Buying a Residential Property
Your property purchase
Buying a property is one of the biggest financial decisions you will make in your life, and it can seem daunting and stressful to those who are not aware of the process.
The following outline will help prospective purchasers understand what is involved in purchasing a residential property and how Ivy Law Group can assist you throughout the process.
To get started, contact our experienced property and conveyancing lawyers today on 02 9262 4003 or submit an online enquiry.
Obtaining finance and review of contract
If you require a loan to purchase a property, it is wise to see a mortgage broker or bank to obtain pre-approval for finance first before looking for a property. This will set up the basis for the type of property and areas you can afford. It will also speed up the process in obtaining unconditional finance approval.
When you have found a property that you are interested in buying, the contract of sale should be reviewed by an experienced property solicitor or conveyancer. The contract will set out information about the property not apparent from a physical inspection of the property, and will often prompt further enquiries about the property. The contract will note the legal description of the property and show any interests affecting the land such as easements or covenants. Your solicitor or conveyancer can also negotiate terms in the contract that are more favourable to you as the purchaser.
Our experienced property and conveyancing lawyers will go over the contract with you and ensure that you understand your rights and obligations under the contract and answer any questions that you may have. This is an important step to ensure there are no ‘hidden surprises’ should you become the successful purchaser.
It is also worth obtaining a building and pest report from a reputable inspector to flag any existing or potential structural or pest problems (if you are purchasing a house) or a strata report for information on the owners corporation’s records (if you are purchasing a unit). The real estate agent may have these reports available or you may have to arrange these inspections yourself.
Exchange of contracts
In NSW, exchange of contracts occurs when two copies of the contract (one copy signed by you as the purchaser and one copy signed by the vendor) are swapped or “exchanged” and the purchaser pays a deposit agreed between the parties.
No legal rights or obligations between the parties arise until contracts are exchanged. Exchange of contracts can be done either through a property solicitor, conveyancer or the real estate agent. The date of exchange is noted on the front page of each contract.
What is the difference between buying through private treaty vs at an auction?
There are two ways of buying a residential property:
- Private treaty; and
Buying a property through private treaty means that the owner of the property has set the sale price through the real estate agent. Once a price is agreed upon, negotiations in relation to the property can be done up until the contracts become unconditional.
An auction involves prospective purchasers bidding on the property at a specified location and time with a reserve price set before the auction. If you are intending to purchase a property at auction, you must ensure that you have obtained all relevant reports for the property and that any requirements and amendments to the contract are negotiated and agreed to prior to the auction.
Cooling off period
If the property is sold by private treaty, contracts may be exchanged subject to a cooling off period. Purchasers typically have five business days during which they can withdraw from the transaction, however they forfeit 0.25% of the price to the vendor. The cooling off period can be waived, reduced or extended by negotiation. Get in touch with our experienced property and conveyancing lawyers today if you require assistance with your property negotiations.
There is no cooling off period if the property is sold by auction. If you are the highest bidder at auction, the contract becomes unconditional and no changes to the contract can be made following the auction.
In NSW, the usual settlement period is 42 days (6 weeks) after contracts are exchanged, but can be made longer or shorter by negotiation.
During this time, your property solicitor or conveyancer will conduct property searches and enquiries to obtain outstanding council and water rates (and strata levies if a unit/townhouse) to be used for calculation of adjustments on settlement and obtain further information from the vendor that may not have been disclosed or discovered prior to exchange of contracts.
Your broker or bank will also prepare the mortgage document which sets out the terms and conditions of the home loan and will organise for you to sign this. Stamp duty and insurance requirements will also be discussed.
Closer to settlement, a settlement statement will be prepared which sets out the final balance payable to the vendor, taking into account any rates, levies or taxes payable as at the date of settlement. Your property solicitor or conveyancer will advise the exact amount required on settlement to cover the balance owed to the vendor, legal fees, stamp duty (if payable on settlement) and bank fees (if applicable).
You should also carry out a final inspection of the property shortly before settlement to ensure that nothing has been damaged since your last inspection and all inclusions listed in the contract are still there and intact.
This is when the purchase of property is completed. At settlement, the balance of the purchase price is paid to the vendor, and ownership of the property passes from the vendor to you as the purchaser.
In NSW, settlements now take place electronically. See our article ‘moving towards 100% eConveyancing in NSW’ to learn more.
Unless the contract provides otherwise, the property must be vacant for the purchaser’s possession on the day of settlement. Once settlement has taken place, the keys to the property can be collected from the real estate agent.
Looking to purchase a property?
Our property and conveyancing lawyers have dealt with many residential purchases and will guide you along the way so that you can make informed and timely decisions. Get in touch with us today on 02 9262 4003 to discuss, or submit an online enquiry.
You might also like to check out our article ‘Buying a property: your legal questions answered’ to learn more about the process and what to expect.