It's one of the quiet anxieties every buyer carries: what if this doesn't actually happen? Finance doesn't come through, the building report turns up something bad, the vendor gets a better offer and tries to wriggle out. The honest answer is that what happens next depends enormously on when it falls over, and that timing is the single biggest thing to understand.
The short answer
If a deal falls through during the conditional period, because a condition like finance or a builder's report isn't satisfied, you can generally walk away cleanly with your deposit and KiwiSaver funds returned. If it falls through after you've gone unconditional, because you or the other side default, the consequences are genuinely serious: penalty interest, loss of deposit, and potential legal action. These are very different situations, and it's worth understanding both.
Scenario one: a condition isn't met
This is the far more common way a purchase doesn't proceed, and it's exactly what conditions are for. If your finance isn't approved, the LIM turns up something serious, or the building report finds a real problem, and you've made your offer conditional on those things, you can typically:
- Walk away without penalty, as long as you act genuinely and within the condition's deadline.
- Get your deposit back, since it's usually only paid into the trust account once you go unconditional. If you'd already made a KiwiSaver withdrawal, it's held by a stakeholder and returned to your provider rather than released to the vendor.
- Renegotiate instead of walking away entirely, if the issue is something the vendor might fix or discount for, rather than a dealbreaker.
This is the whole point of a properly conditional offer. It's not a loophole, it's the mechanism that's supposed to protect you. See our Sale & Purchase Agreement guide for how conditions actually work, and our building inspection guide for one of the more common reasons a purchase doesn't go ahead.
Scenario two: someone defaults after going unconditional
This is a different situation entirely. Once an agreement is unconditional, both sides are legally committed, and failing to settle has real consequences.
If the purchaser fails to settle, the standard process runs roughly like this: the vendor can serve a settlement notice, giving the purchaser a set number of working days (commonly 12) to remedy the default. Penalty interest runs during this time, often in the range of 12 to 16 percent a year, as set out in the contract. If the purchaser still doesn't settle, the vendor can cancel the contract, keep the deposit, and pursue the purchaser for any further loss, including the difference if the property is later resold for less within the following year.
If the vendor defaults, for example by refusing to settle or being unable to, the purchaser generally has similar remedies available: penalty interest, the option to sue for damages, or in some cases to compel the sale through the courts. Either way, this is not a situation to navigate without your conveyancer actively involved from the moment it looks like a problem.
Why the distinction matters so much
The whole design of a Sale & Purchase Agreement is to make sure you know exactly which of these two situations you're in at every point. That's the entire purpose of the conditional-to-unconditional structure: while you're conditional, you have genuine outs. Once you're unconditional, you don't, which is why going unconditional should always be a decision you make deliberately, once you're actually sure, not something that happens because a deadline slipped past unnoticed.
What actually protects you
- Well-chosen conditions, matched to your actual situation, not a generic list.
- Tracking your condition dates properly, so you never go unconditional by accident.
- Advice before you sign, not after. Once you're committed, your options narrow considerably.
How Kemba helps
We track every condition date on your dashboard so you always know exactly where you stand, conditional or unconditional, and we won't let a deadline sneak past unnoticed. And because we know deals can fall over for reasons that have nothing to do with you, finance, a building report, a vendor pulling out, if your purchase falls through through no fault of your own, you can come back to Kemba for your next one and we'll do it for free. Fixed $2,500 + GST otherwise, disbursements included, NZ-qualified people doing the work.
Frequently asked questions
What happens if my house purchase falls through in NZ?
It depends on the stage. If a condition like finance or a builder's report isn't met during the conditional period, you can generally walk away with your deposit returned. If it falls through after you've gone unconditional, it's a default situation with more serious consequences, including possible penalty interest and loss of deposit.
Can I get my deposit back if a condition isn't met?
Usually, yes, as long as you're acting genuinely and within the condition's deadline. The deposit is typically only paid once the agreement goes unconditional, so if you withdraw during the conditional period because a condition wasn't satisfied, your deposit is generally returned.
What happens if I can't settle after going unconditional?
The vendor can serve a settlement notice giving you a set number of working days, commonly 12, to remedy the default, with penalty interest running in the meantime. If you still can't settle, the vendor can cancel the contract, keep your deposit, and potentially sue you for further losses.
What if the vendor pulls out of the sale?
If a vendor defaults after the agreement is unconditional, the purchaser generally has remedies available too, including penalty interest and the ability to sue for damages, or in some cases seek to compel the sale. Talk to your conveyancer immediately if this happens.
Does Kemba's guarantee cover a sale falling through?
Yes, if your purchase falls through for reasons outside your control, such as finance not coming through, a bad building report, or the vendor pulling out, you can come back to Kemba for your next purchase and we'll handle it for free.
