First-home buyers see contracts shredded as housing market drives up prices

 In Home News Section, Uncategorized

Six months ago,  Brittany Goss and her partner Bradley Lockett jumped at the opportunity to get into the housing market.

With funding from the Federal Government’s HomeBuilder package, the young Tasmanian couple signed up for a house and land package in Perth, 15 minutes from Launceston.

The total cost was $359,000, a figure they were able to afford with the help of grants.

“We had a bit of savings behind us but this pushed us over the edge,” Ms Goss said.

“The house was pretty much fitted to our liking — we paid the deposit and everything was going smoothly, until about two weeks ago,” Ms Goss said.

The couple originally pushed for a 21-day finance clause with their vendor.

They were pre-approved, but were relying on two grants — HomeBuilder and First Home Owner.

But the vendor wouldn’t budge on a 14-day finance clause.

“We tried to change this back in February but the vendors denied,” Ms Goss said.

“Fourteen days is no time in the grand scheme of things, with how busy the banks are.”

With the house completed, the couple went about securing finance.

The house was valued and approved by the bank.

Same house now $91k more

But when there were delays with their government grants, their dream of owning a first home quickly disappeared.

“Unfortunately, the funds weren’t in the account by the 14 days and by the next week the vendor had terminated the contract,” Ms Goss said.

“I can’t even put into words how it made me feel.”

The vendor did offer the couple a chance to buy the house when it went on the market, but for substantially more.

The same house would now cost them an extra $91,000, thanks to the market boom since signing the original contract.

The couple is now living with Ms Goss’ parents in Cressy in rural Tasmania.

“We had paid $3,500 for blinds, $2,000 on appliances and there’s an expensive dining table that’s supposed to be coming soon and there’s nowhere now for it to go,” Ms Goss said.

Others caught out in boom

Emily Redman and her partner Lia Visentin signed a contract 18 months ago for a unit in Sorell, outside Hobart, for $375,00.

“It was really exciting, it was something we had worked towards for about three years,” Ms Redman said.

But in the past six months, things haven’t gone to plan.

“We were not informed at the time of signing the contract that there was a [sunset clause] … that allowed them to terminate at a certain date,” Ms Redman said.

Two months ago, the unit hadn’t been completed and the contract was torn up.

The couple has renegotiated new terms to buy the unit still, but the price has gone up.

“The vendor was very adamant on a certain price — we are paying about $35,000 more than what we agreed on [in the original contract],” she said.

“We’ve now had to change up our finances, apply for more money, and it’s going to have a negative impact on our budgeting.”

Call for caution from first-home buyers

Shannon Campbell, the president of the Australian Institute of Conveyancers in Tasmania, said banks were often struggling to meet 14-day finance clauses due to the booming market.

“The usual 14-day time frames we used to put in are no longer applicable — for most banks I’d say you’re looking at 21-28 days at least,” she said.

Ms Campbell said from a vendor’s point of view, there could be motivation to terminate a contract that was signed months ago because of how much the market has changed in that time.

“They’re probably not going to give that extension just because they know they can re-market it and sell it quickly at a much higher price,” she said.

“Contracts are usually drafted to benefit the vendor — that is why it is very important to seek professional advice in relation to your contract so that the purchaser is also protected.”

Her advice to first-home buyers is to have a loan pre-approved, stretch out the finance clause, only offer what you can afford, and to consult an expert.

“A lot of purchasers, just to get the property they want, they are compromising on particular clauses that protect their interest, just so their offer looks more attractive,” she said.

By Sean Wales (Original ABC Article)