Newcastle Living

The Fine Print

When it comes to purchasing a property, the fine print can be overwhelming. From offers to contracts, cooling off periods and auctions – it’s important to know exactly what’s required of you. Alicia from Next Legal and Conveyancing takes us through some of the most commonly asked questions from purchasers.

The Fine Print

My offer on a property has been accepted, but I don’t know the next step of the process. The agent said they would send out a sales advice to my legal representative – what happens next?

The first point to note is that an offer is not legally binding until both parties have signed the contract and a deposit has been paid. Agents are also allowed to take multiple offers and accept a higher offer, even after you have had your offer accepted. This is why it is advantageous to hire a legal representative who is skilled in conveyancing transactions and can act promptly while ensuring your interests are protected at all times.

We often advise clients looking to purchase a property to engage, or at least liaise with us, prior to an offer being accepted to ensure efficiency and ease once their offer has been accepted. This means we can also ensure they are aware of any special conditions they need to put to the agent when making their offer.

In very simple terms, after your offer has been accepted, the real estate agent will prepare and issue a sales advice with all relevant particulars to the vendor and purchaser’s respective legal representatives. The vendor’s legal representative will then prepare the contract and issue the same to their client and the purchaser’s legal representative for review, negotiation and signing. Due diligence will occur including a detailed contract review and at this time you will simultaneously be organising finance, payment of the deposit and all relevant inspections. Once satisfied, the exchange of contracts will occur, settlement figures will be prepared and settlement will typically occur 28 to 42 days later. This is when the exchange of monies occurs, the property is registered into the purchaser’s name and the keys are handed over.

I’ve found a property I like and am keen to secure it, but the agent said they want me to waive my cooling rights and sign a contract – isn’t that risky and over the top?

By law, a purchaser has a legal right to a five business day ‘cooling off period’, which occurs once the contracts have been exchanged (signed and dated by both parties).

During the cooling off period, the purchaser is entitled to rescind or cancel the contract for a variety of reasons, including finance, a pest or building concern, change in circumstances or simply a change of mind. If the purchaser elects to rescind the contract during the cooling off period, they will lose their 0.25% deposit (also referred to as a ‘holding deposit’ which is required to be paid to the agent’s trust account prior to exchange), which the vendor is then entitled to retain. It’s worth noting that once contracts are exchanged, a vendor is totally committed to the contract. So until such time as contracts exchange, the vendor can accept other offers, which is why at times a sense of urgency is created.

Although the standard cooling off period is five business days, a purchaser can also negotiate a longer cooling off period – however, the vendor must agree and it is best-practice that this is included as a special condition in the contract. The vendor can also request the purchaser to waive their right to a cooling off period by requiring a section (66W) to be signed by their legal representative. This request is actually quite common and a purchaser offering to waive the cooling off period can signal your strong interest in the property and can help secure it among competing buyers. However, waiving your right to a cooling off period can be risky because this means you will be completely bound to the contract (unless a finance clause or other relevant special condition has been agreed). Therefore, the purchaser cannot rescind the contract if, for example, finance has not been granted or an issue has occurred after a pest and building inspection and they will be completely committed to purchasing the property.

If I bid at an auction – do I need to get legal advice first – or can I do that after?

Due to the nature of the property market in the current economic climate, auctions have been and will continue to be very popular. Auctions also tend to be an intimidating process and can be emotionally charged, making for an exciting but nerve-wracking experience.

This is why it is so important for buyers to understand the process involved so they can be well-equipped and bid confidently at the auction. Buying a property at auction is very different to a standard property purchase. The bidding process is public and if at the falling of the hammer you are the highest bidder, you have to sign the contract on the spot. This means you are legally committed to purchasing the property and will not have the benefit of a cooling off period.

The most important thing to do is to have your legal representative review the contract prior to the auction. Your legal representative will review the contract, advise you of any risks and assist in protecting your interests by identifying any special conditions that may need to be negotiated on your behalf, such as a longer settlement period or a reduced deposit. It is also important that you carry out all due diligence prior to the auction. This might include a pest and building inspection or strata inspection (if applicable).

It is always recommended that you have your own inspections carried out, however if you are relying on a report provided by a third party, it is essential you have the report transferred into your name for liability reasons. You must also have your 10 per cent deposit ready to go, unless of course you have negotiated a reduced deposit.

It is also important to be aware that when buying a property at auction, there may be some financial risks. For example, you can only obtain pre-approval not unconditional loan approval, meaning there is no guarantee of finance. Know your budget! If the valuation comes back at less than the purchase price, you will be required to come up with the shortfall.

I am thinking of buying an apartment off-theplan, but I’m really worried about paying a deposit – isn’t this a big risk?

The short answer is no. The deposit paid under an off-the-plan contract must be held by the stakeholder (usually the real estate agent) in a trust or controlled money account during the contract period. The deposit cannot be released to the vendor before settlement, which means that the deposit is protected in the event of the vendor’s insolvency (such as the development not going ahead).

Alicia Floyer

Alicia Floyer
Director/Solicitor Next Legal and Conveyancing
Email alicia@nextlc.com.au

At Next Legal and Conveyancing, we understand how difficult navigating the property market can be. Our promise is to work effectively and efficiently with our clients, from initiating the exchange of contracts and navigating cooling off periods, to preparing to attend auctions or buying ‘off the plan’. Our team will always put your interests first, while keeping you fully informed throughout the entire process.

Next Legal & Conveyancing

Office Lot 12, 1A/270 Turton Road,
New Lambton NSW 2305