A truly basic conveyancing error

In our latest article in The District Reporter, we talk about some of the basics that people can forget to do when they are selling their home, and how important it is to get the right advice to get the sale back on track.
We recently acted for the purchaser of a property in southern New South Wales who agreed to pay $675,000 for it after weeks of negotiations. Contracts were exchanged at that price and a tentative date for settlement was booked in.
The vendor was represented by a conveyancer in their home town – so not a local to here.
Surprisingly, when the vendor of the property agreed to that sale price, they didn’t think to check their mortgage balance, which was close to $730,000. Clearly, a sale at $675,000 wasn’t enough to pay out the mortgage with the bank, which meant the bank would not release the property at settlement.
To compound an already tricky situation, the vendor had lost his job because of Covid-19 and couldn’t give any assurances to the bank about being able to pay the other $55,000 the bank was owed. In addition, there was a caveat on the title to the property, put there by a finance company for a car loan belonging to the vendor.
What a mess!
Our firm became involved in the matter, acting for the purchaser, and we tried to help our client sort out this chaotic situation. Even though the problem was the vendor’s, one of our highly experienced, and it turns out, creative Licensed Conveyancers was able to suggest a solution that allowed settlement to take place.
An immediate family member of the vendor owned a property in the same town and was willing to have the loan shortfall secured against that property. Negotiations then took place with the car finance company that satisfied them enough that they removed the caveat on the title to the property the day before settlement. Our clients were incredibly grateful and relieved that settlement took place on time and they’re now the proud owners of a new home.
If you were a purchaser in this situation there is not much that you could have done to avoid the problem in the first place – but having an expert acting for you certainly helped to resolve it. If you are selling, it is crucial that you check all of your financial commitments before you enter into a contract to sell a property. This might seem like such a fundamental exercise but we see mistakes like this happen all the time. What have you negotiated? What fees are you paying to your agent? What sums needs to come out of your settlement monies to pay out your bank? Will you have enough clean funds to do that? If not, have you worked out how that issue can be dealt with? The transaction above nearly ended in disaster for all involved. Don’t let it happen to you.
Don’t exchange on a contract to buy or sell a home without getting good legal advice first.