The first thing you should do is appoint a conveyancer to act on your behalf and to advise you on how a conveyancing transaction is run. Your conveyancer will guide you through the minefield involved in buying real estate. You will need to know what steps should be taken before you commit to a particular property and what you should and should not do. Your conveyancer will also make sure that you are aware of all the additional costs that may be involved so that you can work out a budget and know exactly what you can afford when negotiating the purchase price with the agent.
Your conveyancer will also clarify any matters that you may not be completely aware of relating to the purchase of property.
Once the vendor and buyer have agreed on the price and any other special terms of the sale, the Contract for Sale is finalised in duplicate so that one copy can be signed by the vendor and the other copy can be signed by the buyer. The two copies are then compared to ensure that they are identical, and if so, they are dated and swapped or “exchanged” so that each party holds the copy signed by the other party. Normally at this point the full deposit must be paid to the stakeholder nominated in the contract (see Payment of the Deposit) unless the contract specifically provides an alternative arrangement for payment.
There are two ways to bring about an exchange:
1. By the Estate Agent
Here the contracts are usually signed and exchanged in the agent’s office shortly after the sale price and any other terms have been agreed to. The agent then sends the appropriate copy of the contract to each party’s conveyancer and if the property is residential, the buyer will have the statutory 5 business day cooling off period (see The Cooling Off Period) in which to get any reports, unconditional finance approval etc. The seller does not have the benefit of a cooling off period and cannot withdraw. The danger for the purchaser with this method however is that once contracts are exchanged the vendor may not agree to any amendment to the contract even though the buyer has not had the opportunity to obtain legal advice.
2. By the Conveyancers
Here the agent advises both conveyancers of the agreed terms of the sale; the vendor’s conveyancer issues the finalised contract to the purchaser’s conveyancer for checking and possibly negotiation while the purchaser arranges his reports and unconditional finance approval. Once everything is in order, the contracts are exchanged however with this method it is usual practice for the buyer to waive their right to the cooling off so that the contract is binding on both parties from the moment of exchange.
Under legislation, all contracts for the sale of residential property (having an area of less than 2.5 hectares) have a cooling off period of five business days ending at 5:00pm on the fifth business day. This means that from the date of exchange, the purchaser has five business days in which to make enquiries, carry out inspections and obtain unconditional finance approval before the contract becomes binding. If the purchaser decides not to proceed, the purchaser can rescind the contract within the cooling off period. If the purchaser does choose to rescind, the purchaser must forfeit to the vendor 0.25% of the sale price. The contract is then at an end and neither party has any further claim against the other. The seller is locked into the contract from exchange and cannot withdraw from the sale.
The cooling off period does not affect the completion period in any way. Completion periods expressed in terms of a number of days run from the date of exchange regardless of whether or not there is a cooling period.
The purchaser can waive the cooling off period by having the contract explained by a conveyancer or solicitor and a certificate signed by that conveyancer or solicitor and the certificate handed to the seller’s conveyancer on exchange. This certificate is commonly called a “Section 66W Certificate” because it is issued in accordance with s66W of the Conveyancing Act 1919.
The cooling off period can also be shortened by the use of the 66W certificate whereby it will be stated that the purchaser has agreed to shorten the period to whatever number of days has been negotiated.
The vendor can also agree to extend the cooling off period. If the agreement is made at the time of exchange it must be included in the contract by adding a special condition. The pre-printed pages must NOT be altered. Alternatively, if the request is agreed after exchange, it can be evidenced by an exchange of correspondence.
The cooling off period only applies to residential properties having an area of less than 2.5 hectares. However, there is no cooling off period if the property is sold at public auction or if the contracts are exchanged on the same day as the property is listed for auction sale.
Each contract varies in length depending on the circumstances and the terms in the transaction. Essentially, we can settle on a property from as little as 14 days from exchange up to as long as a few years. Settlement is negotiated at the time of exchange and is generally between 28-42 days after the date of exchange. Your licensed conveyancer can discuss these options with you and give you the best advice in relation to the length of your settlement period. We are PEXA certified, call us to find out more.
Generally stamp duty is payable on the Contract for Sale by the purchaser and may also be payable on some mortgages where the property is purchased for investment properties. Stamp duty is calculated on the sale price: the higher the price the higher the duty. It is the purchaser’s responsibility to pay the stamp duty. The Office of State Revenue allows up to 3 months for the duty to be paid before the fines become payable however the duty must be paid on or before completion in order for the associated Transfer document to be registerable at the Department of Lands.
We can provide you with an amount payable for stamp duty and also provide you with information in relation to any exemptions you might be eligible to apply for.
For an easy to use Stamp Duty calculator, please click HERE
It is standard and essential term of the contract that the deposit be paid on or before the making of the contract (i.e. on exchange) or in strict accordance with any other payment terms detailed in the contract. The deposit paid is usually 10% of the sale price but can vary. We can usually negotiate a smaller amount.
Where a purchaser does not have sufficient funds to cover the 10% deposit, the vendor may agree to accept a deposit bond which is a guarantee issued by an underwriter to secure the deposit between exchange and completion in the event the purchaser is in default. Where a deposit bond is provided to secure the deposit, the purchaser must then pay the full price (plus any other moneys due under the contract) to the vendor at completion.
Please contact us to discuss options in relation to deposits.
If you are buying an investment or a holiday home, you may be liable for land tax. Land Tax is only payable where the value of the land is above the land tax threshold, which is determined on an annual basis. Where more than one taxable property is owned, the cumulative value of all land must be above the threshold. Land Tax generally does not apply to your principal place of residence or to primary production land. If you think you may be liable for Land Tax you need to register with Revenue NSW. This can be done online at the OSR website www.revenue.nsw.gov.au or call 1300 139 816 for more information.
All property owners who may be liable for Land Tax must register by 31 March each year.