But before you eagerly call the listing agent to make an offer, it pays to do your due diligence and have the Contract of Sale thoroughly reviewed by a conveyancer or solicitor to avoid any unanticipated hiccups or nasty surprises come settlement day.
The Contract of Sale is a legally binding document prepared by a real estate agent or solicitor that sets out the terms and conditions agreed upon by the buyer and seller in a clear and concise manner. A typical Contract of Sale contains:
- The vendor’s name and address.
- The property address, its reference and plan number.
- Chattels (i.e. things that can be easily removed like blinds and appliances) and fittings included in the sale.
- The purchase price and deposit amount.
- Settlement details.
- Whether the property is vacant or subject to a lease.
- Building inspection reports.
Here are the questions you should ask your conveyancer and the conditions you need to check when reviewing a Contract of Sale.
What am I buying exactly?
When it comes to real estate, what you see is not often exactly what you get. Attached to the Contract of Sale will be a copy of the registered plan. You need to check that the property on the title is the same as the one you inspected. If you suspect something is amiss on the plan you receive hire a surveyor to inspect and independently prepare a plan for comparison.
You also need to be on the lookout for registered and unregistered easements on the plan. If there are easements on the property (like electrical mains or sewers) you may be restricted in how you can use that part of the land. For example, if you were planning to rebuild or extend the property down the track the cost to build over the easement may be increased or not possible for building approval which may put you off purchasing altogether.
It’s also crucial to carefully review what is considered a permanent chattel or fixture in the contract so you’re clear on what items will be sold to you along with the property. Items such as curtains and blinds, the stove, pool equipment, carpeting, light fittings and the dishwasher are usually specifically referred to so there is no doubt as to whether they’re included or not.
However, you can’t automatically assume that all built-in appliances you see during the inspection (like a fridge, sound system, TV or microwave) will be included. If you think an item like a garden shed or custom built furniture should be included, you can request that they be added into the contract. Once you’re clear on exactly what you are or are not getting you can factor in the appliances and other items you’ll need to buy into the price you’re willing to offer.
How much is the deposit?
The deposit amount will appear in the contract, which is a maximum of 10 per cent of the purchase price. You should always check with your financial institution or advisor about the best method to pay the deposit, whether that may be a lump sum by cheque or in instalments by electronic transfer.
Are there any Special Conditions?
See if there are any ‘Special Conditions’ that have been inserted into the contract on behalf of the vendor. These are the ones to read and re-read. Special conditions could include penalties for a delay in settlement or that the sale is subject to a tenancy. You could also insert your own Special Conditions like the sale is subject to finance being obtained, the sale of your own home or a pest and building inspection being satisfactory.
Furthermore, another common Special Condition could be that you take the property in ‘its current condition subject to any latent and patent defects’. If this is the case your conveyancer needs to make enquiries as to what the defect/s may be and it’d be advisable to have a pest and building inspection carried out before signing for peace of mind.
What’s the settlement date?
If you’re currently renting or selling your own home and want to move in by a certain date, you’ll need to negotiate an appropriate settlement period with the sellers. Check the contract to see what the proposed settlement date is, which is usually 30, 60 or 90 days.
Some sellers may be highly motivated and desire a shorter settlement, while others may still be looking to buy their next home and need a longer settlement. Check with the agent what the seller’s motivation is and when they ideally want to settle. If you’re able to agree on a shorter or longer settlement period that suits the vendor, you may sweeten the deal for them substantially.
Is there a cooling off period?
You need to understand what will happen if you change your mind and want to withdraw from the agreement after signing. The contract will state what the specific cooling off period is. This varies from state to state, but will usually be in the realm of two to five days. Check also if there is a financial penalty for withdrawing from the sale. For example, in Queensland if you cancel the contract during the typical five day cooling off period you have to pay a penalty of 0.25 per cent of the purchase price to the seller in order to cancel the contract.
It’s not uncommon for a buyer to negotiate a longer or shorter cooling-off period depending on their situation, or to request to remove it from the contract entirely as a negotiation tool to show their sincerity.
It’s important to note here, there is no cooling-off period when buying at auction. So you have to do all your contractual negotiations, financial arrangements and building inspections prior to the auction date.
If something seems too good to be true, it probably is. As one of the biggest financial decisions you’ll ever make, it’s so important not to rush into a new home purchase and have the contract reviewed thoroughly by an expert.
Remember buying a property is an endurance race not a sprint. Take your time, do your due diligence and make sure you’re completely comfortable with all the terms and conditions of the contract before signing.
Happy house hunting!
The homely.com.au Team