Should I go “Unconditional” before my finance is formally approved?


“Unconditional” is a word you’ll hear your solicitor or conveyancer and real estate agent use when you have no conditions left to fulfil before you confirm you’re going to purchase your property. 

Typical conditions include: 

  • Finance
  • Building inspection
  • Sale of another property
  • Due diligence

But there can be many others as well. 

Unconditional effectively means – you have no other conditions and you are confirming you are going to purchase the property. 

Our job as your brokers is to get you an unconditional finance approval and that process typically starts with a pre-approval (where time is pending) and then a submission for formal unconditional approval. 

It’s really important to note that a pre-approval does NOT mean you can go unconditional on a property without an element of risk. A pre-approval by the bank says that they are, in principal, happy to give you finance, but they still need to approve the property in question and sometimes that will mean a valuation. If the valuation is not to the bank’s liking there are risks with going unconditional even if you have a pre-approval. 

There are some cases where you may wish or need to make an unconditional offer and the first thing we’re going to recommend you do is speak to your solicitor or conveyancer about the risks such as loss of deposit and other factors you’ll need to consider. 

Typically when you purchase at auction for example you are purchasing without any conditions so you need to be aware of the potential consequences of the bank not approving the valuation to provide you with finance which is where you’ll want to talk to your conveyancer / solicitor. 

Things you can do to minimise the risk: 

  • Get pre-approved (again remember this only minimises your risk, it doesn’t eliminate it)
  • The lower the loan to value ratio you are borrowing at (80% or below is the sweet spot here usually), the more likely a bank is to accept the contract of sale you’ve signed as demonstrating the value of the property. 
  • The more deposit / equity you have to use the more likely you are to be able to combat a low valuation on a property by contributing more cash or equity if required by the bank if the valuation comes in below what you’ve paid
  • The more time you have to settle on the property means that your broker can find an alternative if for whatever reason the bank you are pre-approved at does not approve the deal unconditionally
  • If your broker has capacity to do so with the lender they may be able to give you an indication if the contract of sale is able to be used instead of a valuation prior to auction date if you give them a figure to estimate with – again this is no guarantee and just an indication of what that lender would do if you signed a contract on the day the information is requested. 

Typically speaking an auction deposit is 10% of the purchase price. If you do not have access to this readily available in cash then your options are:

1. Finance it in advance (requires time and a lender who is prepared to do an equity release prior to you buying)..

2. Organise a gift / short term loan from friend / family member.

3. A deposit bond (bearing in mind that you need to flag this with the auction agent prior to bidding)

4. Negotiate a lower deposit that you can cover in cash prior to the auction with the real estate agent (do not attempt to do this on auction day – aim for much earlier!)

Remember the only way to go unconditional with no risk is to have the cash to purchase the property outright available.  

This blog doesn’t constitute any specific advice, and as your brokers we will never give you the advice to go unconditional until your finance and other clauses have been met. As mentioned above, please talk to your solicitor or conveyancer about your specific situation.