Buying a property is a major decision and can be so exciting. However, it can also be daunting and sometimes stressful. It is important that buyers seek legal advice in relation to the transaction. We have put together this Buyers Guide to Purchasing a Property, containing answers to the most common questions clients ask us when they are buying a house.
I have found a property – now what?
You should ask for a copy of the contract for sale. We can provide advice to you in relation to the terms of the contract and any other matters that may impact upon you if you purchase the property (such as covenants and easements, and any planned developments in the local area). Then you need to negotiate the purchase price and other terms and conditions of the sale.
We have agreed on a price. How do we move forward?
You should organise a building and pest inspection, strata inspection, bank valuation and any other relevant searches. Wollongong City Lawyers can guide you through this process.
The agent has asked me to submit a “holding deposit”. What is this?
A “holding deposit” (usually somewhere between $500 and $1000) is sometimes requested by the agent at the time an offer is made to the vendor to purchase the property. Paying a holding deposit does not mean that the seller will hold the property for you – the agent may show other buyers the property and may even exchange contracts with someone else. Unless and until you formally exchange contracts with the vendor, the property may be sold to someone else if the vendor wishes to.
How to we organise finance to assist with purchasing a property?
It is extremely important to organise finance as soon as possible. Obtaining approval for finance can sometimes take weeks.
You may have already had some discussions with your chosen lender in relation to purchasing a home. In most circumstances banks can provide conditional approval for a loan whilst you search for a property. The loan is then formalised once you find the property you wish to purchase and organise the valuation. Our solicitors can talk directly with your lender to assist you to get formal approval for the purchase of your property.
What is gazumping?
Gazumping occurs when a buyer has their offer accepted and they spend money obtaining advice and undertaking searches in respect to the property (such as a building inspection), only to find out later that the seller has accepted a higher offer from someone else. The buyer loses the property and the money spent on obtaining advice and undertaking searches. Whilst this can be very disappointing and frustrating, the seller is within their rights to obtain the best price possible for the sale of their property. Wollongong City Lawyers can advise you on things you can do to minimise the risk of being gazumped.
What does exchange of contracts mean?
Exchange of contracts is the point when both the buyer and the seller sign and exchange contracts. At this point, both parties become bound to carry out the transaction (subject to the buyer’s cooling off rights – see below). At the time of exchange, the buyer must pay a deposit (usually 10% of the purchase price).
Prior to exchange, both the buyer and the seller can change their mind and not proceed with the sale, despite any verbal agreements. Buyers should be aware that any expenses occurred prior to exchange of contracts may be lost if the seller decides not to proceed.
What is a cooling off period?
After exchange of contracts, buyers of residential property have a cooling off period of 5 business days, during which they may withdraw from the contract. Usually a buyer will also have to pay 0.25% of the purchase price to the seller upon exercising their right to cool off. In certain circumstances, the cooling off period may be shortened or extended, or waived by the purchaser.
The seller does not have a cooling off period.
When does the cooling off period NOT apply?
The cooling off period does not apply if:
- It is waived by the purchaser (by completion of a Section 66W Certificate)
- The property is purchased at public auction
- The contract was made on the same day as when the property was offered for sale by public auction but passed in
- The property is not residential property as defined in the Conveyancing Act
- The sale arises from the exercise of a valid option to purchase
How much stamp duty do we have to pay when we purchase a property?
Stamp duty is payable by the purchaser on all real estate purchases. The amount payable is set by the government and is dependent upon the purchase price. Further information is available from the Office of State Revenue website or from our office.
Can we inspect the property later?
You are allowed to have one inspection of the property after the contracts are exchanged. It is common practice for the inspection to occur just before settlement, to ensure that the property is in the same condition as when the contracts were exchanged.
Where can I get more information?
Wollongong City Lawyers are available to offer support and quality advice in relation to all aspects of your purchase. We will help ensure that the purchase runs as smoothly as possible. Contact us on (02) 4263 1803 or send us an email.