Brokers now recognised on WA Offer and Acceptance form
Following engagement with the MFAA, the Real Estate Institute of Western Australia has amended its Offer and Acceptance form to include brokers, in a move welcomed by the industry.
As of 1 July 2022, brokers will become a recognised party on the REIWA’s Standard Contract for the Sale of Land by Offer and Acceptance – a document used by over 95 per cent of all real estate residential transactions, according to the peak body.
The form, which had not been revised for the past decade, had previously only included lenders as a recognised party in the finance clause.
Speaking to The Adviser, REIWA president Damian Collins (and managing director of property consultancy and finance company Momentum Wealth), explained: “It’s fairly common in Western Australia to make an offer subject to finance but the standard form document that had been in place previously required the borrower to apply for a mortgage via a lender.
“The issue was that, if you went to a mortgage broker and the mortgage brokers did their preliminary assessment and said: ‘I cannot give you a loan because you don’t qualify’, under the terms of the contract, that wasn’t acceptable. Because it didn’t meet the criteria of applying to a lender.”
As such, Mr Collins said that it had become common practice for real estate agents to accept written confirmation from a broker that the borrower did not have finance in place.
However, because of the fact that this “technically didn’t comply with the contract”, in some cases, borrowers were being asked to a lender directly “and get a rejection from them”.
“It was annoying and creating a lot of extra hassle and paperwork for the [broker] client, who was going to get knocked back anyway,” the REIWA president said.
Mr Collins said that the Mortgage & Finance Association of Australia (MFAA), had been asking REIWA to update their forms over the past few years. He added that, given that brokers are now the predominant channel of choice for home buyers in Australia – the peak body agreed to do so.
“The REIWA board considered – on approach from the MFAA – that given the role that mortgage brokers now play in the finance market and the fact that they are such a large market share of mortgages, we should review our contract term,” Mr Collins said.
“Given the fact that brokers market share has increased significantly and more and more people now accept mortgage brokers as the person they go and see when they’re getting a loan, we thought it was prudent at this stage that we should update our form to recognize that.
“We have now decided to upgrade and update our standard documents (which are used by over 95 per cent of all real estate residential transactions) to reflect the fact that an assessment by a broker is satisfactory for the purposes of that contract clause.”
As such, from 1 July 2022, if a buyer buys a property subject to finance and the broker’s preliminary assessment shows that they are unable to secure finance, then that evidence from the broker would be acceptable.
The MFAA welcomed the move, with Western Australian state manager taking to LinkedIn to thank the REIWA for “their willingness to understand the progression of our industry and to invest the time into incorporating our requested amendments”.
Several Western Australian brokers have also voiced their relief at the change, given the headaches this caused them and their clients.
Bianca Patterson, director and broker at Calculated Lending, told The Adviser that the omission of brokers from the form previously had left brokers “stuck between a rock and a hard place”.
She explained that while brokers knew that some buyers had an obligation to apply for finance under the contract, due to the fact that brokers cannot submit a loan that is unsuitable for the client under the National Consumer Credit Protection Act (NCCP), “in most cases [brokers] have had to refer them to a lender directly who would then issue a decline letter to satisfy the contract”.
Ms Patterson added: “The change means that brokers can issue a letter that they have completed their preliminary assessment, and that they are unable to assist the client with the application to purchase the property.
“This saves the lenders time assessing a file only to decline it when it should not have been submitted to start with, and removes the risk of the client relationship being severed between the broker and the client by going to a branch.
“This is another positive step forward for the broking industry, proving that we are raising the bar of professionalism in the eyes of the real estate industry.”
However, she cautioned that brokers do need to “use this privilege responsibly”, and “exercise caution that they have met all of their legislative and licensees/aggregators requirements before issuing the letter to ensure they are not in breach of their obligations and PI Insurance terms”.