Unconditional offers - Should you make them?
When you make an offer on a property it will either be conditional or unconditional. But what’s the difference and is an unconditional offer worth all the effort? Read on for a plain-english explanation.
The Conditional Offer
With a CONDITIONAL offer, you make an offer at a price, but that offer is subject to certain conditions. For example, you might submit an offer to buy a house at a certain price subject to a builders report and finance approval. If say your finance is declined, you can pull out of the offer.
If you are happy that the conditions have all been met and you definitely want to buy the house at that price, you go UNCONDITIONAL and the house is sold. You can't change your mind from this point on.
The Unconditional Offer
You can also go UNCONDITIONAL with your offer right from the get-go. An unconditional offer is not subject to any conditions or due diligence. If the owner signs your offer, the house is sold! Just like when you bid at an auction. (Note: You should always seek legal advice before making an unconditional offer.)
When would you use an unconditional offer?
The unconditional offer is riskier, but as long as you're prepared to invest in some due diligence it can give you a real advantage. Especially in multi-offer situations.
Price will always be the most important part of your offer, but in a multiple offer situation, conditions come a close second. By making your offer unconditional you are giving the owner certainty. They don't have the stress of being in limbo waiting to see if the conditions on your offer will be met and the sale will go through. They can confidently go ahead with their next 'thing' knowing their house is sold and for how much.
If you are going to make an unconditional offer you need to be certain you want to buy and that you can complete the transaction when it comes to settlement day. That's where the due diligence comes in. Just as when you bid at an auction you need to have all your ducks in a row. And this means investing some time and money upfront. That's not always appealing when you may or may not get the house. It's the old risk vs return assessment that only you can make for yourself.
The process of making an unconditional offer usually looks something like this.
- Ask your lawyer to review the title and LIM and any other reports available
- Arrange an unconditional pre-approval with your bank/mortgage broker
- Carefully read through and understand the property disclosure statement from the agent
- Get a builders report or way of assuring the home has no unexpected defects/surprises
- Ensure that it's the house you want! That it meets your current and future needs.
If you're the buyer, submitting an unconditional offer means...
- You are likely to have an advantage in multi-offer situations
- You could get the house for a lower price than you would with conditions
If you're the seller, receiving an unconditional offer means...
- You can move on
- No stress
So, the questions is, are you game?
Rodney Fong is a Licensed Salesperson and Auctioneer working with clients throughout Tauranga, Mt Maunganui and Papamoa.< Back to Blog Articles