Quick answer
When a presale buyer can't settle, a developer usually has four paths: give the buyer a short extension, serve a notice to complete and end the contract if they still can't, resell the unit, or refinance the unsold unit into a residual stock loan so the construction lender is repaid while the sale is sorted out. The right mix depends on the contract, the deposit held, the unit's current value and how much time the construction lender will give.
Key points
- Your contract, not your frustration, decides what you can do; get your solicitor involved on day one.
- In NSW, the deposit sits with a stakeholder and isn't released to the developer before settlement.
- A buyer's valuation shortfall is the most common reason a presale falls over at completion.
- The construction lender's deadline usually drives the decision more than the buyer's excuses.
- A residual stock loan can repay the construction lender and give you time to resell properly.
When an off-the-plan buyer can’t settle, a developer has four realistic moves: allow a short extension, serve a notice to complete and end the contract, resell the unit, or refinance the unsold stock so the construction lender is paid while you sort it out. Most developers end up combining two or three of them. The contract and the lender’s deadline decide the order.
The rest of this guide is about making that call quickly and calmly, because a failed presale at completion is one of the few moments in a project when a week really matters.
Why do presales collapse right at the finish line?
Off-the-plan contracts are often signed a year or two before the building is finished. A lot can change in that time. The usual culprits:
- The valuation shortfall. The buyer’s lender values the completed unit below the contract price and lends on the lower figure. The buyer now needs extra cash they don’t have.
- Changed circumstances. A job loss, a separation, a business that’s had a hard year, or a lender that has tightened its policy since the buyer was pre-approved.
- Cold feet. Prices nearby have softened and the buyer is looking for a reason to walk away.
- Paperwork delays. Less dramatic, but common: the buyer’s finance simply isn’t ready on time.
Knowing which one you’re dealing with matters, because a buyer who’s $40k short is a very different problem from a buyer who no longer wants the unit at any price.
It’s worth a frank conversation, through the agent or the solicitors, to find out which it is. A buyer with a genuine finance gap may be able to close it with a little more time, a second lender or help from family. A buyer who has decided they overpaid will rarely be talked round, and every week spent hoping otherwise is a week of interest and lost marketing time. Ask for evidence: a copy of the valuation, a letter from the buyer’s lender, or a broker’s note on where the new application sits. Real progress leaves a paper trail.
What does the contract let you do?
Start with the documents, not the phone call. Your solicitor will check the settlement date, the notice provisions, what happens to the deposit and any special conditions.
A few points that catch developers out:
Settlement timing. In NSW, the government’s guide to buying off the plan explains that completion isn’t due until the building is finished and the plan is registered, and that buyers must receive a copy of the registered plan at least 21 days before settlement. If those steps weren’t done properly, your timeline may be later than you think.
The deposit. The same guide notes the deposit is held by a stakeholder, such as the agent or solicitor, and can’t be released to the vendor before settlement. If a bond or bank guarantee was accepted instead of cash, the process for calling on it is set by that document.
Sunset clauses. A sunset clause isn’t a free option for the developer. In NSW, a developer needs the buyer’s consent or an order of the Supreme Court to rescind under a sunset clause. Other states have their own rules.
Notice to complete. If the buyer misses settlement, the normal next step is a notice to complete giving them a final date. Only once that passes without settlement can the contract usually be terminated. Get the wording and timing right, because a defective notice can unravel everything that follows.
Which option fits your situation?
| Option | Best when | Main cost | Main risk |
|---|---|---|---|
| Short extension | The buyer’s finance is genuinely close | A few weeks of holding costs | The extension becomes a habit |
| Price adjustment | The gap is small and the buyer is committed | The discount itself | It signals softness to other buyers |
| Notice to complete, then terminate | The buyer can’t or won’t settle | Legal fees and time | Disputes over the deposit |
| Resell on the open market | The unit’s value is sound | Agent fees, marketing, months on market | A lower price than the original contract |
| Refinance the unsold unit | The construction lender won’t wait | Finance costs while you resell | A slow resale stretches the loan |
These aren’t mutually exclusive. A common sequence is to serve the notice to complete, line up refinancing in case it’s needed, and list the unit quietly so you’ve got a feel for the market if the buyer falls away.
Where does the construction lender fit in?
Construction facilities are designed to be repaid when the build is finished and the presales settle. Every presale that doesn’t settle leaves debt behind with no matching cash coming in. Depending on the facility, the lender may start charging default interest, ask for a reduction plan, or set a firm deadline for repayment.
