Soap Box - Why a little information can be dangerous!
I had a conversation with an acquaintance recently about her challenging financial position, and her strong desire to buy a home for herself on a limited budget. She was disheartened until I casually mentioned a concept for her to consider, which gave her hope for the future and inspired her re a positive outcome.
We booked a time to catch up after her impending holiday, so that I could do some financial modelling and expand on and develop the ‘concept’ into a strategy, as well as potentially source and buy the property on her behalf. I also introduced her to a mortgage broker who also gave her some brief information over the phone, and suggested a meeting to go into the detail of her challenging financial position (poor credit rating).
With a ‘seeming’ preapproval from a lender arranged by herself and not the mortgage broker (she never accepted the meeting), ‘Janet’ went on her holiday and contacted me during it to say she had bought a property. Needless to say, I cancelled our meeting and wished her well with her new home.
What has since come to light is that while overseas, she had her accountant bid at auction for her (not a licensed estate agent so he is in breach of The Estate Agents Act, because he charged her unlawfully for bidding) . She therefore bought on an unconditional basis, without actually having formal finance approval in place, and without any understanding whatsoever of the legal implications of what she had done. She has since had the lender who provided the ‘preapproval’ decline her finance application, and is now desperate to find a lender to help or she will be in default of the contract of the sale of the property, losing a substantial deposit and setting herself up to be sued by the vendor if she doesn’t complete the contract and settle on the property.
If only she had waited for our meeting, she would have been made aware of the legal and finance obligations and terms of bidding at auction, and she could have had professional and experienced representation at the auction to ensure she didn’t overpay for the property.
She made assumptions based on a little bit of information and has put herself in a dangerous position. At this stage, there is no guarantee of a positive outcome and it serves as yet another example of the ignorance of buyers when it comes to spending $100,000’s of hard earned money.
It’s far easier to make mistakes when not engaging experts in the property buying process, than it is to succeed on your own without specialist help.
Not engaging experts to guide you along the way is the same as taking your money to the casino and hoping you will win at the black jack table. That’s unlikely, as the chances are always stacked in favour of the house.
Miriam Sandkuhler - Property Advisor, Buyer Advocate and Author Contact Us