Getting a Home Loan in Australia if you're living overs...
29 Nov 2023
Buying a property can be daunting, there is often many jargon terms that arise during the process which might be confusing. Words like ‘exchange of contracts’, ‘conveyancing’ and ‘settlement’, another common term that is used is ‘under offer’. But what does that actually mean?
In this article an explanation will be given of what it means when a property is under offer as well as why a buyer still has a chance of purchasing a property that has been under offer.
When a buyer makes an offer on a house but is yet to exchange contracts, it means the property is ‘under offer'. In most cases there will be conditions that will need to have been met before the property is listed as ‘under contract’. The offer to buy is conditional when at the ‘under offer’ stage.
When a property is under offer there are usually conditions attached. The property will only proceed to final sale once these conditions are met.
Usually, a buyer will make their offer subject to securing finance to buy the property and this clause will give the buyer time to do this. Some buyers may even have mortgage pre-approval from a lender but tend to run into issues when they go to have their mortgage application unconditionally approved.
However, if the buyer is unable to get a home loan, including if the lender values the property at less than the sale price, then the property will no longer be under offer and will available again to other potential buyers.
This condition is placed on a property that’s under offer when the buyer has to sell their own property first in order to finance their new home. Given there is a wait period with this condition, it can make things more difficult. If it takes longer than expected for the buyer’s current property to sell, the seller may get inpatient and want to pull out.
Additionally, the buyer might not receive the price they expected from their sale and therefore fall short of what the seller wants for the home.
Either of these cases may results in the offer falling through and the home becoming available again.
In this case, the buyer sources qualified inspectors to give reports on any existing or potential problems with the home.
What might be considered a problem includes drainage issues, cracking in concrete slabs, problems with roofing, termites and mould.
Issues like this may result in the buyer pulling out of the sale.
Under contract refers to a property that is closer towards a completed sale than when it is under offer.
A property is officially under contract when an offer has been accepted by the seller and identical, meaning legally binding contracts have been exchanged by both the buyer and seller.
A property under offer however, is when a buyer’s offer is accepted but the contract hasn’t been exchanged yet and it is still conditional, meaning there are still conditions that must be met before the property can change hands.
If all of the conditions of the sale are met (e.g. subject to finance, subject to sale, subject to building and pest inspection), the offer will then officially be accepted and the buyer and seller will proceed to the next stage, where contracts are exchanged.
Once a seller officially accepts an offer for their home, the buyer then pays a small deposit and the two parties exchange identical, legally binding Contracts of Sale and the property will officially be under contract. This however doesn’t mean that the sale is finalised.
Following the exchange of contracts there is a cooling-off period. Depending on the state, the minimum cooling-off period varies but it can usually be extended by negotiation.
The buyer can conduct further inspections or may just change their mind and decide to pull out of the contract during this cooling-off period.
However, there is a penalty fee associated with pulling out. In NSW and Queensland it’s 0.25% of the sale price, in Victoria it’s 0.2% and in South Australia it’s up to $100.
At this point the sale is completed. The buyer pays the remainder of the contract price to the seller and get’s the keys to their new property. The period of time between exchange of contracts and settlement is known as the settlement period and can take anywhere between one to three months.
When a home is under offer, it cannot be sold to anyone else. However, because offers to buy can often fall through the vender is still allowed to keep the property on the market and hold inspections.
If you find yourself in a position where you are interested in a property but it’s under offer, while you can’t actually make an offer, you can express your interest in the property to the real estate agent. If the initial deal happens to fall through, the agent is likely to approach you.
If you’re ready to inquire about finding a home loan right for you, check out our competitive home loans or chat to one of our lending specialists to help you get into the property market.
As Australia's leading online lender, loans.com.au has been helping people into their dream homes and cars for more than 10 years. Our content is written and reviewed by experienced financial experts. The information we provide is general in nature and does not take into account your personal objectives or needs. If you'd like to chat to one of our lending specialists about a home or car loan, contact us on Live Chat or by calling 13 10 90.