Conditional offers: Everything buyers & sellers need to know

Making a conditional offer is a bit like saying ‘I want to buy your house after I’ve checked out a few things.’ Whatever conditions you include in your offer need to be satisfied before a set time period elapses. Once these conditions are met then your offer is ‘unconditional’ and you’re legally required to go through with the purchase. 

For example, you might make an offer conditional on a building report and finance with a conditional period of 10 days. After the offer is accepted you’ll have 10 days to get your building report and contact your bank or mortgage broker to secure lending to buy the property. If you’re not happy with your building report or your lender denies your application you can pull out of the purchase without losing your deposit. 

Let’s say you made an offer conditional on a building report being satisfactory to you. If the building report comes back highlighting problems with the house that need to be fixed, you may be able to use these to negotiate a price reduction with the vendor. Speak to your lawyer for advice on how to do this. 

A multi-offer situation is when more than one party has made a signed, written offer on a property. If you’re in a multi-offer you’ll be competing against at least another keen buyer, so it’s always a good idea to put your best offer forward to give yourself a chance. 

Offers with fewer conditions and more favourable terms are often more attractive to the vendor. It’s worth speaking to the real estate agent to ask what the vendor wants and tailoring your offer to suit them (including settlement date and deposit size). Unconditional offers are often very attractive, but before you make one make sure you’ve done all your due diligence. 

Read more about multi-offer situations. 

If you’d like the vendor to accept or deny your offer by a certain date and time so that you can look at other options, you can simply put an expiry date on your offer. This can be a great way for savvy buyers to put a little pressure on vendors to take the property off the market (and cut out competing buyers). 

Within reason you can put any legal condition in a sale and purchase agreement. Here are some of the most common ones to consider:

• Finance: Getting approval from your lender that they’ll lend you the funds to complete the purchase. 

• Valuation: registered valuer confirming the market value before purchasing. 

• Building inspection: having a building inspector check the building for defects. 

• Insurance: contacting an insurer to ascertain you’re able to insure the property. 

• LIM: checking the contents of the LIM (land information memorandum), which is a report containing all the information the council holds on your property (your lawyer should check this for you). 

• Title search: the title is the official document that shows a property’s legal owners and legal description (your lawyer should check this for you). 

• Solicitor’s approval: if you’re not sure what you need to check but you want to run the property past your lawyer before you buying this clause is a great idea. 

• Sale of another home: if you’ve got to sell your property before you can settle on another the home you have your eye on.. 

• Conditional on any other report or inspection: you can include other reports you’d like to get in your conditions, such as geotech, pest inspections, or surveys. 

• Sunset clauses: if you’re buying a new build property it’s a good idea to make sure your sale and purchase agreement includes a sunset clause. These allow you to pull out of the purchase if construction is not completed by a certain date (but be careful they can also allow developers to pull out of the contract if their costs have increased and they want to charge more for the property). 

• Due diligence: if you’re not sure what you need to check with a property you can insert a due diligence clause. This is a general clause that covers any and all due diligence you may need to do. Keep in mind, this clause may put vendors off as it leaves an opening for buyers to cancel the agreement for any reason. 

Many don’t know that the seller can also include conditions in an agreement. One example is a cash out clause that allows the seller to cancel the agreement during your conditional period if they receive a more favourable offer. If you’re a buyer it’s important to be mindful of what such a clause could mean when signing an agreement.