What does under offer mean?

Imagine driving past a home that’s caught your eye, only to see a sticker advising it's ‘under offer’.

But what does under offer really mean? And does it mean that particular home or investment property is already beyond your reach?

Don’t lose hope. We’re here to help simplify key terms, which will help you navigate the real estate market with confidence. Let’s dive in.

Let’s talk terms

In the Australian real estate market, ‘under offer’ means the seller has accepted a bid, but the sale has yet to be finalised. This stage is conditional.

Let’s view this through a wedding analogy. A house under offer is like a couple getting engaged. You both agree to get married at some future date, but the deal isn’t sealed until you sign the required legal documents.

Essentially, ‘under offer’ represents a commitment, but not a final sale.

Under offer vs. under contract

The terms ‘under offer’ and ‘under contract’ are used interchangeably. However, they represent two different stages in a property sale.

Under offer

When a property is under offer, it means a seller has accepted a buyer’s offer, but the agreement is still conditional. The sale may be subject to conditions such as building and pest inspections, finance clauses, or the buyer selling their current home.

Under contract

Under contract marks a step closer to the final sale.

A property is officially under offer when a seller has accepted a bid. The status proceeds to under contract when identical contracts have been exchanged between parties.

The agreement is now a legally binding contract. It also usually requires the buyer to pay a deposit.

However, things can still change at this stage. For example, the buyer could still change their mind and back out of the deal.

Is ‘under offer’ legally binding in NSW?

No. A property being ‘under offer’ is not legally binding in NSW. All it means is that the seller has accepted a buyer’s offer.

At this stage, the sale hasn’t yet progressed to the exchange of contracts, which is the point when legal obligations need to be met. Until contracts are signed and exchanged, either party can walk away without incurring a penalty.

This means the seller can still consider other offers, and the buyer can change their mind during this period. In fact, it’s common for this stage to include conditions such as finance clauses, being subject to building and pest inspections, or the cooling-off period.

Once the contracts are exchanged and a deposit is paid, the property moves to being under contract. From that point on, the agreement becomes a legally binding contract with terms that must be fulfilled, unless both parties agree otherwise.

The timeline of an under offer property

So, how long does the under offer phase last? There’s no one-size-fits-all answer to this.

The time between offer acceptance and the official sale can be anything from a few days to weeks and even months. The time depends on how long inspections take, how easily the buyers can obtain financing, whether the buyer has to wait on their own home sale, and a number of other potential factors.

However, the goal at this stage is clear for all parties: move from under offer to under contract as smoothly as possible.

What conditions need to be met?

We’ve referred a couple of times to the conditional nature of the under offer stage. The property can only proceed to final sale once certain conditions are met. So, what are these conditions?

Subject to financing

A buyer usually makes an offer subject to their ability to secure financing. Buyers sometimes face obstacles even with home loan pre-approval. If financing falls through, the property goes back on the market for other interested buyers (like you!).

Subject to sale

This condition applies when a buyer must sell their existing home to finance a new purchase. This step can complicate the process. Delays in selling or receiving less than the expected house price can lead to the seller withdrawing or the offer collapsing.

Subject to building and pest inspections

The buyer hires experts to inspect the home for issues such as drainage, structural cracks, roofing defects, termites, and mould. Such problems could lead the buyer to withdraw their offer. Even if a seller complies with any maintenance request, the buyer has the right to conduct further inspections.

After these conditions are met, buyers and sellers can exchange legally binding, identical contracts. Once these contracts are exchanged, the property is officially under contract.

Exchange and settlement

Okay, so let’s recap these steps and spell out the path forward after conditions have been met.

1. A buyer makes a bid, which the seller tentatively accepts, meaning the house is under offer. At this stage, the offer is conditional.

2. Offer acceptance. Upon meeting all sale conditions (e.g., subject to finance, sale, and inspections), the offer transitions from conditional to accepted.

3. The buyer pays a small deposit and exchanges contracts with the seller. This means the property is under contract.

4. We enter the cooling-off period, which is effectively the buyer’s safety net. A buyer can back out at this stage, but they would need to pay a penalty fee to do so. This cooling-off period is the last opportunity for a buyer to reassess whether they want to proceed with the purchase.

The cooling-off period varies by state in Australia:

• Queensland - five business days.
• New South Wales - five business days.
• Northern Territory - four business days.
• Victoria - three business days.
• South Australia - two business days.
• Tasmania - no mandatory cooling-off period.
• Western Australia - no mandatory cooling-off period.

5. Settlement - the final stage. As long as the buyer is happy to proceed, they can officially transfer ownership at the settlement. The buyer settles the remaining balance, and the keys change hands.

The time between contract exchange and settlement can range from one to three months, marking the end of the buying journey.

6. The buyer is then free to organise their move-in or make the next moves in their investment planning.

Can sellers accept another offer while their property is under offer?

You might not be aware of it, but a seller can still accept another offer while a property is under offer. Until contracts are exchanged, the agreement isn’t legally binding in NSW. Therefore, if you see a property you like that is currently advertised as “under offer”, there is no harm in expressing interest or even placing a bid.

Your offer essentially becomes a backup offer.

As a backup, the seller can reach out to you if the original offer or contract falls through. This is actually quite common, as buyers can sometimes change their minds before the settlement date, or perhaps they can’t get the right financing. It might even be that some of the inspection conditions aren’t met, causing the buyer to pull out.

For buyers, this can be a stressful time, especially in a competitive market. That is why it is a good idea to have pre-approval for a mortgage to speed up the process.

DiJones: Real estate made easy

Understanding the under offer status is important for both buyers and sellers looking to make informed decisions in the Australian real estate market.

Knowing exactly where you stand is empowering in property management. It can mean you don’t feel lost as you search for properties or embark upon your selling journey. Demystifying all the jargon can help you tackle your property ambitions with greater confidence.

It’s also helpful to have an ally on your side.

The skilled agents and property managers at DiJones can help you with expert guidance. Reach out today to start a conversation or to book an appointment.

FAQs

Can I negotiate the price after a property is under offer?

Yes, you can still negotiate the price even after a property is listed as under offer. However, this depends on the seller's openness to further negotiation. It may also depend on the terms of their agreement with the initial buyer.

If the initial conditions aren't met, or if the seller is still considering backup offers, there could be room for negotiation.

What happens if a property fails the building and pest inspection?

The buyer has the option to withdraw from the contract or rescind their offer without penalty if a property fails its inspection. This assumes the offer was based on a conditional contract upon a satisfactory inspection.

Alternatively, sometimes, the buyer can use the inspection results to renegotiate the price or request that the seller address the issues before proceeding.

Is it possible to view a property that's under offer?

Yes, it’s often still possible to view a property that's under offer. Sellers can continue to show the property until they’ve finalised the sale. This makes sense for them, so they have interested parties ready to go in case the current offer falls through.

It's important to communicate with the selling agent; they can provide advice on the current status of the property and whether viewing is advisable.

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

Yes, you can still make an offer on a property that’s under offer. That is because while the seller has accepted another offer, the sale isn’t complete until the exchange of contracts has taken place. There’s still a possibility the initial deal may not go ahead.

It’s not uncommon for buyers to submit a backup offer in case the current agreement falls through. These offers may be considered by the agent or seller if the existing buyer can’t meet their conditions. For example, they may face challenges securing finance, finalising inspections, or selling their own property.

Submitting an offer doesn’t guarantee a second chance, but it can put you in a favourable position if the first contract does not proceed. Whether or not the offer is accepted is up to the seller. However, by putting one in, you’ve got nothing to lose.