Putting an offer on a property that’s under offer might seem like a pointless venture, but experts argue this is how many Aussies are snagging their homes.
If you’ve ever browsed through the houses listed for sale online, on sites such as Domain and realestate.com.au, you would have likely noticed that many properties are displayed as being “under offer”. But they’re still showing up in the “for sale” section, so this might seem quite confusing. So, what exactly does it mean when a property is under offer?
In this article, we’ll discuss:
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What does "under offer" actually mean?
When a property is “under offer”, it simply means that a person has submitted an offer on a house that the owner has accepted, and a contract has been signed. Meaning, both parties have agreed on the purchase price and applicable terms and conditions, but the contract hasn’t yet been finalised. Therefore, the agreement is not yet completed, and the house is technically still for sale (but not really).
In a nutshell, when a property is under offer, both parties have signed the contract, but it might take time for certain conditions, such as building and pest report or finance approval, to be satisfied. All contract conditions need to be met before the contract is unconditional and then, ultimately, sold.
A property advertised online as under offer can serve as a final warning to interested parties that the property is about to be snapped up for good. But it doesn’t always mean that it’s definitely going to be sold.
Under offer, unconditional, and sold: What’s the deal?
There’s no shortage of real estate jargon that can easily confuse buyers that are new to the property market. From “under offer” to “conditional”, both of which mean the exact same thing, you might need some schooling on what it all means, so you don’t miss out on any upcoming real estate deals.
As already discussed, under offer, also known as “under contract” or “conditional”, means that there’s an offer on the property that has been accepted, the contract has been signed, but the deal is awaiting all the terms and conditions being satisfied. Whether that’s something simple, like finance approval, or something a little more complicated, like a subject to settlement clause, it’s basically time for the buyer and seller to do their due diligence. If any of the conditions on the contract aren’t met, it means that the contract “falls over”. Basically, the deal is off.
When a property is unconditional, it means all of the terms and conditions the contract was waiting for have been satisfied. Essentially, the contract can no longer fall over. When a contract is unconditional, it’s basically the limbo stage between a property being “under offer” and “sold”. For example, if you purchased a property and the contract is unconditional, the property is not quite yours yet, but it’s going to be. All you need to do is wait for the settlement date to roll around.
When a property is officially “sold”, it means that the property has settled and transferred into the buyers' name/s. Once settlement day has passed, the contract has officially been completed, the new owner can pick up their keys, and they’re set to move into their new home or do whatever they have planned.
Submitting an offer on a property that’s under contract: expert advice
You might be wondering if it’s even worth submitting an offer on a property that’s already under contract. While it could seem like a waste of time, in many cases, submitting a backup offer is what seals the deal for Aussies on their house-hunt.
For a more informed understanding of how to do this, Principal of Hugo Alexander Property Group, Adam Nobel, gave his skilled advice on submitting an offer on a property that’s already under contract.
According to Mr Nobel, making an offer on an under contract property is definitely worth doing, with these types of offers happening a lot due to the high volume of buyers attending inspections.
He said there are a few cases in which a backup offer comes in handy for real estate agents and keen buyers ready to get their hands on a property. One is when an existing contract on the property falls over.
“When this happens, the property goes back on the market, so to speak, and the agent has to wait for another offer to come through. But if someone had spoken to the agent beforehand and said that they wanted to make a backup offer, it would have taken the agent five minutes to reach out,” Mr Nobel told Savings.com.au.
“It does happen in some cases, and then the property will be under contract again, straight away.”
Another situation in which a backup offer is useful is when a seller becomes unhappy with the buyer.
“Let’s say that the buyer asked for one extension, which was granted, but then they asked for another. If there was a viable backup option there, and perhaps the backup was unconditional or a higher offer, the owners might decline the extension and go with the backup offer instead”, Mr Nobel said.
How to make the right offer on a property
Regardless of whether a property is under contract or not, knowing how to properly make an offer on a property can be tricky, especially if you’re a first-time buyer.
