A recent call from an agent has highlighted the risks to buyers when they fail to notify the seller that their finance has been approved.

In this instance, the buyer had told the agent they had received finance approval. But, in an attempt to delay settlement, they refused to provide the written notice required by clause 1.1 of the Offer.

Ten days after the finance due date the buyer had still not provided anything in writing.

Of course, the seller could have exercised their right under clause 1.3 to terminate the contract, leaving the buyer without a property and the agent without a commission.

But, in a soft market, that was an option the seller was less than keen to exercise.

Instead, they chose to wait for the buyer to provide a finance approval letter and accept the delay in settlement.

But this move could have backfired on the buyer.


Well, in addition to the risk of the contract being terminated, their actions could have caused a delay in settlement and cost them thousands in penalty interest.

Many contracts contain a settlement date of “Within 28 days of finance approval”, which means 28 days from the date on the bank’s approval letter, not 28 days from the date on which the buyer notifies the agent.

Had the buyer ‘sat’ on the finance approval hoping to delay settlement they could be in for a nasty shock if there was a subsequent delay.

The moral of the story is to ensure buyers understand the obligations created by the Subject to Finance clause and how these relate to the settlement date. These obligations include immediately applying for finance and keeping the seller informed as to the success or otherwise of their application. Complying with these obligations are in the best interests of the buyer and help reduce the likelihood of delayed settlements.

Image by Jes via Flickr.

About the Author

Residential Settlements

We provide real estate settlement services throughout Western Australia. In addition, we complete Related Party Transfers, Family Transfers, Private Sales and other title related services.