a home. I've been there, I've fell in love with a home, but I was able to do the numbers and everything prior to falling in love with a home. So it's really important to start the process, understand your borrowing capacity, understand your purchase price. Because these days when you go on the Internet and you do borrowing power, it just gives you what your income and liabilities is to get your borrowing power. But if you don't have a deposit, you don't have purchasing power. So it's really important that we can not only give you your purchasing power, we can start the process by getting a pre approval and the time that sometimes the banks take, we can start that timer now. So then when you go to the weekend to an open home, you can start falling in love with the right house and go to the next step.
Yes. So then the next step, once you've organized your finance so you know your borrowing capacity, what we do then is ensure that you have unconditional loan approval.
So unconditional loan approval is so important when you are needing the bank's backing to buy a house. If you don't need the bank's banking to buy a house, it's really important still to be able to get the other two components of checking out the home and also the contract review so you don't get into any trouble. But when you're getting the Bank's unconditional loan approval, or another more commonly term we call formal approval, is that we're able to then go, cool, we've got our deposit, we've got the bank's money, and then that two sets of money can be handed over to you where you can take it through.
And formal approval or unconditional loan approval is so important because it's the letter that binds the bank into giving you a mortgage. So when you exchange a contract either under a cooling off period or no cooling off period, you are committing to purchasing that property regardless of whether you have finance or not. So it's very important to have the finance before you make that step.
And when talking about starting doing the pre approval before you get interested in a home, that helps with the timing. But sometimes we have people that talk to a broker and very quickly ninja themselves into loving a home straight away. In contracts, there's this funky thing called cooling off period. What is that all about?
So a cooling off period is five business days in which you can rescind the contract if you no longer want to purchase that property. And sometimes it's not a matter of wanting to. You might want to, but you might not be able to obtain your unconditional loan approval and accordingly you are forced to rescinding the contract.
Yeah, absolutely. It's not uncommon to fall in love with a house and use the cooling off period to get exchanged. But it is a little bit easier for us to submit a pre approval prior to you falling in love with the house to give us the time we need. So you mentioned there's five days, Judy. Sometimes my bank approvals can get it done within five days, especially if the client's had a pre approval before. But sometimes with the person that's fallen over the house, and we're submitting from day one of the cooling off period, what can happen when we go over the five days?
We can request an extension. Extension of that five days. So we would communicate. So Aaron would say to me, judy, we're going to need a few extra days. I would then communicate directly to the vendor's solicitors and request an extension of the cooling off period. And that then takes the stress away from the client.
So going after financial approval, there's three major things. If we need the bank's money, the bank now has to be happy with you as the borrower, you, your income, your liabilities and living arrangements. The bank then also does a check on the property via a bank valuation. Don't get scared about that. Bank valuations typically go after the market value. And in this case, purchasing a home, you are the person determining the market value. So the bank will check it out with a valuation, they'll check out you. And if all that lines up, then we can get our financial approval and get the letter and the bank documents all signed and sealed and delivered and then hand that off to our representation with the conveyancer to take it through.
To settlement and then we just check over. So when we receive the unconditional loan approval, I will just review it, make sure that it has the right property details, has the right documents. I just have a quick scan over it, make sure it's all good. And then we allow the property, the cooling off period to either cool off or, or we can exchange with no cooling off period.
Absolutely. And for you as a client, you can focus on what you do best and that allows us to communicate behind the scenes to do what we do best to make your job as easy as possible. Stay tuned to the next video.
