Subject to Finance: What Sellers Need to Know in Queensland
Most private treaty offers include a finance condition. This means a conditional period where the sale is agreed in principle but not yet confirmed. Here is how the condition works, what happens if finance fails, and how to protect yourself while you wait.
In Brisbane's inner east, the majority of private treaty property sales involve a buyer who is purchasing with a mortgage. Most of these buyers include a finance condition in their offer, making the contract conditional on formal finance approval from their lender. For sellers, understanding how this condition works, what it means for your timeline, and what happens if the condition is not satisfied is essential knowledge for navigating the post-contract period without making avoidable mistakes.
The finance condition period is often the most anxious part of the selling process. The vendor has agreed to sell, the price is set, the property is effectively off the market, but the transaction is not yet confirmed. Understanding the mechanics of this period helps sellers manage it rationally rather than on anxiety.
What the condition actually says
A standard Queensland residential contract includes a finance condition clause that states something to the effect of: the buyer's obligation to complete this contract is conditional on the buyer obtaining unconditional approval for finance in the amount specified, from a financier of the buyer's choosing, by the finance date. If the buyer does not obtain finance approval and notifies the seller in writing before the finance date, the contract is terminated and the deposit is refunded.
The key elements are the finance amount (the loan the buyer needs to proceed), the lender (typically described as a financier of the buyer's choosing, giving the buyer flexibility to change lenders without losing the protection of the condition), and the finance date (the deadline by which the condition must be satisfied or the notification of non-satisfaction must be given).
The finance condition is a specific contractual right for the buyer. If the condition is properly drafted and the buyer provides timely written notification of non-satisfaction, they can terminate the contract and their deposit must be returned. The seller has no recourse to keep the deposit if the finance condition is properly exercised.
How long does the finance period last?
Finance periods in Queensland residential contracts are typically 14 to 21 days from the contract date. This period is negotiated between buyer and seller at the time of offer. A buyer with straightforward employment and income, an existing pre-approval, and a standard loan application may be comfortable with 14 days. A buyer with a more complex financial position, a self-employed income structure, or a less straightforward loan application may need longer.
As a seller, you have the ability to push back on an extended finance period if you have other interested buyers and want to move to certainty sooner. Accepting a 14-day finance period from a strong buyer profile is generally preferable to a 21-day period from the same buyer if you have alternatives. If you have no competing interest, negotiating a shorter finance period adds risk for the buyer without material benefit for you if the buyer's finance is genuinely solid.
The finance period runs from the contract date, not from when the buyer formally lodges their application with their bank. A buyer who is already at the formal approval stage when they make an offer may be able to obtain approval well inside the finance period. A buyer who is still waiting on a valuation or a document request from their lender may find the period tighter than expected.
What sellers can and cannot do during the finance period
Once a contract is signed, the property is under contract. The seller cannot sign another contract for the same property while the existing contract is on foot, unless the existing contract is first terminated. This is the fundamental limitation of the conditional period: the seller has committed to selling to the buyer at the agreed price and terms, subject only to the finance condition being satisfied.
What sellers can do during the finance period is maintain contact with other interested buyers who did not submit offers. The seller's agent can communicate to other parties that the property is under a conditional contract, that the seller will notify them if the condition is not satisfied, and that they should remain in contact. This keeps the alternative buyer pool warm without creating any contractual obligation to those buyers. It also means that if the finance condition fails, the seller can move quickly to re-engage with parties who have expressed interest rather than having to restart the marketing campaign from scratch.
Some sellers make commitments for their next purchase during the finance period based on the assumption that the conditional sale will proceed. This is a real risk. Until the finance condition is satisfied, the sale is not confirmed, and making significant financial commitments based on a conditional sale can create serious problems if the condition fails. The prudent approach is to treat the conditional period as genuinely conditional, and to wait for formal confirmation that finance is approved before making irreversible commitments on the purchase side.
What happens when the finance condition is satisfied
When the buyer's finance is approved, the buyer (through their conveyancer or directly) notifies the seller or the seller's agent that the finance condition has been satisfied. At this point, the contract becomes unconditional, meaning both parties are fully committed to completing the transaction. The buyer can no longer terminate under the finance condition. The sale proceeds to settlement on the agreed settlement date.
In practice, the buyer's formal notification may come as a written communication from the buyer's conveyancer confirming unconditional finance approval. Some buyers and agents communicate informally before the formal notification: "finance approved, formal notification coming." Your agent should confirm that the formal written notification has been received before you treat the sale as confirmed, because informal communication has no contractual standing.
What happens if the finance condition fails
If the buyer cannot obtain finance approval, they must provide written notification to the seller before the finance date, stating that the condition has not been satisfied. The contract then terminates. The deposit held in trust is refunded to the buyer in full. The seller's property returns to market.
The notification must be in writing and must be given before the finance date, not on or after it. If the buyer fails to give notice by the finance date, the outcome depends on how the finance condition is drafted. Under the standard REIQ residential contract, failure to notify by the finance date means the finance condition is no longer available as a basis for termination. The buyer may have waived the condition or allowed it to lapse. What happens at this point depends on the specific contract wording and the circumstances, and is a question for your conveyancer.
A late notification of finance failure, or a failure to notify at all, is sometimes the result of a buyer who is in a difficult position: they do not have finance approval but they also do not want to terminate the contract. They may be hoping that approval comes through in the next few days. This creates a problematic situation where the seller is holding on a contract that the buyer cannot complete. Your conveyancer and agent should guide you on the appropriate response if you receive a late notification or hear nothing by the finance date.
Conditional versus unconditional: the trade-off
Some sellers, particularly at auction, specifically want unconditional offers to avoid the conditional period entirely. An unconditional offer means the buyer is committed from the moment the contract is signed, with no right to terminate based on finance failure. Unconditional offers typically come from cash buyers or buyers who have arranged finance to a level of certainty that they are prepared to commit without the protection of a finance condition.
The trade-off is real but often misunderstood. A conditional offer at the right price from a pre-approved buyer with a solid financial profile carries a low risk of finance failure. An unconditional offer at a lower price from a buyer who has pre-approved finance is not clearly better simply because it is unconditional. The relevant question is which offer is more likely to result in a settlement at a good price, not which offer carries fewer conditions.
In the inner east market, most offers received through private treaty campaigns include a finance condition. Insisting on unconditional offers through a private treaty campaign significantly reduces your buyer pool, because buyers who are prepared to commit unconditionally are a minority of purchasers. It can make more sense to select the strongest conditional offer and manage the finance period carefully than to hold out for an unconditional offer that may never materialise at the price you need.
The building and pest condition
Finance conditions are often accompanied by a building and pest inspection condition, which gives the buyer a period (typically the same timeframe or slightly shorter) to conduct a building and pest inspection and, if significant issues are identified, to terminate or renegotiate. The finance and building and pest conditions can run concurrently, which means the conditional period covers both simultaneously in most standard contracts. Your agent should clarify which conditions are included in any offer and what the respective deadlines are.
Received an offer and need to understand your position? Daniel works through the terms of any offer with sellers before they sign, including the finance period, conditions, and what to do if a condition fails. Understanding what you are agreeing to before signing is the most important step. Get in touch.
Contract terms, conditions, and the rules around their operation are governed by the Queensland standard REIQ residential contract and the Property Law Act 2023 (Qld). The specifics of any finance condition depend on the drafting in the actual contract. This article is general information only and does not constitute legal advice. Seek advice from your conveyancer before signing any contract.