Making an Offer Subject to Finance Without Pre-Approval

A first-time buyer asked me last week if they could make an offer on a Brisbane unit they loved without a pre-approval letter in hand. The agent had told them other buyers were 'ready to go unconditional' and they felt panicked. My answer was simple: yes, you can make the offer, but you need to be careful about the finance clause.

Why the finance clause matters

A subject to finance clause is a condition in the contract that says the sale only goes ahead if your lender approves your loan by a certain date. Pre-approval is a lender's initial nod based on your income and debts. It speeds things up because the bank has already checked some of your paperwork. I once saw a buyer write 'subject to satisfactory finance' and nothing else. The vendor's solicitor struck it out and the buyer nearly lost the deal.

I've bought three investment properties in Queensland, and on two of them I made offers before I had full pre-approval. I never had a deal fall over, but I learned to write a tight finance clause. One of those offers was for a townhouse where the bank valued the property a few thousand dollars less than my offer. Because my clause was specific, I could renegotiate or walk away without losing a cent. I always specify the lender, the total amount I need to borrow (including stamp duty and conveyancing costs), and the loan product. If you leave it vague, a vendor's solicitor will often ask for it to be removed. And if the clause is too broad, a tribunal or court might not enforce it.

Sellers prefer buyers with pre-approval because it looks like less risk. An agent will tell you that another offer is unconditional, meaning there's no finance condition at all. That's a trap for a buyer without pre-approval. If you go unconditional and your loan is declined, you lose your deposit. In most Australian states, that deposit is ten per cent of the purchase price, though sometimes you can negotiate five per cent. Losing that money would make me sick, so I'd never advise a first-time buyer to go unconditional unless they already have the cash sitting in a separate account.

Building inspections come first

Building inspections matter more than pre-approval. I always get a building and pest inspection done before I make an offer, even if it costs a few hundred dollars each time. That report tells you about structural issues, termite damage, waterproofing failures, and roof leaks that a fresh coat of paint can hide. You can make the contract subject to a satisfactory building inspection as well as finance. If the inspection comes back with major defects, you can pull out or renegotiate the price.

My step-by-step for a safe offer

Here's what I'd do if I were in your shoes. First, ring a conveyancer or solicitor and ask them to review the draft contract before you sign anything. They know which clauses hold up in your state. Second, write the finance clause with the lender's name, the loan amount, and a realistic timeframe. Fourteen days is common, but I'd ask for twenty-one if you haven't started the loan application yet. Third, apply for finance the same day the offer is accepted, not a week later. Lenders take time to value the property and assess your file. Some lenders will do a desktop valuation in a day, others send a valuer out and take over a week. That delay can kill your finance approval if you've only asked for ten days.

I'm not a lawyer, and contract rules vary from state to state, so check with a local conveyancer. But you don't need pre-approval to make an offer subject to finance. You just need a detailed clause, a quick loan application, and the spine to say no to an agent who wants you to go unconditional.