Have you been looking to buy a property and had Agents talk to you about whether your offer will be conditional or unconditional?
There’s a big difference.
The strength of an offer does not always come down to price. Conditions often play a pivotal role as the whether a seller will accept an offer or not, particularly if the market is competitive with multiple buyers on each property.
What’s the difference?
Conveyancing laws in Australia differ from state to state, but here in New South Wales conditional and unconditional contracts refer to whether there are conditions attached to the sale of a property that must be satisfied before it becomes legally binding. Such as:
- Subject to Finance
- Subject to 5 day cooling off period (generally used for pest, building or strata reports and formal finance approval)
Selling?
PRO – Receiving an offer with no conditions is more appealing as the contracts are binding straight away, as seen in Auctions. A higher price is not worth much if the buyer pulls out due to their conditions.
CON – Not every buyer is able or willing to offer unconditionally.
Buying?
PRO – Making an offer with conditions has less risk and gives the opportunity to pull out should anything change whilst doing your due diligence.
CON – If other buyers do not need any conditions, you may not be successful securing the property. Asking for conditions shifts the risk to the seller.
Sale Method
How the property is being sold can typically give guidance as to what type of offer and contract the seller is after, for example:
- Auction – Unconditional offers/contracts
- Private Treaty – Conditional offers/contracts
- Expressions of Interest (POA or Tender) – Conditional offers/contracts
There is nothing stopping an offer being made either conditional or unconditional on any method of sale but it will either reduce or enhance the likelihood of being accepted depending on how the sellers campaign is going.
(It is worth noting that it is very common in Newcastle and Lake Macquarie for private treaty sales to exchange with a 5 day cooling off period as noted above).
Further to this, sellers are now commonly providing pest and building reports (or strata reports) during marketing to assist in making sure buyers have all the information required to make an offer and potentially reduce any conditions in a contract.
Next time you are selling or buying, establish your chosen team of professionals (Brokers, Conveyancers, Solicitors etc.) to help navigate the marketplace when it comes to commit to signing an conditional or unconditional contract. This will help avoid any delays on securing your next property!