Particularly if the house is listed as “For Sale” or “Contact Agent”, you might not know what offer to go in with. It’s important not to ‘low-ball’ the agent too much, because they’ll likely discard the offer altogether, according to real estate experts. But if you offer too much over the asking price, you could end up paying more than what a property is actually worth.
To make the first time a little less scary, we’ve compiled some expert advice on how to make the right offer on a property.
1. Do your research
It never hurts to be extra prepared. It can help to do some research on houses in the area that have recently sold, how much they sold for, and how similarly these properties compare to the one you’re looking at.
“Just go on realestate.com.au and have a look in the sold section,” Mr Nobel told Savings.com.au.
This should give you a pretty accurate ballpark figure, and can give you an extra edge when you first approach the sales agent. Plus, this will indicate to you whether you can realistically afford the property.
2. Get in with the agent quickly
The property market is ‘hot’ right now, with a mass supply of buyers and a more limited number of sellers.
“It’s a seller's market right now”, according to Mr Nobel.
If you’re really keen on one property in particular, it’s wise to get in contact with the agent, as soon as possible. This way, you can get ahead of the crowd, and begin the process of buying the property before it’s inevitably gone.
It can also put you in a better position to offer a great deal for the owner to take, before someone else comes in and you fall into a bidding war. This can end up hiking up the purchase price, simultaneously decreasing your chances of actually securing the property if you can’t match up.
3. Figure out how much you’re going to offer
Here's where things can get a little complicated. Ultimately, the dollar amount that you're going to offer is what's really going to make or break your offer. If you offer too little, you're out of the game. If you offer too much, you're playing it wrong.
In most cases, the amount you offer should be based on the current demand for the property at that time. For example, if that particular property is popular or in high-demand, going in with a low offer likely isn’t going to cut it.
“If you’re at a property inspection with 40 to 50 other people, you’re better off just offering the asking price”, Mr Nobel told Savings.com.au.
Additionally, the market itself will dictate the value of the property, according to experts.
“If we’re in a rising market, going in with a lowball offer isn’t the right time or place to do so,” Mr Nobel said.
This isn’t to say that you should always offer the asking price and that you can never offer less than what’s being advertised - just that it's generally not the right market to, right now. Even still, there are ways to negotiate a lower house price.
“If you’re in a buyers market, and there’s little demand (for property), that’s when you can start lowballing”, he said.
4. Get it in writing
Verbal offers mean very little to agents. Until they have something in writing, they can’t take your offer to the sellers and begin the negotiation process. It’s important to put your offer to paper, ensuring that you detail all of the important information needed for the contract, including:
Your full legal name (middle names included)
Your official offer (even if it changes down the line)
Your deposit amount (and balance deposit, if applicable)
All required terms and conditions (finance, building and pest, and settlement dates)
Any other additional clauses (subject to sale, sunset clause, any other relevant clauses)
While there will be more details required for the contract, like any included chattels and solicitor details, having this information ready should at least get you started in submitting an official offer.
5. Figure out your finances
If you’ve got the house and the offer sorted, another thing you’ll need to consider is how you’re actually going to pay for it. In most cases, you’ll need to take out a mortgage to cover the cost of your new home, especially if it’s your first time purchasing.
To avoid your offer going to waste, it could be worth looking into home loan pre-approval. This minimises the chance of the contract falling over due to finance which, as we discussed earlier, does really happen.
Home loan pre-approval (also known as conditional approval or mortgage pre-approval) is, in essence, an agreement with a lender to borrow a set amount of money to purchase a property. While things can still change, and it’s not an absolute guarantee of finance approval, it can end up saving the stress of putting an offer on a property without knowing whether you’re actually borrowing within your means.
An additional factor you’ll need to consider for your mortgage is the type of home loan you’re after. There are thousands of home loan products available, for many different purposes, so you’ll need to figure out which one is your perfect match. From owner-occupier home loans, to investment home loans - you’ll need to know what you’re purchasing the house for to find the loan for you.
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