An unconditional contract is characterized by a commitment from both parties to carry out the settlement process without the option to terminate the contract due to the failure to meet specific or typical conditions. Let’s explain what this means, why it’s important, and how it changes how we buy or sell homes.
What Is An Unconditional Contract?
An unconditional contract is a contract for the sale of property with no conditions attached. This means that once the buyer signs the contract, they are legally obligated to purchase the property, regardless of whether they can obtain finance or whether the property passes a building and pest inspection.
Unconditional contracts are typically used in competitive markets, where sellers seek to maximize the purchase price and minimize the risk of the sale falling through. They may also be used when the seller needs to sell the property quickly, such as when relocating or facing financial difficulties.
Conditional Offer vs Unconditional Offer Property
| Aspect | Conditional Offer | Unconditional Offer |
| Definition | Offer with conditions that must be met for sale. | Outright commitment to buy with no conditions. |
| Common Conditions | Mortgage approval, home inspection, title search, sale of current home. | None. |
| Flexibility | Allows withdrawal if conditions aren’t met. | Binding once accepted; no option for withdrawal. |
| Risks and Benefits | Protects buyer but can be lengthy & uncertain for seller. | Quick sale & certainty for seller but riskier for buyer. |
| Preparation | Buyer should list and communicate conditions. | Buyer should do all due diligence before offering. |
When Does A Contract Go Unconditional?
A contract goes unconditional in the context of property buying when all the conditions stipulated by the buyer (and agreed upon by the seller) are satisfied, and the relevant parties communicate and acknowledge these fulfillments. Here’s a breakdown of how and when this happens:
- When a buyer puts a conditional offer on a property, they set specific conditions that must be met for the sale to proceed. Common conditions include obtaining mortgage approval, a satisfactory property inspection, a clear title search, or selling the buyer’s existing home. The contract becomes unconditional when all these conditions are met to the buyer’s satisfaction.
- Once the conditions are met, the buyer’s solicitor or conveyancer typically notifies the seller’s representative in writing that all contractual conditions have been satisfied.
- The contract will specify a time frame for the buyer to fulfill the conditions (e.g., 14 days from the offer’s acceptance date). If the buyer fails to meet the conditions within this period, the contract may either be extended (if the seller agrees), renegotiated, or terminated.
- The agreement becomes legally binding after the buyer’s representative notifies the seller that all conditions have been satisfied and the contract is now unconditional. At this point, both parties are obligated to proceed with the sale or purchase, and backing out typically has legal and financial consequences.
- Often, the buyer is required to pay the remainder of the purchase deposit (if applicable) when the contract goes unconditional. The initial deposit amount and terms would be specified in the contract.
When buying or selling a house, we recommend engaging a property lawyer or conveyancer to help navigate the process and ensure all the relevant legal rules are complied with. This is because the exact steps and legal effects can vary depending on the area laws and the contract terms.
Can A Buyer Pull Out Of An Unconditional Contract?
Yes, a buyer may cancel an unconditional contract in Australia only under certain conditions and without incurring penalties.
Taking advantage of the cooling-off period is the primary method for a buyer to withdraw from an unconditional contract without penalty. Most Australian states and territories provide purchasers with a five-day cooling-off period from the date of contract signing. During this period, they can withdraw from the contract for any reason and without explanation or penalty.
There are significant exceptions to the cooling-off period, however. For instance, the cooling-off period does not apply to properties purchased at auction or before construction has begun. Additionally, purchasers may forego their right to a cooling-off period if they agree to do so in writing before contract execution.
If a buyer wishes to terminate an unconditional contract outside of the cooling-off period, they will typically be required to provide a legal justification. For instance, the buyer may terminate the contract if the vendor has breached a contract term, such as by neglecting to disclose a property defect. Depending on the agreement’s provisions, the customer may also be able to terminate the contract if they cannot secure financing.
Importantly, if a client terminates an unconditional contract without a valid legal reason, they may be responsible for compensating the seller. This could include the seller’s losses and any costs incurred in preparing the property for sale.
Can A Seller Pull Out Of An Unconditional Contract?
It is extremely difficult for a seller to withdraw from an unconditional contract. Unconditional contracts are legally binding, and sellers may only terminate them if the buyer violates a term of the contract or if the buyer and seller agree to its termination.
If a seller attempts to terminate an unconditional contract without a valid legal reason, they may be liable for compensating the buyer. This may include the buyer’s lost profits and any costs incurred in preparation for the purchase.
In certain circumstances, a seller may obtain a court order to terminate a comprehensible contract. However, this is only possible if the seller can demonstrate a compelling reason, such as undue pressure or a fraudulent contract.
If you are a seller considering withdrawing from an unconditional contract, you should seek our conveyancer’s advice to determine your rights and options.
Client’s Request for a Binding Sale
Our client approached Walker Pender, exhausted from unreliable buyers withdrawing offers on her property. Situated in a competitive market area, her property faces stiff competition, leading to buyer fickleness. She implores our legal expertise in drafting an unconditional contract, ensuring the next buyer’s commitment is legally binding, minimizing her stress, and securing a definite sale amidst the bustling property market.
Secure Your Sale with an Unconditional Contract
Tired of uncertain deals? Walker Pender is your solution. Our expert team specializes in crafting ironclad unconditional contracts in Australia, ensuring your property sale concludes without risk of buyer withdrawal. Trust us to bring you peace of mind in your real estate transactions.
Contact Walker Pender today, and let’s solidify your sale!
