Bidding on a house without a finance clause

When buying a house in The Netherlands you probably need to get a mortgage. I’m often asked by clients about buying a house zonder voorbehoud van financiering which basically means you are agreeing to buy a property without waiting for the financial side of things to be approved.

It is an increasingly common term in a draft sales contracts, but it is one that requires a lot of thought, because those four words could end up costing lots of money. 


What is bidding on a house without a financing condition?

Basically, if you bid on a house or flat zonder voorbehoud van financiering you are committing yourself to buying the property without the final say so of your bank – and that means if the deal falls through for financial reasons, you could end up paying a rather large forfeit – a whopping 10% of the purchase price. 

On the other hand, if you are able to make such an offer on a property it will greatly increase your chances of sealing the deal. After all, if lots of people are bidding on a property, you want to be sure your offer is as attractive as possible, and stating that you do not want the traditional ‘subject to financing’ get-out clause is one way to do it.


What are the risks?

A draft contract which includes the clause ‘subject to financing’ gives you usually around six weeks to sort out the money side of things with your bank. Without the clause, the deal is effectively done the moment you sign the purchase agreement. This means if you are buying a €400,000 home in Amsterdam and your bank turns down the mortgage application, you will end up having to pay the seller €40,000 in compensation. 

Now you might think that this will not happen to you because you have an idea about how much money you can borrow. But you do need to be aware of the risks.


Find a good mortgage advisor

A good mortgage advisor will minimise the risk by checking your finances thoroughly before you make a bid as well as getting quick, initial approval from the bank before you are fully committed. And if the mortgage you need is well below the value of the property – something all banks like to see – then signing a preliminary contract zonder voorbehoud van financiering could make sense as well.

It all depends very much on your individual financial situation and no two cases are the same. Talk it all through first with your mortgage advisor, who knows all the little things to look out for. That is, after all, what you are paying them for.