Buying a home is one of the most stressful and expensive things you will ever do. Whether it is an investment property, the property next door or your forever home, it is vital that you seek legal advice from someone experienced in property law and who knows the area.
Before You Start
The first round of decisions you will likely need to make is in regard to finance. It is best practice to have your pre-approval in place prior to making an offer to Purchase. Make sure you read everything thoroughly, from the pre-contractual statement which outlines the fees and charges to which you'll be subject to the actual mortgage contract itself. Remember you are under no obligation to sign anything on the spot.
Making an Offer
Once you have found THE property, make an offer. If you offer is accepted, you might be asked to pay a small sum as an initial deposit, but this is fully refundable if you do not sign the contract. It does not mean that the property is yours yet either, as the agent can take other offers.
Signing the Contract and Exchange of Contracts
Contracts are exchanged when the seller and purchaser have both agreed on a price and have signed a copy of the contract (each party to the transaction signs a separate but identical copy of the contract) the contracts are dated and a 0.25% deposit has been paid by the purchaser.
Cooling off period
Every contract for the sale of residential property (2.5 hectares or less and used for residential purposes) has a cooling off period of five (5) working days (the cooling off period ends at 5.00pm on the fifth working day).
The Purchaser must then use the cooling off period to obtain any pre-purchase reports, have the contract legally explained to them and have their finance application unconditionally approved. If the purchaser decides NOT to proceed with the Purchase during the cooling off period, for any reason, the Purchaser can rescind the Contract and the 0.25% deposit that was paid is forfeited to the Vendor. The contract is at an end and neither party has any further claim against the other. This right is NOT reciprocal to the seller. Once the Contracts have exchanged, the seller is bound to the contract and cannot withdraw from the sale.
The 5 business day cooling off period can only be extended by agreement between the parties and it is quite common for the Purchaser to request for an extension of time as 5 day is often not sufficient to organise unconditional loan approval.
There is no cooling off period if the property is sold at public auction OR on the same day as the property was listed for auction sale.
Before the expiry of the cooling off period, the Purchaser is required to pay the full 10% deposit, unless an alternative deposit has been agreed.
Contract Review
Prior to entering into the Contract (exchange of Contracts), or during the cooling off period, your Conveyancer should review the Contract for sale with you and discuss your property purchase. There may be several things that can be negotiated in your favor and, you need to be absolutely clear on your rights and responsibilities before the Contract becomes unconditional.
Pre-purchase Inspections
It is advisable for a purchaser to commission a pest and building report and a survey if required. Any pre-purchase inspections and enquiries should be completed before the Contracts are exchanged OR before the cooling off period expires.
The inspectors should maintain Professional Indemnity Insurance and be experienced in property inspections. The Contract and the vendors’ warranties do not apply to the structures on the property, only title. It is therefore important the purchaser ensures that the property is not infested with termites and the property is structurally sound. The cost and time associated with pre-purchase is a very small proportion, compared to costs of any repairs if any issues are not discovered up front. Once Contracts are exchanged unconditionally, you are legally bound to the Contract.
Should any issues arise from your inspections, you may be able to use this information to negotiate a reduction in the purchase price. If you are not sure who to trust to complete an inspection for you, we can provide you with a list of reputable local inspectors.
Purchasers should also consider obtaining an Identification Survey when buying property. A survey would show any encroachments on or by the property being purchased, that the building next door does not encroach onto your property and vice versa. You will want to know that the fences are on or close to the boundaries and the buildings are set back the correct distance from the front boundary etc.
Unconditional Contract
It is not uncommon for the Purchaser to waive the cooling off period once the Contract has been explained to them by their Conveyancer and they have completed their pre-purchaser inquiries. The Conveyancer can prepare, sign and serve on the seller a certificate which is prepared under Section 66W of the Conveyancing Act which is commonly known as a “Section 66W Certificate”.
From this time, both parties are bound to the Contract.
Once the Contract is binding, your conveyancer has a number of tasks to perform including:
- Arranging payment of stamp duty
- Liaising with the lender in regard to any mortgage
- Checking with various government authorities to see if they have a vested interest in the property
- Checking to see if there are any outstanding debts to local council
- Calculating adjustments for council, water and strata rates
- Making final checks on the title
Settlement
Settlement (or completion) usually takes place 42 days after the date of the contract (i.e. the date of exchange) unless a specific date has been agreed to.
On settlement your Conveyancer will complete the settlement electronically through PEXA. This transaction with include the seller's lawyer/conveyancer as well as any lenders involved, and the funds will be handed over in exchange for the Property. If you have a mortgage, your banker will hold the Control to Deal with your title until such time as your debt is repaid.
As buying and selling property is one of the biggest financial decisions you will make, it is important that you get expert advice. Let's get Connected and let us minimise your stress with our expertise and diligence. Phone us today!
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