Unconditional Offer - Pros & Cons

Hi

I have tried typing into the search box unconditional. Trying to find threads that cover the topic, but nothing comes up :confused:

Anyway I would like to hear some stories in which people have put an offer on a property *unconditional* Anyone have any good links to some threads?

Is it more appealing for the vendor to get an unconditional offer? I was thinking perhaps I might be able to go around $20 K lower off the price I think the property is valued at if I put an unconditional offer to them. Is this a way to get a property for a lower price?

But what happens though if the building and pest inspection comes back and you dont like what you see? Its a gamble isnt it? You also might get knocked back on finance and then you could be in big trouble if you've made it unconditional. Would your mortgage broker have a fair idea if he thinks it will be approved?

When you offer unconditionally are you gambling that it will pay off. Are there ways around this. Are there any get out clauses?
 
I think every property we have bought (except the very first one) has been on unconditional offers :eek: - or at least finance unconditional (conditional only on building inspeciton).

Yes, you have to have a good idea that the loan will be approved. We usually do the buidling inspection prior to making the offer. In reality, this condition is no different to buying at auction in Victoria.



The good thing is, the agent knows you are serious because you don't spend a few hundred dollars on inspeciton just for the heck of it. And yes, absolutely a path to lower price.

When we sold our properties, we would always go for the unconditional offer, even if they were 10%-20% LOWER than a conditional offer.


We have only had one occasion when buying where we couldn't get finance, and we had to run around prior to settlement for another lender (ended up cross collaterallising and all sorts).

One thing you might want to do if putting in unconditional offers is to allow a longish settlement, so if your first lender of choice bombs, you have time to look for another.


Cheers,

The Y-man
 
Most markets are quite hot at the moment, so if you're making an offer, the unconditional offers will be taken more seriously and have a better chance of being accepted than offers with lots of conditions.

Having said this, if you need a 95% lend you'd be insane to not include a finance clause for your own protection.
 
Having said this, if you need a 95% lend you'd be insane to not include a finance clause for your own protection.

Good point - whenever we made offers, we had access to enough (emergency) funds to allow a 80% LVR (or better) if required.

Cheers,

The Y-man
 
One thing you might want to do if putting in unconditional offers is to allow a longish settlement, so if your first lender of choice bombs, you have time to look for another.

Yeah, but can you just easily say "here's the letter from the lender, I had preapproval, but they backed out. Sorry" and walk away without any legal issues?
 
Yeah, but can you just easily say "here's the letter from the lender, I had preapproval, but they backed out. Sorry" and walk away without any legal issues?

No - again, generally the same as buying at auction, then failing to settle - the actual cost would most likely be loss of the deposit (?).

We bought our PPOR after it sold at Auction, but the buyer failed to settle.

Cheers,

The Y-man
 
When you offer unconditionally are you gambling that it will pay off. Are there ways around this. Are there any get out clauses?
No, there aren't any "get out" clauses; hence the term "unconditional". You are saying that you will settle - no exceptions!
Yeah, but can you just easily say "here's the letter from the lender, I had preapproval, but they backed out. Sorry" and walk away without any legal issues?
Um, no, you can't. UNCONDITIONAL means just that; without any conditions. Not settling puts you in breach of contract and could result in either specific performance (being forced to buy something that you don't want to buy, if you could get finance but didn't want to go ahead), or being sued for damages if you can't settle, which would mean forfeiture of deposit and possibly being sued for any lower sale price. eg if you agreed to buy for $400K, and they have to put it back on the market and can only get $375K, you have to pay the $25K difference (plus any extra costs, less any deposit already forfeited).
 
Not that anyone should rely on this, but.. getting sued for a lower sale price should be unlikely if offering a lowball price?

and offering the minimum deposit? 0.25% or $1K.. will the buyer not think you're serious, even though there are no conditions?

I'm just suggesting possible ways to control your losses while offering an unconditional contract..
 
Not that anyone should rely on this, but.. getting sued for a lower sale price should be unlikely if offering a lowball price?
True, less likely.
vbplease said:
and offering the minimum deposit? 0.25% or $1K.. will the buyer not think you're serious, even though there are no conditions?
If you're offering both a very low price and a tiny deposit, yes, the risks are certainly substantially lower, and that may work if it's a buyer's market and/or the vendor's desperate and accepts such an offer.

The RE agent is entitled to their commission in such a situation, though (if an unconditional offer doesn't proceed to settlement), so they may pursue the vendor for their commission, say $10K, and in such a case, the vendor could, in turn, come after you for this.
 
I actually think it depends on how you go about the unconditional offer. It can be quite attractive, even in a hot market.

I have bought TWICE in a rising market after a previous contract had fallen through. I offered unconditional on finance and building and bought one property for 15k less than the previous contract. 310k down to 295k.

I had a motivated vendor who had bought elsewhere and needed a 4 week settlement.

The other property I bought for 40k under previous contract. :D The previous contract fell through on a bad B&P. I did however insist on a building report but no finance, no pest and 4 week settlement.


If you get your finances together, make sure you know your area like the back of your hand and nearly every real estate agent in the area knows you...it's amazing what deals you can find.:)

Regards Jo
 
Is this the correct rule of thumb - As soon as the contract becomes unconditional, the agent is entitled to his/her commision? I thought it was on settlement..

