While hunting for your dream home or selling the one you’re in, you may come across the term ‘under offer’. This is when a property’s seller has accepted an offer from a buyer. But the property isn’t necessarily off the market.
Understanding what this term means can help you navigate the Australian property market more efficiently.
What does ‘under offer’ mean?
When a property is ‘under offer’, the seller has accepted a buyer’s offer but has not yet sold the property.
While a property is under offer, additional prospective buyers can submit backup offers, which the seller can accept if the initial one falls through.
The property’s sale is finalised once contracts are exchanged and the ‘cooling off period’ is complete.
Under offer vs under contract
Under offer: When a seller has accepted an offer made by a buyer.
Under contract: When the seller accepts a buyer’s offer, and both parties sign the contract of sale. This step is sometimes referred to as ‘exchanging contracts’.
The ‘under offer’ step comes before the ‘under contract’ stage in the home buying process. In general, property inspections are conducted sometime between these two steps.
Cooling-off period: A set number of days after the contracts are signed when buyers can pull out of the sale. Depending on where you live, cooling-off periods can last between zero and five days.
🤓 Nerdy Tip
It’s important to note that contract terms can vary in meaning, so you should check with individual agents and sellers to know what they mean when referring to a specific property.
What happens during the process?
Once you have pre-approval for a home loan and find a property you like that’s in your budget, you can make a formal offer.
It’s usually best to submit one in writing through your real estate agent or solicitor. That offer is typically included with the contract of sale to expedite the process. Once the seller agrees to it, the property is under offer.
Once any required conditions have been met and both parties sign the contract of sale, you typically pay a deposit before settlement. This step is when the remaining funds are paid to the seller, and the property legally becomes yours.
Here are a few key terms you’ll encounter during this process:
As a buyer, you can make a ‘conditional offer’, which means it is only valid if certain terms are met. These could include:
- The property passing inspections
- The successful sale of your current home
- Getting final approval for a home loan.
🤓 Nerdy Tip
It’s important to note that properties sold at auction are done so unconditionally, meaning if you secure the winning bid, you cannot include conditions in the contract of sale.
Conveyancing generally refers to the management of legal documents during a sale, such as preparing the contract of sale, arranging inspections, and overseeing the exchange of contracts and settlement process.
Considerations for sellers
Even if buyers have pre-approval, their financial situation could change after they make an offer. They may lose their job or need to use their deposit for an unforeseen emergency, for example. If this happens, their lender may not approve the loan, and the sale can fall through.
If you are selling an older property, the building and pest inspection may reveal structural or maintenance-related issues that the buyer can’t afford to fix. Depending on the terms, the buyer may counter or negotiate a lower price to cover the cost of the repairs. Or, you may be required to pay for mandatory fixes.
If the initial offer isn’t working out, you can accept a backup and move forward with another buyer.
Considerations for buyers
For buyers, you can protect yourself by submitting a conditional offer. This gives you the opportunity to make sure the property meets your requirements before you agree to buy it.
Getting pre-approval for a home loan before you make an offer is also a good idea. Sellers typically want a smooth transaction, so obtaining pre-approval and having good communication with the seller or their agent can help both parties reach an agreement quickly.
While a property is under offer, other potential buyers can contact the seller and submit a backup. That possibility should reinforce the importance of being reliable and organised so the seller isn’t tempted to move on to another buyer.