Ep 68. Why pre-approval isn’t optional
In this episode, Michelle shares a recent experience that reveals just how critical pre-approval is when buying property, especially in Sydney’s fast paced market.
Michelle dives into how timing, finance readiness and clear communication can either make or break a deal, and why having your finances in order isn’t just a box to tick.
Here’s what you’ll learn from today’s episode:
Why pre-approval is a non-negotiable in a hot market
The risks of making an offer without unconditional finance
What a 66W certificate is, and why you need one
How Buyer’s Agents leverage relationships with selling agents
Speakers in today’s episode:
Michelle May - Michelle May Buyers Agents
Jason Ratcliffe - The Wellbeing Surveyor
Follow Us:
Enjoy the show?
Don’t miss an episode, follow via iTunes. If you like it, please leave a review!
Or, find us on the podcast app of your choice, such as Spotify.
This podcast has been produced and edited by Snappystreet Creative
Please note that any views or opinions presented in this podcast are solely those of the speakers, and do not necessarily represent those of any business. These views and opinions are general in nature, and do not take account of your personal objectives, financial situation and needs. Please consider whether it applies in your circumstances and seek professional advice wherever appropriate.
Listen to the Episode Now
Hi, and welcome to another episode of the Buy Your Side podcast, the property podcast to help you make smarter property buying decisions. My name is Michelle May, and I am the principal of Michelle May Buyers Agents here in Sydney.
And today I want to talk to you about how not having a pre-approval in place can cost you the property of your dreams. Now, this sounds quite dramatic, but this actually happened quite recently to a client of mine.
This was an old client who I had helped purchase a property for, about five or six years ago. They were quite happy with the property, loved living there. And due to a change of circumstance, they sold the property and now they were back in my inbox saying, we need your help.
So the email was quite urgent saying that the property that they found was everything they needed and more. But the agent said that there was another offer on the table. And so they were going to be selling prior to auction.
Now, they needed my help evaluating the property. It was a strata titled property, so we needed to look at the strata report. But we're also going to get a building and pest done since it was a townhouse. We needed to do a full set of due diligence and they wanted my help since they had had a good experience last time.
So before I take on a client, I will always ask you straight up, do you have pre-approval in place? And funnily enough, that was because there was a change in my operating with clients and that was actually due to this old client because when I last helped them purchase, they didn't have pre-approval in place and it was a very stressful experience, not just for them, but also myself.
And it really tested the relationship with the selling agent because I needed to create more time in order to purchase for that property. So after that experience, I made sure that I never worked with anybody who isn't pre-approved because it just isn't worth the stress.
So in this case, as per always, I asked, are you guys pre-approved? And have you spoken to your broker about this property and how much you're potentially prepared to pay?
The answer I got back was, yeah, everything's fine. We're talking to the broker. Everything's okay. Let's proceed. Because I also don't want someone to pay for my services if there isn't really a chance in hell of me actually getting the property across the line for them.
So I took that answer as a yes. They paid the invoice and we got our skates on to get ready to make an offer. Now, I had already spoken to the selling agent at that stage. I have a good relationship with them.
And there was a genuine offer on the table. And also from experience, this agent moves very fast. They sell a lot of properties prior to auction. I had said to the client in that same email about the pre-approval that to be aware that in order to get deal done, you would have to make an unconditional approval because when a property goes to auction, you are buying unconditionally, i.e. you're waiving the cooling off period.
There's no cooling off in which to do your due diligence or subject to finance or all of that stuff. At auction, you're locked in and otherwise you lose your 10% deposit. And even if you have agreed to a 5% deposit on the day, you are still liable to the full 10% if you pull out of the contract.
Now, if you were to make an offer prior to auction, you have to buy under the same terms and conditions because no vendor is going to accept a conditional offer whilst you decide to make up your mind to purchase. Because that means they lose a whole week of the auction campaign and have to tell people, sorry, we've got an offer. We're considering taking it, et cetera.
And if you then change your mind, whilst you only lose 0.25% of the deposit, not the full 10%, they are left with a seriously damaged campaign. So typically in Sydney, you have to make an unconditional offer.
The way to do that is to waive the cooling off period with the addition of a 66W certificate to the contract of sale. And that is issued by your solicitor or by your conveyancer.
So that does mean you have to have your pre-approval in place because you need to have finance. So I spoke to the agent and said, hey, I'm representing these clients. Will you allow me some time to make you an offer?
And because we have this relationship, he's like, listen, okay, how much time do you need? I said 24 hours, as long as I can get my B&P guy through. We can get the due diligence done. We've got a good solicitor on the job.
We'll get all that stuff. If everything pans out, if everything is okay, then we'll definitely be making an offer. So he said, okay, I'll give you the 24 hours, even though they already had an offer on the table.
So that really, I had to leverage my relationship with the agent. I got everything organized, my building & pest guy was like, yeah, I'll do this rush job for you. We looked at the Strata report, everything was ticking the boxes.
So I was talking to the agent about pricing and, what they would accept or not. And I got the information basically that the client would be able to get it across the line for under market value which was fantastic right so there was an offer on the table that was a little bit lower and if they got the right price which was what we were well prepared to pay my client would be getting a really good deal which is rare in this market, it's a hot market, there's not not a lot of property and there's a lot of buyers now coming back because the interest rates have gone down.
