What Happens If Finance Falls Through After Auction?

If your finance falls through after an auction, you face serious consequences as the property purchase is legally binding. You will likely lose your deposit (typically 5-10% of the purchase price) and could be liable for the seller’s losses if they need to resell the property at a lower price.

The seller may also pursue legal action to recover losses, impacting your credit rating and future borrowing ability.

Here’s a more detailed breakdown:

1. Loss of Deposit:

In most cases, you will forfeit your deposit if you cannot complete the purchase due to finance issues. This can be a significant amount of money, especially in competitive markets.

2. Legal Action:

The seller can sue you to recover any losses they incur due to your default that exceed the forfeited deposit. These could include the difference between your winning bid and the resale price, legal fees, holding costs, and auction costs.

3. Credit Impact:

A court judgment against you for failing to complete the purchase could negatively affect your credit score, making it harder to obtain loans in the future.

4. Importance of Finance Approval:

If you are bidding at auction, ensure you have a solid pre-approval from your lender and factor in potential valuation issues. Engage a conveyancer to review the contract and ensure you understand the terms and conditions before bidding.

If you have questions or wanted to learn more about conveyancing, contact Glenferrie Conveyancing at 03 9815 2351 and we will gladly assist you with your concerns.