Once a successful negotiation has taken place and an agreement about price and conditions has been reached between the vendor and purchaser, there are several steps in the process towards settlement on the property.
They are listed as follows:
Choose a solicitor, settlement agent or conveyancer
The solicitor, settlement agent or conveyancer (land broker) needs to have both a sound reputation and experience in conveyancing. A reputable solicitor will advise of their capability or refer the purchaser to a more experienced solicitor who specialises in property transfers.
While there are recommended fees for each aspect of the conveyancing process, they are not always the same as those actually charged and it is important to establish the total fees involved. If the purchaser is not aware of a reputable solicitor or licensed conveyancer they can obtain a list of solicitors from the Law Society or for conveyancing, from the Australian Institute of Conveyancers in each state.
When buying a property through real estate agents, they will likely recommend that the contracts used are prepared by the Real Estate Institute of Australia and relevant to the state in which the purchase is taking place. It is a condition of sale that the purchaser’s solicitor draw up the contracts and to avoid lengthy negotiations and expense. The standard Real Estate Institute of Australia contract pro forma should be used. It allows for the insertion of special conditions into the contract. Rather than instruct a solicitor to draw up a completely new contract, solicitors or conveyancers insert special conditions into the contract to ensure the purchaser’s requirements and rights are fully and clearly recorded.
An important section of the contract refers to exclusions and inclusions and these must be made clear in order to avoid unnecessary disputes. In particular, clarity is needed as to what constitutes a fixture.. Disputes often occur in relation to dishwashers, light fittings and similar items.
Prior to signing a contract the option exists to have the purchaser’s solicitor or conveyancer examine the contract to ensure that their interests are identified and protected. Once agreement is reached in relation to the terms and conditions the contracts are exchanged between the purchaser and the vendor.
The signed purchaser contract is submitted to the vendor. The vendor considers the contract and, if in agreement with the terms and conditions, submits a signed contract to the purchaser. Until the vendor signs and transmits a contract to the purchaser the vendor is under no obligation to the purchaser. Only when both vendor and purchaser have signed the contract does it become binding on both parties, subject to any special conditions that need to be fulfilled by either the vendor and/or purchaser.
When contracts are signed, often a small holding deposit is taken. Once the contracts are exchanged (or in states where exchange does not occur), the sale becomes unconditional. It is required that a larger deposit is paid by the purchaser to the vendor. State regulations restrict the maximum deposit payable directly to the vendor to a token figure, usually $100. The full deposit is up to a maximum of between 5 per cent and 10 per cent and is paid into a trust account of the agent immediately on expiry of the cooling-off period.
The cooling-off period
While there is no cooling-off period for auctions, there is, in all states except WA and Tasmania, for private treaty sales. In some states the vendor and/or their agent can request a waiver of the purchaser’s cooling-off rights in which case the purchaser is issued with a notice of cooling-off rights and required information about the property immediately following the exchange of contracts.
The cooling-off rights for normal purchases vary between states, but range from three to five business days.
Meeting of special conditions
Reasonable effort must be made to meet any special conditions set by the vendor and/or purchaser within the agreed time frame.
Settlement occurs when funds are transferred to the vendor. The exact amount of the funds transferred will be determined by the adjustments required in relation to statutory charges and services including water and sewerage rates, council rates, land tax and strata title levies.
The time line between an unconditional contract and settlement varies, but is usually between 30 and 45 days.