What does “Under Offer” mean?

We field this question a lot. I even searched back through nine years’ of writing to make sure we weren’t doubling up a new blog.

After our newest clients of 2019 spotted an online listing with this notification, it prompted this blog to explain what “Under Offer” can mean, (it varies) and what buyers can do if they find these dreaded two words on a listing they love.

When a property is officially under offer, a Contract of Sale has been signed, accepted and executed.

The contract is not yet unconditional though.

It may still be facing the three day cooling off period (which is available to most buyers who make an offer on a residential property.)

In many cases (particularly in today’s tough-credit climate), offers are subject to finance clauses. Such clauses typically span 14-21 days and often during the condition period, buyers are applying for extensions when they are advised that more time is required in the lenders’ assessment queues.

Many private sale negotiations are also accompanied by a building and pest inspection clause, and while we can arrange a builder to inspect within a day or two, some buyers struggle to keep to this pace. Seven days is a common default period for a building and pest clause.

Some sales are subject to the sale of the buyer’s property, and while agents really don’t favour this condition it is interesting to note that such conditions become more prevalent during tough Buyer’s Market conditions such as those we are currently experiencing in Melbourne for some segments of the market.

An upgrading Buyer will be reluctant to face a settlement without the comfort of an unconditional contract on their own home. This clause enables them to confidently trade up, obtain their deposit funds via a Section 27 (if eligible), and merge their settlement dates by negotiation. 

Agents don’t love the uncertainty of this clause though.

It means that a sale may remain conditional (or “subject to…”) for a lengthy period, and in the absence of a suitable offer the likelihood of the sale toppling over will be high. If a vendor has unrealistic expectations on their sale price, or if they require an optimal figure that is unlikely to be met in order to make the sale, or worse still, if their property is a tough property to sell and is likely to exhibit long days on market, the sale could be ended and the agent will be back to square one. The vendor will likely be frustrated by the exercise and the agent’s risk of losing the listing upon expiration of the authority date could be high.

The call I made to the agent a few days ago in relation to a listing my new clients had spotted explained the “Under Offer” status that applied to this particular property. It effectively had a two-part chain of conditions affecting the sale. The property had been sold to a buyer who applied a “subject to the sale of their own home” clause, and the buyer who had signed the contract on the purchaser’s home had a finance clause applying that had been further extended.

Based on the uncertainty of a third party’s finance I made the request to the agent to notify me before any further extensions are granted to the current buyer. 

Knowing that my clients are in a position to make a stronger offer, it is likely that the agent will contact me if the current conditions are not met within the nominated period. 

It is important to note that the agent can’t execute other offers unless the vendor has resisted the current purchaser’s application for extension, and the current purchaser has declined to move forward on an unconditional basis.

If condition-extension requests are declined, Purchaser has the right to proceed unconditionally or end the contract.

Upon ending the contract, the agent may sign up another offer and execute the contract.

The agent may, however continue to market the property during the conditional period and they may also invite other buyers to inspect the property. Many continue to host open for inspections and this is to protect the vendor from lost opportunity should the contract not proceed with the current buyer.

Many alarmed buyers call us to ask why their property is still advertised with scheduled opens. We explain that the reason for this is to safeguard the vendor should they not proceed to an unconditional contract.

The agent cannot sell the property to any other buyer during a conditional period.

They can only continue marketing it.

The official “Under Offer” process is clear. It is the unofficial process that can be murky.

Some agents will advise buyers that a property is under offer without having a signed and executed contract. it is a very difficult process for buyers to tackle and many aren’t equipped with the right questions to ask or the knowledge to press ahead and have an opportunity to make a stronger offer.

These types of situations are uncommon, but the likely possible reasons for agents doing this include:

• Regional/country agents who are accustomed to preparing a sale contract after an acceptable verbal offer has been presented.
• Older-school agents who prefer to sign up the buyer’s offer in person in the office. If a commitment is given verbally that the offer has been accepted, many agents of this style will be reluctant to overturn the commitment and take other offers. 
• Agents who have favoured a particular buyer’s offer and have made the decision to close out the opportunity for other buyers. Their reasons can be rational, selfish or based on favouring a personality or a buyer who has a listing for them as a result of the purchase.

When this does happen, hell breaks loose and the bitter-buyer stories come out.

If a buyer is told that a property they favour is Under Offer, they should ask the agent whether a Contract of Sale has been signed and executed. If one hasn’t, a window of opportunity may exist for them. In the case of the loyal agent or the country-style contract preparation process, it could be hard to overturn an agent’s decision to honour the initial buyer. And in many cases like this, vendors will keep their word too. I recall a couple of years ago when I offered an unconditional offer with a $5,000 increase and despite the agent’s reluctance to take it, they did present it to the vendor. The vendor still declined and chalked it up to being “a person of their word.” 

I had to respect that.

Every now and then though we challenge a verbal “under offer” and secure a property for a client. Sometimes the agent is relieved to have a signed offer, particularly if a former party had verbally offered and were delaying the contract-signing part of the process. An agent will only have faith in a verbal offer for a limited time. If a buyer doesn’t keep to their word (particularly in this day and age where emails, electronic signing and scanning are easily accessible), the agents won’t hold out for long and will consider signing up a subsequent offer.

It’s never a deal until it’s signed.