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Conditional vs unconditional: reading the contract carefully

In most Australian states, a residential sale contract can be signed either conditional (subject to finance, subject to building inspection, subject to sale of existing property) or unconditional (no conditions, binding on signature). The choice changes your risk profile materially.

What each condition does

Subject to finance: if your lender declines formal approval within the agreed period (typically 14-21 days), you can rescind the contract and recover your deposit. This is the most commonly requested condition.

Subject to satisfactory building and pest inspection: if the reports reveal defects you consider material, you may rescind. Contracts usually require the defects to be “material” and supported by the report, not subjective.

Subject to sale: rare in heated markets, common in slow markets. You have a defined period to sell your existing property. The vendor typically retains a “kickout” clause allowing them to give you 48 hours’ notice to go unconditional if another buyer emerges.

Cooling-off period: in NSW and VIC, standard 5 business days; QLD 5 business days; SA 2 clear business days; WA and TAS have no statutory cooling-off. Auction purchases bypass cooling-off in all states.

Why auction contracts are unconditional

At auction, the contract is signed on the fall of the hammer, deposit paid on the day, no cooling-off, no conditions. That is why pre-auction diligence (finance pre-approval, building and pest, strata report, solicitor contract review) must all happen before auction day.

The risk of unconditional outside of auction

Vendors in hot markets often require an unconditional contract to accept your offer. This transfers inspection and finance risk entirely to you. If you agree, you should:

  1. Have formal (not just pre-approval) unconditional finance approval in writing from your lender
  2. Have a building and pest report already in hand
  3. Have reviewed the strata report or Section 32 / 10.7
  4. Have a solicitor’s sign-off on the contract
  5. Have your deposit funds cleared and accessible

Anything less and you are exposed to losing a 10% deposit if any of these fail to land.

What to push back on as a buyer

Vendor requests for unconditional contracts should be reciprocated with a lower price. You are taking on the risk the vendor usually carries (settlement certainty); the price should reflect that.