Cautionary tale, with a happy ending fortunately!

[brokerman]

Yesterday a lady called me in tears as she had just been declined by her bank and had to settle on a new build $1.2m by Friday. She had signed the S&P Agreement 2 years ago and had a pre-approval. She thought the approval was valid (they never are) and worse, she went from employed to self employed 3 months ago and didn't tell the bank. The RV came back at $1.5 by the way. She thought she was going to lose the $120,000 deposit and the $300,000 capital gain. We arranged a bridge for two years to enable the settlement and buy time to get a couple of years financials to get to a bank. Two themes here. 1. Mortgages do not have to come from Banks and 2. No bank will grant a lasting approval for long term settlements.

[Meehole]

That's shocking that it took 2 years to build in the first place. RV 1.5, but what could she actually sell it for in this market? No wonder housing companies are going to the wall, it would be surprising if there was much profit for them in this build taking that long.

[ripeka]

The banks and solicitors need to make it VERY CLEAR that this is one of the risks of investing into a new build but the banks never do. Obviously, it's not in the banks interests to do so, and what do they care? However, your solicitor who IS meant to be acting in the purchaser's interests, should clearly highlight this as one of the risks of proceeding so it's not a surprise come settlement time. Sadly surprising how many don't seem to.

Is this also part of what a broker should also do at the time of arranging the initial approval? Do they?