Breaking down Common Real estate Contract Clauses
When buying or selling a home, you'll come across all sorts of legal-sounding contract terms that can be confusing — especially if it’s your first time. One of the most common (and most important) is the "subject to finance" clause. So, what does it actually mean, and how does it affect your sale or purchase?
Let’s break it down — in plain English.
What does ‘Subject to Finance’ mean?
Put simply, this clause protects the buyer. It means the contract to purchase a property will only go ahead if the buyer gets formal loan approval from their bank or lender by a certain date.
It gives the buyer time to:
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Apply for a home loan (if they haven’t already),
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Get the property valued by the lender,
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Receive unconditional approval before committing to the purchase.
If the buyer can’t get finance, they can legally withdraw from the contract without losing their deposit.
🕒 Typical timeframe: 14–28 days from the contract date, but this can vary depending on the situation or what’s agreed between the parties.
Why Buyers Use It
Even if you’ve already been pre-approved, pre-approval is not a guarantee. Banks still need to assess the property and run final checks before confirming a full (unconditional) loan.
A subject-to-finance clause gives you peace of mind — and ensures you’re not locked into buying something you can’t afford if things change at the last minute.
What It Means for Sellers
For sellers, a ‘subject to finance’ clause means:
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The sale is not unconditional until the finance date passes.
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There’s a risk the sale could fall through if the buyer’s finance is declined.
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You generally can’t accept another offer while the current contract is active (unless you negotiate a special clause — see below).
If you’re selling, it’s important to work with your agent to understand the strength of the buyer’s financial situation and how likely they are to get approved.
Other Common Clauses to Know
Subject to Building Inspection
This clause allows the buyer the right to arrange an independent inspection, and assess the property for building defects, if defects are uncovered over a nominated defect limit they can request the seller to either:
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Renegotiate the price,
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Request repairs,
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Or the buyer can walk away from the sale.
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Subject to Sale of Another Property
This clause is used when a buyer needs to sell their current home first in order to finance the new one. This clause can add more uncertainty for sellers, as there are now two sales that need to go through.
Often paired with the Shorter Period Clause (aka ‘48 hour clause’), this clause allows the seller to continue marketing their property and accept another offer, giving the first buyer 2 business days to go unconditional or step aside.
Extended Settlement or Special Conditions
Other custom conditions might include:
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Longer or shorter settlement dates,
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Early access for renovations,
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Inclusion of certain furniture or appliances,
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Or clauses around council approvals, zoning, etc.
Final Tips
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For buyers: Seek legal advice if you are uncertain before signing a contract. Understand your obligations and deadlines.
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For sellers: Be realistic and flexible, but work with your agent to minimise the risks of conditional offers falling through.
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For both parties: Communication is key. Most issues can be resolved with transparency and good negotiation.
Got Questions About a Contract Clause?
Whether you're buying or selling, we’re here to help you make sense of the fine print. Reach out to the MIX Property Group team at any time for obligation-free advice or assistance with your buying or selling needs.