During the fast-moving consideration phase, buyers may feel pressured to sign an unconditional contract.
While it can seem like an effective strategy to make the most of a ‘good opportunity’, most buyers don’t realise the risks involved. Whether buying at auction or through a private sale, it’s important to understand what an unconditional contract is, and if it’s worth it. Here’s our 2026 guide.
What is an unconditional contract?
Every property transaction will involve a legal document that outlines the terms of the sale for both the seller and the buyer, known as the contract of sale.
The contract of sale will include certain conditions that safeguard the interests of the buying and selling parties, respectively.
An unconditional contract is one in which both parties are legally obligated to proceed with the settlement of the transaction and transfer of ownership.
This involves greater risk for buyers, as the contract will not have any conditions such as ‘subject to finance’ or ‘subject to building & pest inspections’, and therefore due diligence must be carried out before making an unconditional offer. For the seller, however, an unconditional contract is favourable in the sense that it provides certainty that the sale will be completed and the buyer cannot back out without significant legal and financial consequences.
When are unconditional contracts used?
Sellers often favour unconditional offers as it will speed up the finalisation of a property transaction. With no conditions, all the usual obligations that sellers have to deal with are taken out of the picture.
In cases where the property transaction will need to be completed urgently, an unconditional contract can accelerate the entire process. These include scenarios involving a property purchase at auction, a competitive private sale where buyers want a way to secure a sale, or a transaction with a very short settlement period.
Risks of signing an unconditional contract
Signing an unconditional contract comes with significant risks and thus it should be approached cautiously.
We’ve outlined some of the common risks that are posed by entering into an unconditional contract:
Overvaluation
Overestimating the property’s value can lead to spending significantly more money than intended. If the property’s value is decidedly lower than the purchase price, the lender can refuse finance or lower the loan amount due to the lack of sufficient equity in the property to secure the loan.
Lack of sufficient finances
By enter into an unconditional contract before securing finance, there’s a risk that the lender may end up not providing the approval for the requested loan. If this happens, the buyer may not be able to settle the property and lose their deposit. The seller can also pursue legal action to force the sale or sue for damages.
When deciding whether to proceed with an unconditional contract offer, buyers should ensure that they have the requisite funds needed to complete the settlement, whether through personal finance or loan approval. You should always speak to your banker or broker for financial advice and to obtain a pre-approval.
Issues with the property
As the unconditional contract will not be subject to conditions, you should do your due diligence before signing the contract. We recommend you ask the Agent for permission to arrange a Building & Pest Inspection before submitting an unconditional offer. This may help you identify major building defects or pest infestation before you are locked into the unconditional contract.
If you do not thoroughly inspect the property and obtain a building & pest inspection, you will have to go through with the settlement regardless of the state of the property.
Can a buyer pull out of an unconditional contract?
In Australia, each state has their own requirements for whether a cooling-off period will apply to the unconditional contract. In NSW and QLD, for example, buyers have a cooling period of 5 business days to retract their decision to purchase the property. However, they will still be liable to pay 0.25% of the sale price.
Other states have stricter requirements, such as VIC, where there is a cooling-off period of only 3 business days of the purchasers signing with a 0.2% purchase price forfeit, as well as TAS where there is no automatic cooling-off period for any sale.
However, no cooling-off periods will apply if you purchase at auction.
Can a seller get out of an unconditional contract?
No, sellers are not permitted to exit from an unconditional contract unless exceptional circumstances arises. Save for exceptional cases, sellers are not permitted to exit from an unconditional contract.
Get expert property purchase advice with Entry Conveyancing
Unconditional contracts are high-risk strategies for both buyers and sellers that should be carefully considered before proceeding. Seeking advice from an expert conveyancer is the best way to understand whether an unconditional contract is worth using for a property purchase.
At Entry Conveyancing, our team of conveyancers in Sydney, Brisbane, and Melbourne are perfectly qualified to offer tailored advice for both buyers and sellers to ensure a smooth settlement with minimal risks. Contact us today for a free quote!
