Are Unconditional Offers A Big Red Flag?
Originally published on Linkedin.
There are two ways to buy property – conditional, where there are minimal (if any) costs involved in backing out if you lose confidence in a deal, and that you’ll have anything from three to 30 days to change your mind during the “cool off” period, and unconditional, which means that you’re buying under auction conditions and there’s no cool off.
When it comes to the hundreds of thousands of dollars of investment that is involved in property purchase, it makes sense that you’d want to buy through a conditional offer. However, Australia’s property market is moving so quickly, and competition is so stiff, that the power very much sits with the seller. As sellers want certainty and agents want to be paid, the push is towards selling on an unconditional basis.
Indeed, many buyers are finding that if they make offers that include a conditional aspect, they are scuppering their chances there and then.
The good news, however, is that unconditional offers don’t need to be the massive risk that many assume them to be. It just means that you’ve got to work fast and be organised to make sure you’re not making the wrong purchase with no way back out of it.
The three steps to buying via unconditional offers with better surety
Remember: Sellers that are presented offers from multiple parties will very often take the unconditional contract at less money for the surety it brings.
There’s every chance that you’re likely to wind up in a position where an unconditional offer is the only strategic option. In such an event, there are three things that you should keep in mind:
1) Know the buying process and what’s required (in what order):
· Contract Review
· Building and Pest
· Offer Made
The only time that an unconditional offer becomes truly risk is if it’s accompanied by a lack of understanding about the property. In other words, when buyers jump to bullet point three, without doing due diligence at points 1) and 2). This happens more often than you think, and it’s because a buyer is working at a rush and ends up making a hasty decision out of concern for losing the property to another person.
2) Move with speed through the steps required
Having your ducks in a row from the outset of a property being available is an advantage and being able to call on the building inspection ahead of your competitors means that you’ll be able to get the offer in first. The secret to being able to do this is to become focused. When you’ve decided that you want a property, select one or two suburbs, do your research, and make sure you engage with the local agents frequently. That way, as soon as a property is available, you can get ahead of the curve, and be able to make the inspections before making the offer, while still moving more quickly than your rivals.
3) Knowledge is power
The other advantage to getting the inspections done quickly is that with the research completed prior to making your offer you can use the inspection reports to reflect your price and refer to it when negotiating.
You’ll be able to highlight the issues as costs that the seller needs to compromise towards in the contract. Buyers have significantly less negotiation power for any issues with the home that they detect after they have already agreed on the price and signed a conditional contract.
In short, you want to have all the answers known upfront, and then use that as leverage before committing unconditionally. There is no doubt that unconditional offers are the faster way to buy, and that sellers and agents prefer to do business this way. Don’t take this as a red card that they’re trying to hide something – they’re often not! – but with speed of the essence, buyers need to come to the table and find a way to make unconditional offers without exposing themselves to risk.