A finance clause means that if the purchaser does not secure finance from their lender by a specific date and for a specific amount they are able to exit the contract with no penalties (however there are strict obligations the purchaser needs to undergo first before they will able to prove that they tried their best to obtain the loan, so a finance clause should not be treated as an extended cooling off period). Having pre-approval from your bank means that they are willing to lend you a certain amount of money. It does not, however, mean that they will lend you the money for a specific property. They will need to assess the type, zoning and value of the property you have bought before providing you with a final approval. For this reason, having a safety net means a purchaser will not be trapped in a contract for a property they cannot pay for. Finance clauses can only be added for private sale contracts. If you are buying at auction you won’t be able to add one in, however you may be able add a finance clause if the auction ‘passes in’ (does not reach the vendors reserve) and you have the opportunity to negotiate afterwards.