Selling your property? Things to know about conditional offers
When the market is running hot and listings are in short supply, it’s common to see buyers trying to do everything they can to put in an unconditional offer on the properties they like.
But when things are a bit calmer, and buyers have more options, conditional offers become much more frequent. So, what does this mean for vendors?
There are a few things to think about when your house is on the market and conditional offers come rolling in.
What’s a conditional offer?
Firstly, it’s an offer! This is a great step on the path towards selling your house and is a great chance to at least open negotiations with a potential buyer.
An offer being conditional means that it is contingent on things happening. Buying a house is a long-term financial commitment, and the buyer wants to make sure that their hard-earned money goes into a quality purchase.
Finance is a common condition: an offer conditional on finance means that the purchase will only go ahead if the buyer can get the money from a lender to do so. In many cases, lenders like to see the sale-and-purchase agreement that they are financing before they give the final tick of approval.
You might also get an offer that’s conditional on the sale of a buyer’s house. People do this if they want to secure a new property before selling their own. The Real Estate Authority says you might also see offers that are subject to a property inspection by a
builder, a valuation or a satisfactory LIM report. None of these is generally cause for concern: if you know your property well, you probably have a good idea what sort of things will show up in these reports.
Other conditions, like “due diligence” can be more wide-ranging and can potentially offer the buyer more flexibility should they just change their minds, as law firm Alexander Dorrington notes.
Am I trapped by a conditional offer?
Some sellers may be wary about signing a conditional offer in case another buyer comes along with a better one.
That’s why many add a “cash out” or “escape” clause to their agreement, as Jennifer Edwards at law firm Smith and Partners notes. This usually means that, if you receive an unconditional offer while the conditional offer is in place, the buyer has a set number of working days to satisfy their conditions, or their deal is terminated.
Can I make conditional offers less likely?
If you’re keen for offers to be as condition-free as possible, there are some ways you can help. It may be possible to pre-empt some conditions by having things like a property report on hand for buyers to see, house inspection firm RealSure says. Some might still want to get their own, but it’s possible you’ll smooth the path for some buyers.
How do you choose between offers with conditions?
Belinda Moffat, who is chief executive of the Real Estate Authority, told Trade Me that salespeople should help sellers to understand offers and the conditions involved. Depending on your circumstances, an offer for slightly less money but with fewer
conditions might appeal – or you could have time on your hands to wait for the offer with the right price to work through a checklist.
Your lawyer can also advise you if you have a technical questions about how conditions may be dealt with.
Like to talk?
Is it time to move on from your current property? Whether you’re shifting away, downsizing, building new or just moving across the road, we can help you make sure your home loan finance is in order. Give us a call today for a no-stress conversation about what we can offer to make your property transactions as smooth as possible.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current development or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.