On another subject.. ommiting the b+p inspection because it's a unit.

Reason being, body corp should be responsible for any structural defects? Is that correct?
In this case checking the sinking fund would be an important check..
 
On another subject.. ommiting the b+p inspection because it's a unit.

I assume unit being "apartment" or "flat", not "villa", "townhouse" or "homette".

Agree, but not for the reason you stated. Because it is:

1. relatively easy to check yourself (smaller)
2. chances are, the bits you can't check, the B+P inspector won't be able to either (eg roof top, under building).


Having said that, I suggest people go through once or twice with a professional inspector to get the trick of the trade.

Cheers,

The Y-man
 
Is this the correct rule of thumb - As soon as the contract becomes unconditional, the agent is entitled to his/her commision?
I think there are some states that may be different - it's been discussed on the forum before - but certainly in QLD they become entitled to commission as soon as the contract goes unconditional. It's a convention that they only collect it at settlement, to assist their clients' cashflow, but they can actually demand payment as soon as the contract goes unconditional.
 
I would like to hear some stories in which people have put an offer on a property *unconditional*


We have only done this once. It was done 2 years ago, and managed to lop 500K off the asking price.

It was very very daunting signing the contract offer, especially as we had done no building inspection, no pest inspection and didn't have any finance in place. What the hell - who dares wins.

REA came back and said the Vendor was almost over the line, but he had another offer which was 150K higher than ours - with a 30 day finance clause. I knew that was utter lies, so I told him to tear my unconditional contract up and go with the higher conditional offer.

In less than 3 hours, the REA delivered the signed and accepted contract to us. It was ours....you bewdy.

I'm glad the Bank came through with the dosh. Would have been slightly uncomfortable if they had of said no.

The property has increased 65% in those two years, and the rent has tripled, allowing me to give up work. I like the power of unconditional contracts.



On the flip side, we have been the highest bidder with only a 30 day fin. clause for properties during Tenders, sometimes by a margin of 500K. However, we lost out to lower unconditional cash bids from institutions and super funds.


The surety of going ahead with the deal is absolutely paramount to the Vendor, and they are willing to pay for it.
 
When we bought our current PPOR the property was on a conditional sale agreement with a 48 hour clause for the purchaser to sell their house. We viewed a recent pest inspection for the place (which had termite damage) that the agent had but as we were paying land value anyway decided to go cash unconditional as that was the only way of getting past the existing sale agreement. Glad we did - it has made more for us than any other investment.

However, the bank we got pre-approval from before purchasing then informed us that one of their new staff members had used the wrong servicing calculator (only applicable for purchases below $750k at the time) and we weren't actually able to get finance through them. There followed some frantic searching for finance, which was obtained with the first bank to say "yes". It was an uncomfortable experience with a $50k deposit on the line...

Ever since then all our offers have been conditional only on building / pest inspection, with some good prices being achieved as a result I have no doubt. If there was something worthwhile I would forego B&P if need be in the right circumstances. I advise giving yourself a longer settlement to be absolutely sure of obtaining finance if you are going with this strategy ATM. Sixty days for us...
 
I dont know if I know enough about it to go this option!

Here's the situation

I'll be getting a loan from the bank for $280 K, and I'm thinking of putting an unconditional offer in the low 280's on a property that is valued closer to the $300 K mark, so that I dont have to use any of my own cash in the deal.


I have a $177 K ppor mortgage. $31 K in offset atm. So with the $280 K loan my LVR will be around 85% The ip loan is cross-col with my ppor so that I can get something a bit better. Once the ip grows in value I am going to get the loan seperated.


So people here are saying:

1. Make sure you know your finance will be approved. Will my mb be able to tell if I will definately be able to get this finance?? Its x-col.

2. I like the idea of doing the building inspection prior to actually making the offer. I could also do a pest inspection too beforehand.

3. Pt Bear "Having said this, if you need a 95% lend you'd be insane to not include a finance clause for your own protection." Why? Why is it so risky? Yep I'm getting a 95% lend

4. Y Man and OzPerp How about if I offer $5 K deposit when putting in my offer Would that be enough?

5. Go with the longer settlement if opting for unconditional



Do you think its risky in my situation?
 
1. Make sure you know your finance will be approved. Will my mb be able to tell if I will definately be able to get this finance?? Its x-col.

....

3. Pt Bear "Having said this, if you need a 95% lend you'd be insane to not include a finance clause for your own protection." Why? Why is it so risky? Yep I'm getting a 95% lend

1 and 3 are for the same reason. There is a much higher possiblity of a 95% lend getting rejected compared to an 80% or 60%

Your mortgage broker should be able to advise on your probability of getting the loan.

Ask him/her - what are the chances of getting 95%, 80%, 70% etc

Cheers,

The Y-man
 
Do you think its risky in my situation?

Another factor is your monthly saving capability.

It's another reason for long settlements - because if you can save 5% of the deposit per month, a three month settlement can make all the difference if you fail to get a 95% lend but securing a 80%.

Cheers,

The Y-man
 
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