Buying or selling a property is a multi-stage process that requires careful considerations. The terms ‘Under Contract’ and ‘Under Offer’ are often seen on real estate advertisements or online listings, and while they might appear to describe different things, in the industry they are commonly used interchangeably.
“Under contract” and “under offer” indicate the contractual status of a property transaction, and understanding what they actually indicate can help all parties involved navigate a transaction with confidence.
What do “under contract” and “under offer” mean?
In practice, “under contract” and “under offer” are generally used by agents to convey the same thing: a conditional contract has been signed, and the parties are waiting for the conditions to be satisfied before the contract becomes unconditional and the property is “sold.”
Often you will see a property listed as “under offer” on realestate.com.au, or a for-sale sign out the front saying “under contract.” Both are the agent’s way of saying that an offer has been accepted and contracts have been signed, but the sale is not yet finalised.
Because a conditional contract is in place rather than a completed sale, the property may still be marketed online, and the agent may still be willing to receive “back-up offers” in case the current contract falls through.
What happens once a property is under contract / under offer?
At this stage, the seller has accepted a buyer’s offer, and both parties have signed the contracts. Once the signed contracts are exchanged by both buyer and seller, the sale becomes legally binding.
A property that is under contract is usually taken off the market or shifted to backup-offer status. The contract may still be conditional upon finance approval, a building and pest inspection, or the buyer selling their own property first.
The cooling-off period
A cooling-off period applies once the buyer signs the contract, unless the property is sold via auction or if the contract explicitly waives the period. Cooling-off period varies by state and territory, and can range from 2 to 5 business days.
During the cooling-off period, buyers can withdraw from a signed contract without legal repercussions. Some states, like New South Wales and Victoria, require withdrawing buyers to pay a termination fee to compensate the seller. Others, like the Northern Territory, have no forfeit fee that applies.
Conditional vs unconditional
An important distinction is that a property under contract can still be either conditional or unconditional. Most contracts will include conditions that require buyers and sellers to fulfil, or risk delays or contract termination. From a competing buyer’s perspective, there is a chance (albeit a small one) that the contract will fall through, opening up an opportunity for purchase.
A note on offers before contracts are signed
It is worth understanding the stage before contracts are signed, because this is where buyers face the most risk.
There is no binding contract in place at this point, as nothing has been signed yet. The seller may be open to accepting offers from other interested buyers.
An offer can either be a verbal offer, or may be submitted via email outlining the terms of the offer being negotiated (price, settlement date, inclusions) and that it will be made subject to finance approval and a building and pest inspection.
There are also risks for buyers, known as gazumping. Gazumping is when a seller accepts a different, higher offer before the exchange of contracts, leaving the buyer of the previous offer without recourse. Once contracts are exchanged, this risk falls away.
An important thing buyers must be aware of is that some real estate agents will require their offer to be submitted via a signed contract of sale. If this is the case, a buyer’s cooling off period will begin, and potentially other contractual conditions will begin from the time they sign, even if the seller has not yet signed.
A buyer should discuss all the risks involved with their lawyer or conveyancer before signing a contract.
Does “under contract” mean the sale will go through?
Not necessarily. Many contracts remain conditional after the exchange – if either party does not satisfy the conditions, the transaction can be rendered null and void. The sale only becomes close to guaranteed once the contract is unconditional and any cooling-off period has expired.
For buyers looking at a property listed as under contract or under offer, it may be worth keeping an eye on whether the sale actually goes through. A cancelled or failed sale may be an opportunity to submit a backup offer.
Can a seller accept another offer while a property is “under offer”?
Once contracts are exchanged, the seller is legally bound to the buyer’s offer.
However, some agents may still be in contact with other potential buyers in case a conditional contract falls through, so the seller has a back-up buyer ready just in case.
Real estate terms like “under contract” and “under offer” can be interpreted differently by agents, buyers, and sellers, which is why working with a conveyancer early on during the buying or selling process is essential to obtain a clear understanding of the available options.
