If contracts are terminated due to a purchaser’s failure to have adequate finance in place, the consequences are catastrophic. The purchaser will forfeit the deposit paid following exchange, be liable for the balance of the 10% deposit (if a reduced deposit of 5% was paid on exchange), be responsible for the vendor’s fees and expenses consequent on the termination, and also be liable for any deficiency if the property is re-sold for a sum less than what the purchaser initially bought the property for.
A purchaser must have satisfactory finance arrangements in place before participating in an auction because if he/she is the successful bidder, he/she will need to enter into contracts unconditionally following the conclusion of the auction (in addition to making payment of the deposit required under the contract).