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How does an unconditional offer work ?

Discussion in 'The Buying & Selling Process' started by PJ1, 8th Oct, 2015.

  1. PJ1

    PJ1 Well-Known Member

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    I've been researching the buying process and found as you'd expect an unconditional offer usually trumps the same $ offer , less strings attached faster less fuss for the vendor.
    Maybe I just have the definition of un conditional incorrect . My understanding is an offer is made with finance pre approved no building and pest required. Usually a short settlement .
    I'm having trouble understanding how anyone would be able to offer unconditionally wouldn't most lenders require a p&b , then there's contract to review, legal checks etc. Does the buyer simply have cash ?

    Firstly can someone clearly define an unconditional offer ?

    How does a buyer get the position of being able to offer unconditionally ?

    Sorry for the silly question but I'm a newbie at a loss to find an answer and I'm dealing with a RE that is pushing for a quick turn around on a house with a lot of issues .
     
  2. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    It's like an auction. You pay your 10% deposit and exchange contracts straight away. You then seek formal finance approval with the bank.

    Cheers

    Jamie
     
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  3. Fargo

    Fargo Well-Known Member

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    That sounds like a purchase to me Jamie, Its not like an auction at all where if your offer is accepted, you have to sign and pay a deposit immediately, and you cant negotiate conditions and terms, you are bound to those even before you bid The reason you make an unconditional offer is to get the terms and condition you want. If the offer is accepted have the contract sent to your conveyancer. PJ1 Rule No 1, is don't sign anything until your solicitor or conveyancer has read the contract, after which you can sign and forward the deposit. This will also allow a day or two to do some due diligence. If you make an unconditional offer you should already have finance, you cant rely on banks to come up with finance they will promise one thing put do another. It would usually be done from an existing LOC or sometimes liquidating other assets.
     
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  4. wylie

    wylie Moderator Staff Member

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    We've always gone in cash unconditional. We were able to do that because if something bad happened and we couldn't get a loan we would use LOC that is sitting there. Last house we bought, I walked down the hill to our friend (loan broker), said I could probably get this house for $460K and can we get a loan. He knew our financial position well, and said "no trouble at all - go for it".

    We have always bought houses that are like open books, queenslanders that you can see under, look for termites, leaks etc. I would be less confident with brick on slab houses and probably would want a building and pest on them. But with a queenslander it is easy to see problems. The only hidden part is in the roof, and we look there too. We have at times asked our pest man to come to the open house and look in the roof (last time, just after the people left - we didn't want to spook anyone into offering early if they saw how serious we were).

    We've never had a solicitor look over a contract. Perhaps we were lucky, but it is just something we've never done. We've never put tricky clauses in either.

    I'm sure some will think us foolish, but I see it as taking a very calculated risk. When you are buying for not much more than land value, ie. old house that needs renovating, I always think "what have we got to lose". We don't buy expensive houses, but I guess we are buying expensive land.

    These days unconditional isn't quite as powerful because there is a cooling period. Waiving that means a trip to the solicitor but for the right deal I would do that to lock it in. As a vendor, the last sale involved the purchaser waiving their cooling off. Purchaser tried to back out next day, but too bad so sad, he was locked in.

    With son's recent purchase, we went in cash unconditional, knowing that if the bank dragged its feet on another matter to give me cash to buy, we could use undrawn funds in a LOC. If I didn't know we could settle if the bank stuffs up, I would not go in so hard.

    And, of course, we are continually being mucked about by banks, and last year had to use the LOC, and luckily my uncle lent us $30K to settle. We could have scratched that money elsewhere, but time was against us and he had it sitting in a bank.

    Forgot to add that no bank has ever asked for a building and pest inspection.
     
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  5. The Y-man

    The Y-man Moderator Staff Member

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    @PJ1

    Much to the horror of my brokers, we always try to make an unconditional offer.

    The process is basically as follows in Victoria:
    1. set your upper price limit based on what you have in offsets, draw downs, shares, cash, gold... whatever. Also talk to your broker to get an idea of what you can borrow with about about 90% certainty.
    2. Inspect property within budget
    3, Get section 32 and read it (you can get your lawyer to check at this stage if you want)
    4. OPTIONAL: Get property value report
    5. Do Building and Pest inspection (yes you have to pay)
    6. Decide on what you will offer based on findings of steps 1-4
    7. Go in and offer 10% below your figure in step 5 ;) and remind the agent "this is unconditional" and site all the things wrong in the B&P report
    8. Sign contract and this will be forwarded to vendor for countersigning OR further negotiations.

    The Y-man
     
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  6. The Y-man

    The Y-man Moderator Staff Member

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    I think after our first few, we never have either. Not that hard to read and understand - pretty much in plain english these days.

    The Y-man
     
  7. The Y-man

    The Y-man Moderator Staff Member

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    In Vic, the cooling off is only a few days, so still quite effective.

    The Y-man
     
  8. wylie

    wylie Moderator Staff Member

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    Agree Y-man but for the vendor, those five days mean it is not a done deal, so I still was doubtful we had a contract when we were vendors recently.

    But in the case of our son's recent purchase, we used those five days to get our pestman under the house to confirm our thought that there was nothing to worry about.
     
  9. Scott No Mates

    Scott No Mates Well-Known Member

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    @Fargo - what are you smoking bro (unless you are talking from the vendor's point of view)?

    Unconditional is based on a s66w (waiver of the cooling off) & on the vendor's terms as per the contract drawn by their solicitor.

    Like @wylie I haven’t been asked for a p&b nor have I ever required one.

    As for reviewing the contract - we always flick it past our solicitor - the nasties stick out like dogs ¿@!! $

    S149 Cert/drainage plans/flood map/LEP are all easily understood (after years of experience)
     
  10. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    One party fully accepting the terms of the other party.
     
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  11. KateAshmor

    KateAshmor Victorian conveyancing lawyer Business Member

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    An offer with no strings attached. Those strings are 'subject to finance', 'subject to building and pest inspection', delaying payment of the deposit and any changes to the terms and conditions.

    In Victoria, the cooling off period is 3 days, but not within 3 business days of an auction. So if you make an offer within 3 business days before or after an auction, it's an unconditional offer - no cooling off.
     
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  12. PJ1

    PJ1 Well-Known Member

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    Thanks for the reply guys.
    I have submitted an offer as Yman suggested a little under what the RE stated the vendor would accept.
    This is the reply from RE to my first offer .... We have submitted another offer .

    "As we have explained to you the vendors are highly motivated and would be prepared to accept $xxx on an unconditional contract meaning once you have completed your searches and finance there would be no cooling off period in the contract. "

    This statement is why I was confused as it states unconditional - after searches, finance etc.
     
  13. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes, it is illogical!
     
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  14. Scott No Mates

    Scott No Mates Well-Known Member

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    Not illogical - perfectly normal. The vendor is prepared to wait for you to pull your finger out, have the solicitor go over the contract, do you p&b etc and then sign a S66w without amendment to the contract (or negotiate any change once the solicitor responds).

    That would indicate that the vendor is motivated and you are the only serious buyer.
     
  15. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    That makes sense - but the potential buy may lose the property without entering a contract.
     
  16. Scott No Mates

    Scott No Mates Well-Known Member

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    @Terry_w I have used that when the market was slow and moving a buyer to a commitment - give them a few days to get their ducks lined up, then close the deal.
     
  17. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    i did it recently in Sydney too, delayed them 2 weeks, had the finance fully approved and went without a cooling off.