Generally, private purchases of property in Queensland are made through conditional contracts, although this isn’t always the case. In this article, we’ll explore the advantages and disadvantages of an unconditional contract of sale and the various types of conditions applicable in Queensland.
What is an unconditional contract?
A conditional sale is a type of agreement that specifies that the sale of a property will only proceed if certain conditions listed in the contract are met. Until those conditions are satisfied, the contract is considered “conditional.” Once all conditions are met, the contract becomes “unconditional.”
Conversely, an unconditional sale is one in which there are no conditions attached to the sale. An unconditional offer assumes that no matter what the circumstances (deposit delay, home inspection problems, market valuation, etc.) you will still buy the property. What is unconditional contract meaning in simple terms? Once you have signed, you have no way to back out.
Typical conditions for buyers
|Subject to finance||Gives the buyer time to get finance approved from the bank nominated in the contract. Accordingly, if approval is not granted, the contract can be safely terminated.|
|Subject to building and pest inspection||Gives time to inspect the building and terminate if the buyer acting reasonably is not satisfied with the building inspection.|
|Subject to settlement of a sale of a property||Usually used if the buyer first wants to sell one property, and then pay for the purchase of the next. It gives the opportunity to safely terminate the contract if the sale of the property does not take place|
|Subject to the sale of another property||Similar to ‘subject to settlement of a sale of a property’ but the buyer does not need to have a contract of sale on the property they are selling. If they don’t achieve a sale by a nominated date then this clause gives them the right to terminate the contract.|
Typical conditions for sellers
|Sunset clause||Allows the seller to continue marketing the property for sale even after a contract of sale has been signed with a buyer. This is often done as a protective measure in case the buyer requests long-term conditions, such as “subject to the sale of another property”.|
|Subject to prior contract termination||Permits the seller to enter into a contract with a new buyer while the existing contract of sale is still in progress. Accordingly, the seller can terminate one of the contracts without penalty.|
What are the risks of signing an unconditional contract?
- Over- and undervaluation. Rushing to secure a property can lead to overestimating its value and overspending. If the bank’s valuation of the property is lower than the purchase price, the buyer may not have the right to proceed with the contract, and the bank may refuse to finance the purchase due to insufficient equity.
- Lack of finance clause. There is a possibility that the bank may not approve the buyer’s loan or may not be able to provide the funds on time, leading to the buyer’s inability to settle the property and lose the deposit.
- Property problems. As a rule, the transfer of ownership takes some time. If during this period you find any problems with the house, there is nothing you can do about it.
What are the benefits of signing an unconditional contract?
If you agree to an unconditional sales contract, you cannot negotiate additional conditions for the sale to proceed. The fewer conditions in the transaction, the more chance the sale will settle. This gives the seller a certain degree of confidence that the sale will go through.
The specifics of conditional contracts in Queensland
Special conditions for the contract of sale in Queensland usually include:
- Pest inspection of a building
- Finance approval
- Due diligence
- Cooling off period
1. Pest inspection
While it may not be explicitly required, it’s worth noting that building and pest inspections are listed on the Queensland government website. Therefore, if you’re in the process of conveyancing in Brisbane, it’s highly likely that you’ll need to have an inspection conducted before transferring ownership. These inspections are important to ensure there are no significant defects that would have otherwise affected your decision to buy the property or the amount you offered for it.
In Queensland, building, and pest inspection conditions are typically included in standard residential real estate contracts, with a due date of 7 or 14 days from the contract’s signing.
As a buyer, including a building and pest inspection condition in the contract provides you with the option to terminate the contract without any penalty if the inspection report is unsatisfactory. Alternatively, you can choose to waive the condition if the seller agrees to rectify any issues or provide a discount to compensate for any necessary repairs.
2. Finance approval
Typically, in Queensland, the buyer has 14 to 21 days from the date of signing the contract to receive financing approvals from the bank.
If you’re unable to obtain finance approval after applying, the finance condition allows you to terminate the contract without any penalty.
However, it’s essential to take all reasonable steps to secure finance, including submitting an application to a lender and providing any necessary information. Otherwise, you may be sued. We wrote more about this in the description of the difference between rescission vs termination of a contract.
3. Due Diligence
When it comes to purchasing a property in Queensland, it’s important to note that the buyer is responsible for conducting thorough due diligence investigations since there are limited disclosures that a seller is required to make about the property. As such, it’s essential to check the land title and registered plan, local authority records pertaining to any alterations made to the home, the risk of flooding, and any proposed infrastructure plans that may impact the property.
Typically, these searches are:
- Verification of Identity
- Land Tax – Clearance Search
- Property searches (Department of Transport and Main Roads)
- Body Corporate Information
- Certificate & Insurance Certificate (Estimate only)
- Common Property Title
- Community Title Scheme Search Statement
- Title Search
If you’re not satisfied with the results of these searches, and you negotiate a due diligence condition to be included in the contract, you can typically terminate the contract within the due diligence period (usually within 14 or 21 days) without incurring any penalty.
It’s worth noting that the standard residential real estate contracts in Queensland do not include a due diligence condition, so you’ll need to add it as a special condition prepared by a lawyer.
4. Cooling-Off Period
The cooling-off period allows the buyer to withdraw from the contract within 5 days of signing it. While technically a cooling-off period is not a condition, it is important to understand that you can opt out of this 5-day cooling-off period by electing to waive your rights in writing to a cooling-off period before the contract is signed.
In addition, the cooling-off period is not applied in all real estate transactions (more on this here).
How can Conveyancing solicitors help you with contract conditions?
The above special conditions in a contract of sale are just common examples. In practice, sellers and buyers can put forward a variety of conditions to each other, and the task of conveyancing solicitors is to ensure that the process goes smoothly.
It is also important to understand that the very fact of the participation of solicitors in the transaction is an additional guarantee that the parties will be more accommodating in drawing up the contract.
As mentioned above, most contracts in Queensland have the same mandatory searches and checks, the price for which are included in our Instant Quote. Even if you do not agree to work specifically with us, you can still take a look at the cost of searches, as the price for them is approximately the same for all conveyancing solicitors in Queensland.