So I prep my clients to say, hey, I think we're gonna get this done, but obviously we need to make it an unconditional as I told you, so speak to your broker. I said, we need to get this done because it is now Friday and we really want to exchange before the weekend comes along and another whole new set of buyers potentially can see it because then the vendors will want feedback from that open and then potentially price may go up as the more buyers get involved.
So I told the client there is a time pressure there and also, we are already extending the deadline because the vendor already has an offer on the table. And whilst it's not high enough just yet, they're already talking to them as well to increase it. So there is time pressure there.
However, as you know we need to make an unconditional offer. And we always set up WhatsApp chat messages with the group of the people that are involved. And, yes we're trying to get in touch with the broker. Yes, he hasn't called us back yet.
I said, well, you need to step on it. How about I call the broker and see what I can do? Like, maybe he'll talk to me quicker, whatever. Yeah, no problem. So the client gives me the broker's number and I call, leave a message and I get a text message back.
All caps, by the way. Under no circumstance is this client to make an unconditional offer. I have told them this repeatedly. They have only just handed in the paperwork yesterday and I need at least another day to complete the filing and as such they can't make any unconditional offers.
Now this was news to me. I was shocked when I read that message. So I forwarded it back to the WhatsApp chat group with my clients and said, hey, this is not good because as I told you, this is a race to the finish.
And the only way you're going to be taken seriously with an offer is with an unconditional offer. There's no other way you can do it. And the client was taken aback and calls me and says, hang on a minute, where does this deadline come from? And why does it have to be unconditional? And what's the issue? And I said, well, there is another offer on the table. You said there was a deadline and there is a deadline and that's fast expiring. And in order to be taken seriously in an auction campaign, the only way you're going to get a deal done with a vendor when there's other buyers looking around, especially when there's other buyers looking around, is to make an unconditional offer waiving the cooling off period.
But now it turns out that you do not have pre-approval in place at all. And your broker does not want you want you to make an offer at all. So that leaves me with nowhere to go. And he turned around to me and said, well, this is how you helped me buy last time. And I said, well, actually, this is why all my systems have changed. And I will not work with anybody who doesn't have pre-approval.
And I asked you this quite explicitly. So now we're in a situation where you want this property, but you haven't got what it takes to get the deal done.
So I said, the only thing I can think of is to go back to that agent and go, hey, he's good for it. Here is a copy of his bank statements showing you've got x amount of money in the bank. So the pre-approval is not going to be an issue. It's going to happen. However, there's a delay. So will you allow to exchange conditionally today? And then as soon as the pre-approval comes through in the next week, we can waive the calling off period. Mind you that the cooling off period is typically only five working days.
He's like, well I trust you. Let's do your thing. You're amazing. And I said, well, you should have listened to me in the first place because now you're in a position where you could well and truly lose the property.
So I went back to the agent and said, hey, this is the situation. I am terribly sorry. I was under the impression that they had pre-approval and this is not how I work. And he's like, yes, Michelle, I do. We have done many deals together over the years. You have a good reputation when it comes to this business. So this is very unusual. And he said, to be honest with you, they have been in and out of my opens so many times that I wasn't taking them seriously at all. And it was only because you came in the picture that I even entertained the notion of extending the deadline.
Which put me in a really awkward position because a lot of our deals get done because of this relationship that we have with agents. So I said, look, they are good for it. They do have the money in the bank.
What if I show you bank statements and we can make an offer and then say, as soon as we get the pre-approval, we can waive the cooling off period. Do you think that your vendors would potentially entertain this?
And the agent said, well, we can, but try. So I went back to my client and said, provide me with statements. And then we've got to hope for the best.
It then took a client another two and a half hours to come up with these things, and so by the time I had finally collated everything,
I called the agent and he said, don't bother. We've got another buyer who's upped the price and they're going to exchange on that basis. And when I put it in front of them that this is what you might be doing, the vendor said, no, we're going to take the bird in the hand.
And that was the end of that. I don't blame that vendor at all. I don't even blame the agent. Of course, they're going to go with the vendor who has pre-approval in place and can make an unconditional offer as opposed to some random person who is showing bank statements.
Now, I had to go back to that client and go, hey, this is what happened. You missed out. And the worst part is, that it is their own fault. They're now back to the drawing board. To my knowledge they still don't have pre-approval. But let this be a lesson because even with the best resources at hand, and I'm going to beat my own drum here, we did everything we could to get that client ready.
We had a building and pest through within hours of us putting in the notice. We got the strata report done. We looked at zoning. We looked at infrastructure, like everything. We knew everything about the property and it was a great property. And not only that, we were going to get it under market value, which is like, as they say in Dutch, like a little angel peeing on your tongue. Heaven. I know that's a very strange expression. But, the client didn't listen. The client didn't help themselves.
And not only that, they fibbed to me, which is just like, I don't know what the point of that was. But, oh man, what a shame. So if you're listening out there and you're thinking about shopping around without your pre-approval in place, please don't.
Because you might fall in love with something and then you might do something like that, which is a really rash and silly thing to do. Get yourself organized, get your pre-approval in place. I know it's painful getting all the documentation ready, etc. But at least if you do find something that you love, you can act on it, you know? And certainly don't waste your money on a buyer's agent who then, the hands are tied.
Like my hands were literally tied, so yeah, a hard lesson learned for them, and, I don't blame the vendor for going with someone else at all. It makes total sense.
So on the back of that, if you have any questions for me, do drop me a line at hello@buyyourside.com.au. I'd love to hear from you. follow me on Insta, follow me on Tiktok, and I look forward to hearing from you.
Thanks for listening.