Eight things every buyer and seller must know before making or accepting an offer.

One of the most important things to understand as a buyer or a seller of real estate is what goes in an offer. 

An offer is a buyers official proposal to a seller.  It includes all the buyers terms around how they wish to buy the property.  These terms must be met before the sale becomes official.  The seller can reject or negotiate alternative terms before accepting an offer.

Here are some of the most important things to understand before making or accepting an offer.

1)    Cash versus subject to finance

Subject to finance is one of the most common clauses (terms) in real estate contracts.  This means that a buyer would like to buy the property for a certain price, subject to a bank or other financial institution lending them the money.  There is always a set time frame, usually around fourteen days. 

Cash contracts mean that the buyer is committed to paying the agreed price for the property.  They have the funds readily available, either as a pre-approved loan or in their own accounts. 

Cash contracts are much more appealing to a seller because the finance cannot fall through, causing the contract to become void. 

A seller presented with two offers may select a cash offer even if it is for a lower price because they are motivated to sell within a certain timeframe. 

If you are looking to buy, get your finance pre-approved by your lending institution, you will be in a much stronger position when you make an offer.  

2)    Building inspections

Another common clause is the building inspection.  Subject to a building inspection means that the sale will only go through if the property is found to be structurally sound by a building inspector.   It is important to understand here that minor defects like a rotten window frame or leaky downpipe will not stop a contract going through as these are not ‘structural’ defects. 

Like the subject to finance clause, buyers can request to have a building inspection done prior to making an offer.  Again, this puts the buyer in a stronger position when making an offer by removing the need for this clause. 

3)    Subject to...

There is an infinite list of things that can be placed in an offer as part of the terms of sale.  Here are a couple of the common ones.

Subject to sale: Means the buyer wants to purchase a property subject to the sale of their property.   The funds will not be available until their contract officially settles. 

As a seller considering a subject to sale offer, it is a good idea to take a look at the other property first to see if it is likely to sell for the price they are asking. 

4)    Unconditional offers

This is what every seller wants to see in the hands of their agent.  An unconditional offer means that there are no terms around the sale/purchase.  The buyer has the finance and is satisfied with the property.  The contract proceeds to settlement on the agreed date. 

5)    The 48-hour clause

The 48-hour clause is often placed in a contract where a subject to finance clause is present. 

It means that if the seller has a contract on their property with buyer A, but receives another offer that they would like to accept, for example an unconditional offer from buyer B, buyer A has 48 hours to come up with the finance or buyer B gets the property. 

6)    Chattels

Chattels are the items within the property that are removable, for example, the stove, fridge, and window dressings.

Every contract should clearly identify what is included in the sale and what the seller will be taking with them.

7)    Put it or get it in writing

As a buyer, when you decide to make an official offer on a property, it must be made in writing.

No offer should ever be presented to a seller verbally.  A seller should never accept a verbal offer.

An offer is only official once it has been put in writing and it doesn’t become a contract until it has been signed by the person selling the property.

8)    Settlement

Settlement is when ownership of the property officially and legally changes hands.  At settlement, the funds are made available by the buyer and transferred to the sellers account.  Generally the buyers lawyer meets with the sellers lawyer to transfer the documents of ownership and keys.  Settlement takes only a few minutes, but the period of time between signing the contract and settlement taking place can vary greatly.

A standard settlement period is 6 weeks, but the buyer and seller can negotiate a longer or shorter settlement in the contract terms. 

About the Author
Alan Moane is the Director of Alan Moane Real Estate, a Tasmanian real estate agency.  Alan has more than 20 years experience and has sold over 1000 properties.  Alan has extensive experience in residential and commercial sales, property management and property development.