REIWA amends its subject to finance clause within its contract for sale of land to include mortgage brokers

The Real Estate Institute of Western Australia (REIWA) have changed the ‘subject to finance clause’ in its standard contract for sale of land to now enable customers to elect to make a finance application to either a lender or mortgage broker where a sale is subject to finance.

Previously, even if a prospective buyer had engaged a mortgage broker and despite the broker’s advice that any lender application would likely be rejected, the prospective buyer would still be required to make a finance application to a lender to satisfy the conditions of the subject to finance clause. Not only was this unnecessary effort for a prospective buyer, it also meant that prospective buyers were at risk of unnecessary enquiries on their credit report when the application for finance was declined. Further to this, mortgage brokers were put at risk of a breach of their obligations under the National Consumer Credit Protection Act by submitting an application to a lender where their preliminary assessment indicated the application was unlikely to be approved.

What are the changes and what do mortgage brokers in WA now need to do?

The subject to finance clause within the REIWA standard contract for sale and acceptance has been amended to include the ability for prospective buyers to make an application for finance to their nominated mortgage broker instead of a lender. Upon execution of the contract, prospective buyers must then make a finance application to their mortgage broker and if requested keep the seller or seller’s agent informed of progress of any application. The seller or sellers’ agent may also seek that information directly from the mortgage broker in certain circumstances.

To assist mortgage brokers in providing the approval for finance, the preliminary assessment or confirmation of a rejection of a finance application (whichever is relevant) REIWA has also implemented a new form called ‘Notification in Relation to Finance Approval Clause form Buyer’s Mortgage Broker’ . The buyer’s mortgage broker is required to complete, sign and send this form to the seller or seller’s agent.

For completeness we also included REIWA’s updated Joint Form of General Conditions of Sale.

MFAA welcomes this change

The MFAA welcomes REIWA’s amendments to its standard contract for sale, with MFAA WA State Manager Natalie Price having worked closely with REIWA for many years on this journey.

The change appropriately recognises the responsibilities of mortgage brokers under credit law, including the unrivalled Best Interest Duty. It ensures mortgage brokers in Western Australia can continue to act in the best interests of their customers, and that includes to avoid a broker from submitting a loan application if, on the broker’s assessment, the customer’s home loan application will be unlikely to be approved.

This change is further recognition of an industry that has been reforming for more than five years and it also recognises the important role that mortgage brokers play in assisting and supporting customers. Most importantly it is a good outcome for Western Australian home buyers who seek the help and support of a mortgage broker in their home loan journey.

The MFAA thanks REIWA CEO Neville Pozzi and REIWA President Damian Collins and their entire WA Division Council for their assistance in and time in supporting and assisting with these changes.