One of the major benefits of selling a property at auction is that the contract is unconditional. There is no cooling-off period, and once the hammer falls, the buyer is legally bound to complete settlement. This is a significant advantage for vendors – but what happens when a property buyer cannot settle or tries to exit the contract? And what do these situations mean for the vendor’s rights?
A successful sale – until the buyer couldn’t settle
We recently managed the sale of a client’s mother’s home to help fund her Aged Care Refundable Accommodation Deposit (RAD). The auction campaign was a clear success:
- The property was fully cleared and decluttered
- Minor repairs, cleaning, and gardening were completed
- Professional styling lifted presentation and buyer appeal
- The marketing campaign attracted 46 inspection groups
- Seven bidders actively competed on auction day
- The final bid exceeded reserve, the contract was signed, and a 10% deposit was paid
It looked like the perfect outcome, until the unexpected happened.
When a property buyer can’t complete the contract
Just days after the auction, the purchaser contacted the agent. The overseas funds they were relying on were no longer available, meaning the buyer could not settle.
In cases like this, the vendor’s rights are clear. Under an unconditional auction contract, the purchaser is legally responsible for completing settlement. Whether the issue is remorse, lack of funds, or changes in personal circumstances, the buyer risks:
- Forfeiting their deposit
- Being issued with a default notice
- The Property being re-sold
- Potential liability for any financial losses the vendor incurs
In our client’s situation, they relied on the sale proceeds to fund an Aged Care RAD by an agreed date. A collapsed settlement would have created major stress and financial uncertainty, even if they retained the deposit.
A positive outcome for both parties
Fortunately, this situation turned into a win for everyone. The original purchaser was introduced to the auction underbidders, who still wanted the property. They agreed to purchase at the same price and on the same terms. They were then nominated as the buyers under the existing contract.
Our client avoided the need for a new campaign, kept to their timeline and was very grateful to have the support, advice and experience of Tower Property Advisory to guide them through this extremely stressful situation.
Key takeaways for buyers and vendors
For buyers:
When purchasing at auction, make absolutely sure your finance and settlement arrangements are in place beforehand. An unconditional contract leaves no room for hesitation, and buyer’s remorse can become a very expensive mistake.
For vendors:
If a property buyer cannot settle, your vendor’s rights provide strong protection. While retaining the deposit may soften the blow, a failed settlement can still be frustrating, stressful, and time-consuming – especially when the sale proceeds are already committed.
Thinking about selling your property? contact us today for an obligation free consultation.
Phil Hoopmann 0402 890 830 or Robert Allanadale 0418 517 643