Thinking of purchasing a new property?
Buying a property is probably the biggest purchase you will make in your life, so it pays to do your research, and in particular it depends on what is in the Contract for Sale.
1. Contract for Sale
A Contract for Sale must include a number of documents, the most common of which are:
- Certificate of Title which confirms the vendor is the owner of the property.
- A copy of the plan of the land.
- A copy of any documents creating easements, rights of way, restrictions or covenants.
- Section 149 Certificate. This is a certificate that is issued by your local Council and shows planning controls together with other things which may affect the property.
- Drainage diagram which shows the location of sewer lines.
Vendors of strata properties (generally units or townhouses) should also have attached:
- A copy of the property certificate and strata plan.
- A copy of bylaws affecting the use of common property.
2. Make an Offer
When a potential purchaser decides they are interested in a property, they make an offer to purchase the property. The Vendor may accept this offer, or alternatively, the Purchaser and Vendor may enter into negotiations over the price and conditions of the sale.
3. Finance Approval
To buy a property most people will need to take out a mortgage. A mortgage gives a lender rights over the land for which they are lending money, including the option of selling, if you default.
4. Obtaining Pest, Building Inspection and Survey Reports
At the same time that you are arranging your finance, you should also obtain satisfactory pest and building report, (and survey report if necessary), and once you have received the satisfactory reports, you will now be in a position to exchange contracts, subject to your loan being unconditionally approved.
5. Exchange of Contracts
A contract to sell a property becomes binding when the purchaser and vendor each sign a copy of the Contract for Sale and exchange them. At exchange, the purchaser also usually hands over a deposit (often 10%).
At an auction, exchange happens immediately after the winning bid is accepted.
6. Cooling Off Period
After exchange (excluding auctions), the purchaser of residential real estate may have time to “cool off”. If a cooling off period applies, the purchaser can rescind the contract before the end of the cooling off period.
7. Post Exchange
While you are getting ready to move into your new house, your solicitor will be working hard so that everything works in your favour. To make sure the vendor hasn’t left something out of the contract, they will be carrying out a whole lot of enquiries like fuller zoning enquiries, land tax, Council and water rates enquiries and enquiries with other government departments.
8. Stamp Duty and Other Tax
In New South Wales the sale of property is taxed. This tax takes the form of stamp duty, which is calculated based on the price of the property. You will need to pay stamp duty on or before settlement. However, your obligation to pay is sometimes waived if you are a first home buyer and if you are buying a newly constructed home. For information, visit the Office of State Revenue website: www.osr.nsw.gov.au.
9. Transfer of Property
The Purchaser’s solicitor must prepare a Transfer document, and ask the Purchaser to pay any stamp duty on the Contract and Transfer.
10. Time for Completion
The time for completion can be set by agreement between the parties. Time for completion is usually within 42 days of the date of exchange.
When you sign the Contract you will usually agree to a settlement date. Most commonly this will be 6 weeks after the date of exchange.
At settlement you will need to pay the vendor everything you owe to them to “settle” the purchase of your home. This amount will take into account any Council and Water rates and tax calculations that your solicitor makes.
If you cannot settle by the date stipulated in the Contract for Sale, you are likely to be changed interest. In some circumstances, the vendor may even be able to cancel the sale and keep your deposit.
You should let your solicitor know as soon as possible if it looks like you can’t make the settlement date so they can attempt to come to an arrangement with the vendor’s solicitor.
12. Do you need to be present at settlement?
You don’t generally need to attend settlement in person. Instead, your solicitor and the vendor’s solicitor will meet to make sure they have everything they need for the sale go ahead. If you are taking out a mortgage to pay for the property, a representative of your bank (as well as the vendor’s bank) will also attend the settlement.
13. After Settlement
After settlement, the Purchaser’s mortgagee will register the Transfer document with the Land Titles Office. The Land Titles Office will advise the relevant authorities such as the local Council, water authority and Valuer General that the property has a new owner.