Can you make an offer on a house under contract

Here, we take a close look at the difference between under contract and under offer, and what it means for you. We also answer some frequently asked questions about properties under contract to help you better navigate the property sale process.

What does under contract mean?

“Under contract” means different things across industries, so what does under contract mean in real estate?

When a house is under contract, the vendor and buyer have exchanged a signed contract of sale for that property, usually via the seller’s agent. A property under contract is considered “sold”. As the exchange is a pivotal moment in the sales process, contracts for properties in Australia must be in writing and signed by both vendor and buyer.

Once contracts are exchanged, sellers are legally bound to the sale. On the other hand, buyers get a “cooling off period” during which time they can “cool off” or withdraw from the sale. While cooling off periods vary in length around the country, you can generally apply to extend, reduce, or waive them by negotiation.

The exchange of contracts also marks the time buyers pay their home deposit (typically 10% of the purchase price). As contracts are signed and the deposits usually paid on the spot, cooling off periods don’t apply for properties purchased at auction.

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What conditions need to be met for a property to be under offer?

You’ve probably heard of a property being “under offer” meaning the vendor has accepted an offer but no contracts have been exchanged. Usually, this is because conditions have been placed on the offer by the buyer. These conditions need to be met before contracts can be exchanged and the property is considered sold. 

Commonly, these conditions are:

• Subject to building and pest inspections. Buyers may withdraw their offer if these reports identify serious issues such as structural faults, mould, or termites.
• Subject to sale. This means the buyer is using the sale of their own property to fund their new one. This is risky for both buyer and seller as the buyer might not get their asking price and need to withdraw. On the other hand, if the buyer takes too long selling, the vendor may accept another offer for a quicker sale.
• Subject to finance. This condition gives buyers time to secure a mortgage after their offer is accepted. If the buyer’s application is unsuccessful, the property is no longer under offer. 

The process once a property is under offer

If you’re a buyer and had your conditional offer accepted, it’s up to you to fulfill the conditions so contacts can be exchanged.

Now’s the time to finalise your finance and organise a pre-purchase building and pest inspection report from a qualified building inspector. If your offer is subject to sale, your focus should be on selling your own property as quickly as possible to avoid being gazumped (see FAQs below).

Once conditions are met, the next step is to exchange contracts and wait around six weeks for settlement day when the property is officially sold. At settlement, the remaining sale price is paid, and the title transferred to the buyer.

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How to make an offer on a property

If you’ve found your dream house and want to take it from “on the market” to “under offer”, here are some tips for making an offer on a property:

• Get your finances pre-approved. This will give you an idea of what you can afford and give sellers confidence in your offer.
• Have the contract reviewed. Ask the agent for a copy of the sale contract and seek legal advice from a solicitor or conveyancer.
• Get a pre-purchase building and pest inspection. Undertaking these inspections before making an offer saves time later, especially if you are also selling your own property. It also places one less condition on your offer for a quicker sale.
• Do research. Knowing the value of similar properties in the area can help you decide on a reasonable offer.
• Make your offer. Offers can be made verbally or by writing a letter of offer to the agent that includes the official amount you’re offering, deposit amount, any conditions or clauses, plus settlement period. Your solicitor or conveyancer can help you prepare the letter.

Sometimes, you may be asked to pay an “expression of interest” deposit when making your offer. This deposit doesn’t guarantee the property will be sold to you or that you’re obligated to buy it, but it does show your offer is serious. If the sale doesn’t proceed, your deposit is returned.  

Frequently asked questions about under contract properties

• Is there a difference between under offer vs under contract?

  There’s an important difference between under offer vs under contract. A property under offer is only a conditional sale. Unless certain conditions are met, the property is no longer under offer and can go back on the market.

  Under contract means the conditions of the sale have been satisfied and signed contracts exchanged. The property is sold, and sellers can no longer accept new offers. Buyers must pay their deposit but can still pull out of the sale for a fee during their cooling off period.

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• What is the difference between under offer, unconditional and sold?

  As we saw, a property under offer means the seller has accepted an offer but the sale is conditional. “Unconditional” is when those conditions are met but the paperwork has yet to be exchanged. An unconditional property is as good as sold, but it isn’t officially sold until contracts are exchanged and settlement is complete.

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• Can you make an offer on a property that is under offer?

  In short, yes! In NSW, vendors can legally withdraw from a verbally agreed sale and accept another offer before contracts are exchanged. From a buyer’s point of view, this is “gazumping” – to successfully make a higher offer on a property already under offer. 

  To avoid being gazumped, pre-arrange your finance, and have your contract legally examined and exchanged as soon as possible. You can also waive the cooling off period or be prepared to increase your offer. If your offer is gazumped, there’s no compensation but any deposits will be refunded.

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• How long do cooling-off periods last when purchasing a property?

  How long cooling off periods last varies by state or territory, as do the laws governing them:

  • NSW: Five working days following the exchange of contracts. 
  • VIC: Three clear business days from the date the buyer signs the contract.
  • QLD: Five business days from the date the buyer receives a copy of the contract signed by both parties.
  • SA: Two clear business days after the buyer has been ‘served’ the Vendor’s Statement known as ‘Form 1’, which can happen before or after contracts are signed.  
  • ACT: Five business days from the day the contract is exchanged.
  • NT: Four business days from the day the contract is last signed by either vendor or buyer and is exchanged.