What does under offer mean?

What does under offer mean?

May 14, 2024 | by DiJones

What does under offer mean?

Have you ever stumbled across your dream home online, only to find it marked under offer? This can really knock the wind out of your sails. As a property investor looking to build a portfolio, the number of under offer labels you see in a hot Australian property market can be frustrating.

But what does under offer mean? And does it mean your hopes are forever dashed for that particular home or investment property?

The world of real estate listings can feel like wading through a swamp of mystifying jargon. We’re here to help simplify these key terms to help you navigate the real estate market with confidence.

Let’s dive in and unpack these terms.

What does under offer actually mean in real estate?

Under offer means the seller has accepted a bid but that the sale has not yet been finalised. This stage is conditional.

Let’s view this through a wedding analogy. Under offer is like getting engaged - you both agree to get married at some future date, but the deal isn’t sealed until you exchange those rings and sign the necessary documents before the law.

Under offer represents a commitment, but the house hasn’t been officially sold yet.

In this sense, being under offer marks a critical phase in the home-buying process. It's when the potential buyer and seller negotiate terms, conduct building and pest inspections, and secure financing before locking everything down with a legally binding contract.

The timeline of an under offer property

So, how long does this engagement 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.

In the Australian market, estate agents are moving quickly these days, with homes only taking 44 days on average to sell in 2023. In certain popular areas like Brisbane, homes spend little time on the market before being snapped up.

You can actually find out how fast homes are selling in your area with this interactive tool. Check it out!

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!) You can use our repayment calculator to quickly work out how much you could borrow based on current home loan rates.
  • 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.”

Under offer vs. under contract

These terms are often used interchangeably, but “under contract” actually marks a step closer to the final sale than under offer.

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. All the initial conditions must have been met for contracts to be exchanged. At this stage, all that’s left is for everybody to sign the contracts to make things official. Yet, things can still change at this stage. For example, the buyer could change their mind and back out of the deal.

Can I still make an offer?

So, what if you fall in love with a house but see that it’s under offer - do you need to acknowledge defeat and move on with your property search? Well, it’s complicated. The listing is technically still open. While a property is under offer, the seller may still consider other proposals, especially if the initial deal hasn't reached the "under contract" stage. Your offer 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 the house fails an inspection, causing the buyers to pull out. In addition, a seller might become impatient with a buyer, say, if prospective buyers repeatedly request deadline extensions. In short, the answer is yes; you can still make an offer on an under offer property. However, you should respect the process and avoid being too pushy with your proposals. Just don’t be too dismayed to see an under offer label. This shouldn’t dissuade you from reaching out to the vendor with your offer. Our skilled agents can help advise you on the best course of action if you’ve got your heart set on a house that’s already under offer.

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.

  • NSW - 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.

DiJones: Real estate made easy

Understanding the under offer status is crucial 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 step in with expert guidance. We’ll provide professional support that goes beyond decoding those terms. Here’s just a flavour of what we can help with:

  • Specialised suburb profiles across NSW.

  • Setting up property alerts.

  • Tailored financial advice, including guidance on finance clauses, types of home loan options, managing monthly repayments, etc.

We’ll help you through the entire process of selling your home or buying a property, with expert professionals available to share their selling and buying tips.

Reach out today to start a conversation and book an appointment.

Frequently asked questions

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. Yet, this largely 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.

DiJones Real Estate, together with their directors, officers, employees and agents have used their best endeavours to ensure the information passed on in this document is accurate. However, you must make your own enquiries in relation to the information contained in this document and seek advice from your financial advisor, broker or accountant to ascertain its application to your circumstances.
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