Buying a property is one of the biggest decisions that you will make in your life. It requires planning, patience and understanding. It is not a process that should be rushed.
Below is a summary and a guide to buying a residential property in New South Wales. This page is not set up to offer any legal advice to the reader, as individual circumstances may vary between different buyers and different properties being purchased. Buyers must consult their own legal advisers when buying a property.
A Guide to Buying a Property
What do I do I need to do when I want to purchase a property?
You should have a loan pre-approval from your lender. This is important so that you can determine how much money you can spend on your purchase.
What happens when I find a property I wish to purchase?
Generally you purchase the property in the condition it is in at the time contracts are exchanged.
It is your responsibility to make yourself fully aware of the condition of the property you are purchasing. You should ask questions of the agent or the seller about the property and the structures on the property and ensure that you have made a thorough inspection of the property before you sign the contracts. You may wish to obtain some pre-purchase inspections carried out by professions before you sign the contracts.
You should read the terms of the contract or have your Solicitor explain them to you, as you will be legally bound by the contract once it is exchanged.
Once you are aware of the condition of the property and agree to terms of the contract, you can then make an offer to purchase the property.
Once the offer is accepted by the seller contracts are signed and exchanged.
Who prepares the Contract?
By law a seller or the real estate agent must have a Contract for Sale of Land available for inspection before they can market a property.
The Solicitor or the Licensed Conveyancer for the seller prepares the Contract for the seller.
What must be contained in a Contract before you sign it?
The Details of the seller and the details of the property being sold.
The terms of the sale.
Searches and Certificates – The contract must contain searches and certificates from various departments including a Title Search, a Deposited Plan or Strata Plan Search, a Drainage Diagram, a Zoning Certificate (149 Certificate) from Council and details of any dealings registered on the Title of the property.
Inclusions – These are the items that are included in the sale.
Exclusions – These are the items that will be removed by the seller from the property.
What happens when my offer is accepted?
You and the seller formally enter into and sign counterpart contracts, The contracts are exchanged and then you and the seller are bound by the terms of the contract.
When you sign the contract, you must pay the deposit which is usually 10% of the purchase price to the deposit holder who is usually the agent. In some situations a seller will accept a deposit of less than 10%, but this must be negotiated by the parties prior to contracts being exchanged.
Once contracts are exchanged you will be entitled entitled to a cooling-off period unless you purchase at auction or this right is waived by your solicitor or licensed conveyancer with a Certificate pursuant to Section 66W of the Conveyancing Act.
What is a cooling-off period?
This is a 5 business day period which commences from the date contracts are exchanged which allows you to rescind or stop the contract. The purpose of the cooling-off period, is to enable you to order reports for the property and obtain and finalise your loan, that is to allow you to obtain an unconditional loan approval in writing.
It is usual for the cooling-off period to be extended to more than 5 business days.
If you rescind the contract during the cooling-off period, then you will forfeit 0.25% of the price to the seller, and you will be entitled to the return of the balance of the deposit paid in excess of 0.25% of the price.
A seller does not have a right to rescind during the cooling off period.
Once the cooling-off period expires, contracts become unconditional.
What happens at Auction?
When you buy a property at auction there is no cooling off period, and the contract becomes unconditional at the auction. You must proceed with the purchase if you are the successful bidder at the auction. Your loan should be finalised and your pre-purchase inspections should be obtained prior to the auction.
What are the pre-purchase inspections that I should obtain?
Below is a list of some of the usual pre-purchase inspections that are obtained. You can find details of pre-purchase inspection consultants online or through your local telephone directory.
Pest Report – A pest report is usually a visual report that focuses on insects that eat away at structures.
Building Report – A building report is also a visual report that will outline the physical aspects of the existing structures on the property. You should ensure that the building inspector is properly licensed by the Office of Fair Trading to do pre-purchase building inspections. You can check if they are properly licensed by contacting the Office of Fair Trading.
Survey Report – A survey report should indicate whether or not the structures on the land including the fence have been built within the boundaries, and also whether any structures on the neighbouring land are built on the boundaries. The survey report should also indicate the exact dimensions of the land and/or the exact land size.
Building Certificate – A Building Certificate is from the Local Council which will advise you whether any structures on the land are built without Council Approval, and whether council intends to take any action including demolition of any structures on the property. Generally you can only order a Building Certificate if you have a Survey Report which is no more than 6 months old.
Strata Report – A strata report should disclose any work done to the property which has been organised through, or reported to, the owner’s corporation or the managing agent, the strata report should also indicate the current levies as well as any special levies.
You should always check that any reports you obtain are prepared by properly qualified and properly insured professionals.
What happens after the cooling-off period?
Searches and Certificates from Various departments are then ordered and obtained for the property you are purchasing to ensure that there are no proposals or unpaid levies in relation to the property.
You sign the loan and mortgage documents required by your lender.
The parties then prepare the necessary legal documents in readiness for settlement.
What Searches and Certificates that should be obtained after exchange?
Some of the searches and Certificates that are usually obtained for the property you are purchasing are as follows:
- Council Rates Certificate from the Local Council to determine the Council rates payable for the financial year and to ensure that rates are up to date.
- Water Rates Certificate from the Water supplier to determine the water rates payable and to ensure that rates are up to date.
- Council Notices Certificate to ensure that there are no outstanding notices by Council on the property.
- State Rail Certificate to ensure that there are no proposals by State Rail that will affect the property.
- RMS Certificate to ensure that no proposals by the Roads and Maritime Services that will affect the property.
- Transgrid Certificate to ensure that no proposals for Transgrid affect the property.
- Department of Education to ensure that no proposals by the Department of Education that affect the property.
- Certificate from the Electricity Supply Company to ensure that they have no proposals that affect the property;
- Gas Company Certificate to ensure that there are no proposals that affect the property.
When does settlement occur?
This is usually negotiated by you and the seller before exchange. However in most situations settlement occurs 6 weeks after exchange.
Do I have to be present at settlement?
Settlement usually occurs at the offices of the Lender for the selling party.
Neither the seller nor you are usually present at the settlement. Settlement is attended by your lenders, your legal representatives or their settlement agents.
A Summary to Buying a Property
- Obtain Finance Approval
- Find a property in your price range that you can afford
- Have solicitor go through the contract and advise you on the contract
- Contracts exchanged under cooling off when price agreed on with seller (cooling off usually 5 business days)
- Obtain inspections and unconditional loan approval (usually takes 5 to 10 business days)
- Contract becomes binding on both parties after the cooling off period expires
- Loan documents are prepared and signed, property searches are obtained (between exchange and settlement)
- Matter is settled (usually 6 weeks after exchange)
Where can I get further information about purchasing a property?
For the steps involved in buying a property or for further information you can telephone Chahine for an appointment on (02) 9636 6811 or send an email to email@example.com.
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