Tell the construction lender early. Lenders deal with failed presales all the time; what worries them is silence. Show them the notice to complete, your resale plan and, ideally, an alternative facility you’re already working on.
That alternative is usually a residual stock loan: a facility secured over the unsold units that repays the construction lender and gives you an agreed term to resell. If you’d like a read on whether your remaining stock would support one, send us the project details and we’ll look at it with you.
How does GST affect a resale?
If the unit is still new residential premises, the resale is usually taxable and the buyer generally has to withhold GST from the price at settlement. The ATO’s guide for purchasers sets the withholding at one-eleventh of the contract price for a fully taxable sale, with a different amount where the margin scheme applies. The supplier must tell the buyer in writing, before settlement, whether withholding applies.
The practical point: when you work out whether a resale price clears your debt, use the money you’ll actually receive at settlement, not the headline price. A residual stock lender will do the same when it sets the amount each sale has to repay. The ATO’s broader GST at settlement page covers which sales the rules apply to.
Illustrative example: one failed presale in a block of eight
Illustrative only. A developer completes eight apartments. Seven settle within a fortnight. The eighth buyer’s bank values the unit $60k below the contract price of $750k and the buyer can’t make up the difference.
The construction lender has $520k still owing and gives the developer 45 days. The developer’s solicitor serves a notice to complete, while the developer explores two backstops at the same time: a modest price adjustment for the buyer, and a residual stock loan over the unsold unit.
The buyer can’t settle even at the adjusted figure. The contract is terminated, the deposit question goes to the solicitors, and the residual stock loan settles a week before the construction lender’s deadline. The developer relists the apartment, sells it four months later to an owner-occupier, and repays the residual stock loan from that settlement. The finance cost was real, but much smaller than the discount a forced sale inside 45 days would have demanded.
Mistakes to avoid
- Relying on the deposit before the contract is properly ended. It isn’t yours until the legal steps are complete.
- Agreeing to open-ended extensions. Every extension should have an end date and a reason.
- Waiting for the construction lender to chase you. You lose negotiating room every day you’re silent.
- Pricing the resale on the old contract. Use current evidence; the market may have moved.
- Ignoring defects or certification. A unit that can’t legally be occupied can’t be resold quickly either. Our residual stock loan documents guide lists what lenders check.
If you’re thinking of putting a tenant in while you resell, read renting out unsold units first, because it changes the GST picture.
A presale has fallen over. Here’s how we can help
A collapsed presale feels personal, but it’s a timing problem, and timing problems are what property-secured finance is built for. If you need to repay a construction lender while you resell, a facility between $20k and $5m secured over the unsold stock may give you the breathing room you need.
Our enquiry takes about 60 seconds, and there’s no credit check when you first enquire. We won’t send your details to a pile of lenders, so your phone stays quiet apart from one call from us. A real person reviews the project, the unit values and the construction lender’s deadline, then rings you to discuss options. Please fill in the form accurately, especially what’s owing and what the unsold units are worth today, so we can point you to the right lender first time.
Frequently asked questions
Why do off-the-plan buyers fail to settle?
The most common reasons are that the buyer's lender values the finished unit below the contract price, the buyer's own finances have changed since they signed, or they simply can't get a loan approved. Sometimes it's a mix: a lower valuation means a bigger deposit is needed, and the buyer doesn't have it.
Can I keep the buyer's deposit if they don't settle?
It depends on the contract and the steps you take to end it. Usually the vendor has to serve a valid notice to complete first, and only then terminate. In NSW the deposit is held by a stakeholder until settlement, so it isn't in your hands while the contract is alive. Take legal advice before relying on the deposit.
Can I use the sunset clause to cancel and resell at a higher price?
In NSW, a developer needs the buyer's consent or a Supreme Court order to rescind an off-the-plan contract under a sunset clause. Buyers don't need court approval. Other states have their own rules, so don't assume a sunset clause is an easy exit.
What if the construction loan is due before I can resell?
That's the point where many developers refinance the unsold unit or units into a residual stock loan. The new facility repays the construction lender and gives you an agreed term to resell, without discounting heavily to beat a deadline.
Should I offer the buyer a price reduction to save the sale?
Sometimes it's the cheapest outcome. Compare the reduction with what a resale would realistically cost: agent fees, marketing, holding costs, finance costs and the risk of a lower price. Your solicitor should document any variation properly.
Do I still need to deal with GST withholding if I resell?
Yes, if the unit is still new residential premises. The new buyer generally withholds the GST amount from the price at settlement and pays it to the ATO, so plan your figures on the cash you'll actually receive.