The short version
- Under contract: contracts are signed, often with conditions still to be met.
- Under offer: an offer has been accepted, but nothing is signed.
- A conditional contract can still fall through.
Buying property can be a complex and uncertain business. It's an arena in which things can change very quickly, and what you thought may have been a missed opportunity is still, in fact, a live option.
This is the situation when properties still for sale are listed as 'under contract'. You may think the door has shut on your chance of buying that dream home, but is not necessarily the case.
This guide will tell you all about what 'under contract' means in real estate, and how you can still have a chance of buying a property that has been listed as under contract.
What does 'under contract' actually mean?
A property is under contract when a buyer makes an offer on a house and that offer is accepted by the seller, following which both buyer and seller have signed and exchanged legally binding contracts.
But it doesn't mean that the sale has been finalised, as you will see below.
Under contract vs under offer
When a property is 'under offer', it means an offer on the property has been accepted but the sale has not yet gone through. It usually means there are conditions that need to be met before contracts are exchanged and signed, at which stage the property is placed under contract.
What happens when a property is under contract
Cooling-off period
Once contracts have been exchanged, there is still a cooling-off period during which buyers can change their mind and withdraw from the sale. However if they do pull out of the sale, they will have to pay a penalty fee.
The rules around cooling-off periods and penalty fees vary from state to state:
- NSW - five business days, 0.25 per cent of the price
- ACT - five business days, 0.25 per cent of the price
- Queensland - five business days, 0.25 per cent of the price
- Northern Territory - four business days, no penalty
- Victoria - three clear business days, $100 or 0.2 per cent of the price (whichever is more)
- South Australia - two clear business days, a small prescribed amount (up to $100)
- Tasmania - no mandatory cooling-off period
- Western Australia - no mandatory cooling-off period
During the cooling-off period, you can conduct further inspections or may just change your mind and pull out of the contract. If you pull out, you will have to pay a penalty fee. In NSW, the ACT and Queensland it's 0.25 per cent of the sale price, in Victoria it's $100 or 0.2 per cent (whichever is more) and in South Australia it's up to $100.
Cooling-off periods can usually be extended or removed from the contract by negotiation.
Keep in mind that the cooling-off period does not apply to properties sold at auction, unless the property is passed in and the seller and a bidder negotiate a sale after the auction has concluded.
What is a conditional contract?
A conditional contract arises when a buyer in a private sale attaches conditions to the contract. Basically, if the conditions aren't met, the sale won't go through.
Conditions may include things such as making sure the buyer's existing property is sold before the new property purchase is finalised, ensuring finance to buy the property is able to be secured, or obtaining satisfactory building and pest inspections.
Note, however, that a disappointing building or pest inspection will not usually permit a buyer to withdraw from the contract entirely, unless the defects revealed are extremely serious.