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Under Offer/Under Contract Meaning and Conditional Contract Clauses

Potential Buyers often see “Under Offer” signs on properties or real estate portals and wonder if the property is still available to view or has been sold.

The general meaning is that an offer has been accepted in a legal contract between the seller and the buyer, so when a board goes up, it usually means that the offer is unconditional.

If an accepted offer is conditional – say subject to finance – another buyer can sometimes present a second offer, depending on the terms and conditions of the contract. Be aware that even if your offered price is higher with no conditions, the first contract’s terms will have to be honoured within the agreed timeframe, so the seller can only “provisionally accept” your offer. If the first offer falls through for any reason, your offer will be second in line and kick in immediately. 

The second buyer should be made aware that they can’t or shouldn’t make an offer on other for-sale properties during the waiting period as they have legally committed to buying a property if the first sale falls through – unless they have lots of money and want to buy more than one property.

In an ideal world, agencies should only mark a property as Under Offer or Under Contract once it is fully unconditional, meaning they’re waiting for settlement.

Unfortunately, online real estate sites like realestate.com.au and Domain can’t display a property as SOLD until it’s actually settled. However, reps and agents love putting the sold board up as soon as the property sale is unconditional – it’s great marketing for us. Waiting for an actual settlement can take many months, which could be frustrating for potential buyers.

Pre-empting certain conditions before a Sale

An experienced agent should always ensure that they have as much achievable proof as possible regarding the successful outcome of the contract conditions before committing their client (the seller) to the contract.

This could involve a long chat and a formal, up-to-date, pre-approved letter from the buyers’ financial broker to show that the finance process is in motion and hopefully looking very positive. Note that a pre-approval doesn’t necessarily mean the buyer will get formal approval; it simply proves that the first steps were taken in gaining formal approval.

Under certain circumstances, I advise clients to get a building and pest inspection before going to market. Both reports usually cost approximately $1,000, so it’s not a massive investment. They should choose a reputable building inspector—ideally a registered builder or architect—and a reputable timber pest inspector. Be aware that building reports are about major structural defects only, and won’t include a list of things that might need maintenance.

Examples:

  • Listing a historic home – even if it’s in excellent condition.
  • Selling a home that clearly shows signs of potential structural and maintenance problems (whether minor or not). These potential issues will be of great concern to buyers. It will firstly influence whether the property gets viewings and, secondly, affect the offered amount as they’re trying to work out how much repairs might cost them. Having proof of recent inspections will help persuade buyers to at least look at the property and hopefully proceed with more assurance from there. I usually forward the reports (with my client’s permission) to the potential buyers so they can have an in-depth chat with the inspectors after the viewing.
  • Sometimes, there are obvious signs of white ants or pest damage. If the agent or an owner suspects a white ant problem in or around the property, a complete pest inspection should be conducted to ascertain the severity and necessary actions.
  • If the sellers get regular white ant treatments (especially important with lifestyle/acreage properties or any property in close proximity to natural bush and trees), make sure your agent has copies of the reports to forward to prospective buyers.

Not only will this help put buyers at ease, but sharing the reports could also lead to higher offers (usually considerably more than the initial $1,000 or so spent for the reports) as the buyers feel much more confident in the transparent buying process. If they discovered the potential “problem” during the viewing, the offer could be considerably less – or no offer at all.

Note that many buyers will still employ someone to do a building and pest inspection on their behalf, regardless of receiving copies of a recent inspection from the selling agent – but most importantly – that’s after the contract with the offered price and conditions are signed. We all want our contracts to be unconditional as quickly as possible and being prepared helps. A lot of buyers waive these rights if they feel confident enough with the seller’s professional inspectors’ reports to proceed. Without conditions, the seller will know for certain that their property is sold and can confidently proceed towards settlement.

Pest and building inspections are standard conditions usually included as Annexures to the contract when buying established homes – see mock examples of the paperwork below.

It’s important to know that if the building or pest inspections highlight problems, the pre-purchase condition should offer the seller the option of fixing the problems within a set time frame. If the seller refuses to comply, the buyer should have the option of terminating the contract.

Other conditions might also be included; it depends on the property and the buyer’s needs. Buyers can waive their rights to a pest and building inspection, for example, by drawing a line through the annexures and signing next to the changes or by filling in a pre-prepared waiver form through the selling agent.

If you’re planning to buy a block and build, please read my blog on Buying Vacant Land and the special conditions I recommend in the sales contract in order to avoid costly mistakes.

If you are considering selling a property in Albany, Mount Barker, Denmark or Walpole areas, please contact or call me to discuss your needs. Consultation, advice and appraisals are free of charge, with no obligation or harassment – ever.