Understanding the Contract of Sale
Contracts of sale are a legal document so important to understand
The contract of sale is a legally binding agreement between you and the owner of the property and it is crucial you go through it with your own solicitor or conveyancer to ensure the contract is sound so the transaction can be completed successfully. A lawyer or conveyancer can also help you understand your requirements during the sale. LJ Hooker Conveyancing is available in NSW, VIC, ACT and WA.
Exchange of Contracts
Once your offer has been accepted by the owner, and after both parties have signed the contract, the contract is considered to have been ‘exchanged’.
However, before you sign the contract, you will need to get it reviewed by a lawyer or solicitor. It’s extremely important to have a professional check that everything is sound.
While the contract for your property is getting drawn up, book a professional property inspector to view the home as one of the special conditions of sale.
What it is in the real estate contract
A contract may look like a scary document full of clauses and fine print, but it’s actually not that hard to understand and whilst they often vary slightly in each state, the main elements of them will remain the same. Here are the basic components to check for, however click here to find out what your state regulations are: (insert link)
- Names and addresses: At the top of the agreement there will be an area for the property’s address and current owners’ names. Check that all of the information included here is correct, as you don’t want to sign an agreement for the wrong home!
- The chattels list: These are the things that are included in the sale of your home, such as fixtures and fittings, carpets, etc. If the owner of the property identified that certain chattels are included in the sale of your home, make sure they are on this list.
- Settlement conditions: Many property sales can be subject to a number of conditions, such as finance or an inspection, so these will need to be identified in this part of the contract of sale. Each special condition needs to be numbered and initialled by both parties.
- Sale price of the property
- Any special terms and conditions (finance, inspections etc.)
- Deposit amount and due date: There will also be a section on the agreement telling you how much of the deposit is due and what the remainder of the balance is. Check that these figures are correct and identify a settlement date for the contract.
- Settlement date
- Whether the house will be vacant possession or tenanted
You could be responsible for building insurance (for non-strata properties) once the contracts have been exchanged, so discuss this with a solicitor before contracts are signed.
Each State is Different
Each state can have different rules and regulations for the sale and purchase of real estate. This means it is extremely important that you have an understanding of your rights and obligations as a buyer in the area in which you are purchasing. Click here to read more about the rules and regulations of buying a property in your state. (insert link)
In some states, there is a cooling off period that commences as soon as both parties have signed the contract for non-auction sales. During this defined period, you have the right to walk away from the sale, usually after paying a small termination fee. Find out what your state regulations are here. (insert link)
However, some owners may provide the buyer with an agreement to waive the right to a cooling off period when signing the contract of sale.
Settling the Sale - What You Need to Remember
There are many things you'll need to organise between the time you sign the contract of sale and the settlement date.
During the settlement period, you will need to fulfil the conditions outlined in the contract of sale as well as any other obligations you have.
Before the settlement date rolls around, you will need to contact your home loan lender and organise your finance for the home. Whether you're closing a bridging loan, using a loan portability feature or taking out another loan, your finance needs to be organised as soon as possible.
The balance of the home is due on settlement day and will usually be paid to the seller once the lender has authorised the payment.
If you outlined any special conditions in your contract of sale, now is the time to fulfil these. For instance, the sale of your home may be subject to an inspection, valuation or some type of work by the owner.
For a smooth transaction, this needs to be organised well in advance to ensure everything is completed by settlement day.
Once both parties and solicitors have written to the agent to confirm the sale has settled, the agent can organise the handover of the keys to the new owner.
This can take a couple of hours to be finalised, so it's a good idea to organise your removalists to come to your home the day after settlement.