So you’ve found your dream property and are ready to buy, but then you’re asked to sign an unconditional contract. Perhaps you’re the vendor and it’s been suggested to you to sell under an unconditional contract.
No matter whether you are the buyer or the seller, signing an unconditional contract represents a huge risk. Every contract of sale should be drafted to meet the unique needs of the vendor and should be reviewed by a solicitor or other appropriate legal representative before finalisation.
So what is an unconditional contract and what conditions should be included to protect your interests? Let’s take a look.
What is an unconditional Contract?
An unconditional contract, such as one used in the sale of a home under a private treaty, means that there are no terms or conditions applied to the sale. It gives no opportunities for the seller or buyer to exit the contract should complications arise.
When a home is bought through Auction, this generally utilises an unconditional contract. In the case of an unconditional contract, the sale must be fulfilled by the settlement date, with no exceptions.
Types of conditions that are often incorporated in a conditional sale include:
- A finance clause whereby the sale is subject to the purchaser securing finance
- An inspection clause that allows a buyer to purchase subject to the results of a building report
- A pest inspection clause, which works the same as a building inspection clause
- A review of the contract of sale clause in which the sale cannot proceed without the contract being reviewed by the buyer’s conveyancers or solicitors.
A vendor can also direct their home to be sold under any other special conditions they prefer, such as an extended settlement. This is why it is so important to read the contract carefully ahead of pursuing a purchase.
What Are The Risks Of An Unconditional Contract?
There are so many risks associated with signing an unconditional contract, whether as part of a private sale or auction these risks can include:
- Loss of your deposit with zero recourse to get it back
- Delays in settlement
- Potentially incurring additional costs from penalty interest rates or legal bills
How To Protect Yourself
In some cases, you may feel that the reward is worth the risk. If facing an unconditional contract you should take steps to mitigate any negative outcomes as much as you can.
Understand Your Obligations
Don’t plead ignorance if things don’t go as expected. Once you sign you are indicating you recognise the implications of going unconditional.
Do Your Due Diligence
Avoid buying sight unseen. Inspect the property in person and with great attention to detail so that there are no nasty surprises.
Have Pre-Approval
Wherever possible, have your finances pre-approved. Signing unconditionally and then being unable to follow through with a purchase can have significant financial consequences.
Be Organised
From pre-arranging a building and pest inspection in advance of signing the contract to having your legal representative review the contract for hidden issues, being organised is essential!
By taking the right steps to protect yourself and minimise risk, you stand to enjoy a much smoother and stress-free selling or buying experience.