Buying a Property
When you have found that perfect property after searching for months, it is an extremely exciting time, however, finding the property is just the beginning to securing it as your own. Once your offer has been accepted and contracts have been exchanged, the time limits begin and as a purchaser there are a number of things you need to do.
Exchange of Contracts
When your offer is accepted by the vendor, it is time for you to sign your counterpart of the contract and have your counterpart and the vendor’s signed counterpart exchanged and dated. This date becomes known as the contract date.
Exchange can occur between the respective solicitors or it can be effected by the real estate agent. On most contracts exchanged, there is a “cooling off period” of at least five (5) business days, which is for the benefit of the purchaser. However, this can be waived by you but only after receiving advice from your solicitor and receiving a section 66W certificate.
During the cooling off period, it is time for you as the purchaser to obtain unconditional loan approval (if mortgage finance is required to purchaser the property), obtain any quality reports you wish to obtain (most commonly a building inspection report and pest inspection report) and have your solicitor request amendments to the contract. The vendor cannot sell the property to anyone else during this time, however, you are not yet locked in to contract. If you pull out of the contract before the expiry of the cooling off period, you will forfeit an amount equivalent to 0.25% of the purchase price, which you would have paid on the exchange of contracts.
There is no cooling off period when you purchase a property at auction. Therefore, it is extremely important that before bidding at any auction you have reviewed the contract and requested any amendments you wish to make to the contract, you have obtained any desired quality report and you have obtained unconditional loan approval.
The contract becomes unconditional:
- at 5pm on the last day of the cooling off period if you have not already rescinded; or
- on the exchange of contracts under “auction conditions”; or
- on the exchange of contracts when a s 66W certificate is signed by your solicitor.
When the contract becomes unconditional, subject to any other specific terms and conditions of the contract, you are locked in to purchasing the property and can no longer rescind. It is at this time that you have to pay the deposit on the contract, which is generally an amount equivalent to 10% of the purchase price.
The Contract Period
The most common length of a contract period is 42 days. This is the timeframe between the contract date and settlement. However, this timeframe can be negotiated on between the parties and amended by mutual agreement prior to the contract becoming unconditional.
During the contract period, we will act on your behalf to:
- undertake searches and enquiries of both government and non-government authorities to ensure there are no outstanding interests or problems with the property;
- raise requisitions with the vendor’s solicitor to ensure there is nothing affecting the vendor’s right to transfer the title of the property to you on settlement;
- liaise with your bank to ensure they are aware of the date for settlement;
- assist and advise you with respect to your obligation to pay stamp duty; and
- arrange for your execution of all the necessary paperwork in preparation for settlement.
In the days before settlement, we will prepare the draft settlement figures which is a statement showing the outstanding council rates, water rates and other charges and calculates who is responsible for what proportion of those charges.
The figures are then sent to the vendor for their approval and, once approved, we will be advised by the vendor of how you are to draw the cheques when paying the balance of the purchase price. This is known as “cheque directions” and are usually only provided a day or so before the settlement day. Because of this, it is important that you allocate time the day before settlement to attend the bank to draw the cheques. If you are paying with mortgage finance only, we will advise your bank of how they are to draw the cheques. Because everything happens very quickly around the settlement day, it can sometimes be a stressful time and we make it our mission to ensure that you are informed as soon as possible of your requirements and settlement goes through smoothly.
It is imperative that before settlement you conduct one final physical inspection of the property you are buying. This usually occurs on the morning of the settlement day. The property should be in a similar condition to that at the time of exchange and if it is not, then depending on the issue, there may be some remedies available to you.
At settlement, you pay the balance of the purchase price to the vendor, and the title deed and transfer document is handed over to you. Usually, because banks will be involved, the title deed and transfer will be given directly to the bank who is paying the purchase price on your behalf. We will attend settlement on your behalf and ensure that the settlement documents are in order and the purchase price is paid in full to the vendor. Once settlement is effected, we will then contact you to advise you that settlement has been completed successfully, at which time you will be the new owner of the home.
The keys will then usually be made available for collection by you from the real estate agent’s office.