Read Time: 4-5 minutes
PROBLEM: Understanding Sale and Purchase Agreement Conditions
Buying a first home is a big deal, and with all the steps, paperwork, and decisions, it’s easy to feel overwhelmed. Today, let’s break down the three most common conditions you’ll encounter in an Agreement for Sale and Purchase — Finance, Building Report, and LIM report. Knowing these will ensure you’re in a strong position to buy smartly and confidently.
RISK: Why It’s Important to Understand These Conditions
Each of these conditions serves as a safeguard for buyers. Not meeting them can lead to losing your deposit or being forced to buy a home that isn’t right for you. Understanding these conditions helps ensure you’re financially secure, fully informed on the property’s condition, and aware of any legal or structural challenges before it’s too late.
CONTEXT: Common Approaches (and Why They Sometimes Fail)
Buyers often try to speed through the Finance, Building Report, and LIM conditions, only to find themselves stuck later when unexpected issues pop up. Here’s why each one matters:
- Finance Condition: While many buyers secure a pre-approval, this doesn’t guarantee final approval for the specific property. Relying solely on a pre-approval and not only including a finance condition can backfire if the bank decides not to fund the particular property you’ve chosen.
- Building Report Condition: Some buyers assume all properties are built to code and overlook a building report, only to discover later that the property has costly hidden issues like high moisture levels, unauthorised building works or structural weaknesses.
- LIM Report Condition: The LIM provides critical information on land stability, previous renovations, zoning, rates, and flood plains. Missing this could lead to unexpected costs or restrictions on future modifications.
SOLUTION: Here’s How I Explain Each Condition in Simple Terms
- Finance Condition
a. This condition protects you if you’re unable to secure final loan approval by the due date specified in your agreement.
b. You’ll need an official loan offer and approval letter from your lender before we can confirm this condition as satisfied.
c. If the condition isn’t met by the due date, we can cancel the agreement. However, it’s essential to show that you’ve taken “all reasonably necessary steps” to secure financing, which might include providing a rejection letter from your bank. - Building Report Condition
a. A building report is an inspection of the property’s structure, including moisture levels, electrical issues, plumbing, and overall structural health.
b. This is a condition you’ll want to satisfy only if the report results are acceptable to you.
c. You can negotiate for repairs or a price reduction if the report reveals issues. If the problems are severe, you may choose to cancel the agreement (with the seller’s option to request a copy of the report). - LIM Report Condition
a. The LIM report, provided by the local council, includes information on stormwater and sewage lines, flood history, zoning details, and much more.
b. If there are issues, we can negotiate with the seller to undertake repairs. If they refuse, the agreement can be canceled based on the unsatisfactory LIM.
TL;DR
- Finance Condition: Protects you if you can’t secure a loan.
- Building Report: Ensures you’re fully informed about the property’s structural and electrical health.
- LIM Report: Informs you of potential land issues, council regulations, and property history.
