Conditional versus unconditional house offers
Knowing the difference between an unconditional offer and a conditional offer for a property purchase is important. Both have different legal obligations and expectations, and you’re going to want to be clued up on those before you enter the market.
Here’s a rundown of the basics around offers, and how to make them safely.
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What does unconditional mean when buying a home
Broadly, the term “unconditional” when applied to the purchase of buying a house can appear twice in the process.
Firstly, the term “unconditional offer” refers to when you as the purchaser are making an offer on a property that is not subject to any due diligence or other checks. If the vendor accepts your unconditional offer, then you will both be locked into completing the terms of any resulting sale and purchase agreement.
Secondly, “going unconditional” is when all the conditions in a conditional contract for sale and purchase have been fulfilled by both the buyer and seller. These conditions can include things like the buyer having a chance to inspect the property, or a builders report.
To keep it simple: an unconditional offer is one that is almost impossible to back out of once you commit to making it.
A common example of an unconditional offer would be when you bid on a property at auction. In those cases, buyers may not have the chance to assess a current LIM report or to learn more about a house beyond what has been advertised by a real estate agent before they bid. Once a contract becomes unconditional, then both parties will have to complete the transaction.
How to make a conditional offer
Conditional house offers are best made through negotiation. In most cases, this will be your conveyancer or lawyer having a dialogue with the vendor’s. We would recommend making conditional offers through property professionals because they'll be familiar with:
- Common conditions (including ones concerning a building inspection or builders report)
- How best to ensure that you're covered when you make a conditional offer
The wording of conditions is very important, and you’ll notice that plenty of conditions often have a time limit on them of a certain number of working days. This is to incentivise parties to meet those conditions and to keep the transaction ticking along. Conditions are also very specific, and keeping this specificity is important if you want to ensure that your rights are adequately protected.
Our beginner’s guide to sale and purchase agreements has some helpful examples of conditions that are designed to protect your rights as a buyer, including a condition around obtaining a Land Information Memorandum report from the local Council
Can I have more than one conditional offer?
It is possible to have more than one conditional offer. Just because you make an offer on a property does not mean that the vendor will accept it, especially if there’s competition in the market, so you may feel like you want to keep your options open by making an offer on a back-up property.
One way that buyers can do this is through having sunset clauses as a condition in the sale and purchase agreements. Having a sunset clause in your SAPA will technically let you make offers on other properties; if the vendor does not accept your conditional offer by the timeframe specified, you have grounds to withdraw that offer and to commit to another property transaction.
However, because SAPAs are legally binding from when they are signed, you have to be careful that you do not end up in a situation where you place offers on multiple properties and end up having to go unconditional on them because all conditions have been met.
Reading all the terms and conditions of those agreements is very important before making more than one conditional offer - ensure that your lawyer has advised you properly before you make multiple conditional offers.
Can you withdraw a conditional offer?
Conditional offers can be withdrawn. That being said, conditions are not a “get out of jail free” card. If you can reasonably fulfil a condition then you are legally obligated to because of the obligations imposed on you after signing a SAPA.
For example, if you make a contract conditional on pre-approved finance and have obtained that approval from your bank, you cannot pull out of the agreement if you happen to just have a change of heart. This is why you have to word conditions carefully if you do want the ability to be more flexible about committing to a contract.
It’s important to understand things from the seller’s perspective too - each condition you impose is essentially another hoop for them to leap through before they can sell their property. Don’t be surprised if you put in a conditional offer that the seller turns down in favour of an unconditional one.
It’s important that you consult with your conveyancer or lawyer about putting forward conditions that are reasonable without making the vendor second-guess the transaction.
Have other burning questions about the process of acquiring your first home or about the basics of home ownership? Check out our first home buyers hub, with advice on everything from building reports to sorting out your deposit.
