Whether buying or selling, you have the right to negotiate conditions that you may need in a Contract. Conditional Contracts are a form of protection that both Vendors and Purchasers need to be aware of. And this information is why it is important to discuss your situation with your Conveyancer before signing the Contract.
Conditional Contracts in favour of Purchasers
As the Purchaser, a Contract condition could include a pest inspection revealing issues. Or your finance approval not meeting the requirements. Another example could be if you are needing to sell your current property to finance the new property.
Conditional Contracts in favour of Vendors
As the Vendor, it could be you’re in the process of a land division or construction of new dwellings. Another condition could be that the owner of the property has passed away and you are applying for the Probate.
All conditions have a time frame that you must follow. If you need an extension, your Conveyancer will request it on your behalf.
For example, if your finance is due today but the bank’s not ready because of perhaps the valuation, as your Conveyancer we would contact the other Conveyancer with a formal request for extra time for them to discuss with their client. We’ll also let the Agent know what’s happening to keep them in the loop.
Once all conditions are met, then the Contract will become unconditional. Some Agents will consider this the date of sale, while others like to wait until settlement occurs.
During the conditional stage, the party who has the condition for their protection, may be able to terminate the Contract. For example, if one of the conditions is that the Purchaser needs a certain amount of finance but the bank won’t come to the party, the Purchaser may terminate the Contract. As long as the Contract conditions are included and the requirements are met, the Purchasers will receive a full refund of their deposit.
Likewise, if the pest report comes back with active termites and structural damage, then generally the Purchaser can terminate the Contract without penalty. Again, it all comes down to the fine print in the Contract.
There are no conditional contracts when buying at auction
Be cautious when purchasing at auction because the Contract does not allow any conditions. These Contracts are normally an unconditional Contract with no cooling off period. Read here for details on cooling off periods. You must therefore have all your inspections and approvals either completed, or at a stage where you feel comfortable that there won’t be any issues.
There’s a lot more to consider with conditional Contracts, so feel free to contact us anytime if you have any questions or would like further clarification.