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  • Writer's pictureRosh Daji

How often do conditional offers fall through

How likely it is for a conditional agreement on properties to come back on the market.

The chances for a conditional agreement falling through, meaning the property did not sell as the buyers/vendors conditions have not been met.

In the past 2 years the opportunity to purchase properties have not been easy, the reason being competition amongst buyers have been extreme and low interest rates did no help.

Many buyers have invested a huge sum of money to reduce the common conditions such as finance, LIM reports and building inspections for a number of properties and still were not able to secure an offer on a home/property they liked.

With this changing market, the bank or lending agent would have required conditions to lend towards a property, some of the conditions may be the type of property they would prefer you to purchase, a LIM report and or building inspection. These conditions are often the reasons for home/property sale falling through and the property is put back on the market.

It leads to the question of how often do these agreements do not convert to an unconditional sale. It is important for the buyer to understand that a conditional agreement does not mean they have purchased the property and the buyer is not able to make move in plans before these conditions are satisfied. For the vendors it means that their home/property is not sold until buyers are satisfied with the conditions.

In this market where interest rate is on the rise and the banks are still working towards putting new rules into place, it is getting more and more likely that the homes would come back on the market more frequently.

Conditional agreements could be subject to all sorts of issues the buyer wishes to check/satisfy before committing fully to the purchase; Let's discuss some of the common conditions:

Home Inspections - one of the most common reasons the home is back on the market

If you have ever bought a home before, you know how easy it is for a house inspector to spot issues to be fixed or issues that cannot be easily fixed. All these issues highlighted by the inspector has a dollar value attached to it. Sometimes the parties work them out via their respective solicitors and sometimes the transaction will fall through as an agreement between both parties cannot be reached.

If you have a knowledgeable real estate salesperson, they can mitigate or renegotiate the sale all over again for the transaction to go through.

If a first time home buyer has conditionally offered on an existing home and are financially over stretched, it would be difficult for them to go through with a purchase where for example, the roof needs replacing immediately or in the near future.

In many cases, if the vendor or the buyer are to share the cost of repairs from the buyers investigations or an agreement is not reached, the property gets put back on the market for the search of a new buyer.

Conditional on Finance

As the bank rules are still remain unchanged until sometimes after June 2022, we find many buyers can only afford far less than than they could a year ago. Not excluding the fact that the buyer may have job insecurity in this economic climate. The buyer would have little or no control to salvage an offer when these happen. Our recommendation would be for the buyer to find a good mortgage broker, particularly one who has a good reputation with the banks, this can make a huge difference to the financing outcome.

A lower registered valuation

Registered valuation could be a pre-approved condition for the purchasers finance and if the purchase is on-plans purchase, most banks have a registered valuation at settlement as a condition. If the registered valuation does not come at the purchase price or higher, the banks would not have the the required equity to grant the loan to the purchaser. Since the purchaser, in this instance could not meet the LVR (Loan to Value Ratio) they have the option to increase their deposit by seeking additional funds elsewhere, whether family or friends.

Or they ask the salesperson if the the vendor is willing to drop the purchase price to the amount of the registered valuation. It rarely happens that the seller agrees to this term unless there is minimal difference between the purchase price and the valuation. Again if the parties do not reach a compromise then the property is back on the market.

Conditional upon purchaser's current home selling.

There is a saying in real estate, an offer conditional upon the purchaser's home selling is a "no offer" for the obvious reason the purchaser can change their mind about selling or buying the said property. If the buyer's home does not sell, they will not satisfy this clause and the property will be back on the market. Normally the vendor via the salesperson would have inserted an escape clause where the vendor can accept another more favourable offer by giving the current buyer notice. However, if there is no other offer and the first buyer's house does not sell, the property is back on the market.

Most real estate agents would recommend their purchasers to avoid conditional upon selling their home and rather to have a long settlement period during which they would sell their property and could bring the settlement date forward or later. In this way they will not lose the opportunity to settle into their dream home.

Final Thoughts

If you are looking to purchase a dream home and it already has an offer on it, ask the salesperson if a Back Up offer could be of strong consideration. Putting a back up offer is always recommended if the salesperson can weigh up the current offer situation's and giving you the chance to buy the property you desire.

If leave you with this, if there a home you wish to purchase which has a conditional offer, keep talking to the listing agent to see if will be back on the market or your back up offer could be considered.

1 comment

1 Comment

Feb 06, 2023

Hi, interesting read. Are there any stats about what percentage of contracts fall through?

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