Sections
  1. The Contract
  2. Inspection Reports
  3. Exchange
  4. Deposit
  5. Cooling Off
  6. Mortgage
  7. Stamp Duty
  8. Settlement / Completion

The Contract

It is a legislative requirement that there must be a contract in place before residential property is offered for sale.

This means that if you are shown a property you can ask to see the contract before you make your decision to buy it.

The contract will have all of the legal obligations that you are committing to and it is our job as Conveyancers to advise you on what they all mean.

It is also preferable for us to look at the contract before you sign it, although that may not be possible in all instances.

The contract will also show what type of title (ownership) you will have over the property.

There are a number of different types of title: -

 

Torrens Title - Torrens title is the most common form of title and is the normal type of title for a standard home or block of land.

Old System - Old system is the type of title that occurred in NSW at the beginning of the last century. It is based on keeping a record of all of the original deeds of the property. In other words it is not computerised. There is only about 3-4% of properties in NSW that are still under Old System.

Strata Title - Strata title is the normal type of ownership for units or townhouses. It means that the owners of the "complex" share in the cost of common property, such as communal hall ways, roads and walls. There will be a management committee of the owners called a Body Corporate and there will be levies raised from each owner for common expenses.

Community & Neighbourhood Title - Community and Neighbourhood title are normally in addition to Torrens title and apply to common areas. A group of houses on Torrens title might share ownership over a common driveway or common entertainment areas such as playgrounds or swimming pools. Like Strata Title there will be levies raised on each owner for the costs of upkeep of common areas.

Company Title - Prior to the introduction of Strata Title people used Company Title for apartment complexes. In this form of ownership a Company owns all of the property and what you are buying is shares that give you the right to occupy a certain apartment.

Inspection Reports

We recommend that you get a property inspection report done by an independent (not recommended by the owner or agent) inspector for the property you are looking at.

There are a few different types of inspections (all of which we can arrange on your behalf or you can arrange your own): -

Building Report - A building report is a visual inspection that looks at the structural integrity of the home and will tell you if there are any repairs that are needed to the property.

Pest Report - A pest report is a visual inspection to see if there is any evidence of termite damage or conditions that are conducive to termite attack.

Strata Inspection Report - If you are purchasing a property within a Strata, Community or Neighbourhood plan (where levies are paid for the upkeep of common property) an inspection is carried out on the financial and minuted records of the Body Corporate. This is necessary to determine whether or not the Body Corporate is underfunded or may have other risks that are not evident from just looking at the property.

Survey Report - A survey report will identify where the building has been built on the land in comparison to where the actual legal boundaries are. This is required in case part of the building is built over on the neighbours property and /or the neighbours property is built on the land that you are buying. An up to date survey is also required if you want to get a Building Certificate from the Council.

Building Certificate - A building certificate is obtained from the local Council and is a certificate from the council certifying that all of the buildings either have been approved or would be approved by the Council.

Other - Other types of inspections and reports can be obtained for a variety of things if it is deemed necessary. The other types of reports (although not limited to these) are: Smoke tests; Engineers certificate; Geotechnical Reports; Swimming Pool report.

Exchange

Once you have agreed on a price with the owner the contracts have to be "exchanged" before there is any legally binding agreement. The exchange takes place after both the owner and buyer have signed their respective contracts and the buyer has handed over the deposit. Then either the agent or your conveyancer will compare both contracts to ensure they are identical. Once this is done the contracts are swapped i.e. the owner is given the buyers contract and the buyer is given the owners contract (the owner and the buyer's conveyancers may act as agent for the owner and buyer in this situation). The "exchange" has then taken place and that is then the date that is entered onto the contract.

Once "exchanged" the contract is legally binding on both parties.

Deposit / Deposit Bond

Normally the deposit to be paid will be 10% of the purchase price. However it may be possible to negotiate a lower deposit if there are good reasons as to why you cannot come up with that amount of money. The deposit is normally paid by cheque, which can be a personal cheque.

If you have difficulty getting access to the deposit, you may be eligible to get a Deposit Bond.

A Deposit Bond is normally used by people where all of their cash is tied up in their current home or they are borrowing the full purchase price.

We can issue On the Spot Deposit Bonds which are provided by Vero Insurance Limited, provided you have a written unconditional loan approval or if your funds are coming from the sale of your home, a copy of the exchanged contract.

Cooling Off

All residential contracts have a mandatory "cooling off period" of 5 working days. This means that only the buyer can pull out of the contract without any reason within the 5 working days after the date of the contract. The owner does not have the option of pulling out at any time.

If the buyer pulls out of the contract they will forfeit 0.25% of the purchase price to the owner and the balance of the deposit will be refunded to the buyer.

Once the contract has "cooled off" it will become unconditional and the buyer will be bound to the terms of the contract.

The contract also allows for the cooling off period to be waived, provided that the buyer has had the contract explained to them by a conveyancer and the conveyancer signs a certificate (section 66W certificate) on their behalf. If this is done then there will be no cooling off period and both parties will be unconditionally bound to the terms of the contract.

Mortgage

If you are going to have a mortgage / loan on your property you will need to ensure that you have written approval from your lender before the contract becomes unconditional.

Most lenders will give you what they call a "pre approval" which indicates that they will loan you up to a certain amount. However this is not good enough to rely upon, as it is normally dependant upon a valuation of the property. What you need to get is an unconditional loan approval.

Stamp Duty

Stamp duty is payable on all contracts. It is paid to the NSW government and is based on a scaled formulae. Stamp duty is normally paid before settlement, even though legally you have 3 months to pay it.

If you are a First Home Buyer you may be eligible to a concession on the amount of duty you have to pay.

Settlement / Completion

Your contract will have a completion period that is normally 42 days (6 weeks) from the date of the contract. This period can be negotiated up or down before you sign the contract.

Completion also known as settlement is when you finally pay all of the money for the property, become the legal owner and collect the keys before moving in.

We arrange the settlement and coordinate any mortgage / finance provider to ensure that everything goes through smoothly and you become the new owner.

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