Do I need a solicitor?
Yes. Buying a property is one of the biggest financial decisions you will ever make. Making an offer and entering into a Contract without knowing your legal rights can have serious implications.
What’s the difference between private treaty and auction?
Private treaty is where the seller advertises the amount they are asking for the property and then negotiates with prospective buyers.
Auction is the public sale of a property in which the property is sold to the highest bidder.
What is ‘exchange’?
Contracts become binding on the parties once contracts are exchanged. Exchange is literally the swapping of the Contract signed by the seller with the Contract signed by the buyer.
At the time of exchange the deposit is paid (usually 10%, but a reduced deposit of 5% can be paid if the seller agrees).
At auction exchange takes place immediately after the winning bid is accepted.
What does a “cooling off” period mean?
The standard Contract for sale includes a “cooling off” period, during which you can change your mind. You can pay a deposit of 0.25% of the purchase price and exchange Contracts under a cooling off period.
During the cooling off period (5 business days is standard) you can arrange for building and pest reports and strata reports to be carried out. If those reports come back favourably and you still wish to proceed then, upon the expiration of the cooling off period the Contract will be binding on the parties. If the reports raise issues with the property you can elect to rescind the Contract and you will forfeit the 0.25% of the deposit paid to the seller.
Your solicitor can arrange for the “cooling off” period to be waived so that Contracts are immediately binding upon the parties. This is called a section 66W Certificate.
If you are buying a property at auction, be aware that there is no cooling off period so it is essential that you obtain advice from your solicitor about the Contract and have them negotiate any changes to the Contract (including payment of a reduced deposit, and changes to the Special Conditions) prior to the auction.
What if I’m buying a unit, apartment or townhouse?
Most units, apartments and townhouses are strata title which means that you’re not only buying real estate but you’re also buying into the rights and obligations of being a member of the Owners Corporation (or body corporate).
Being a member means that you will get to vote on issues affecting the building. It also means that you will need to pay strata levies and the way you use the property will be governed by By-Laws. By-laws often cover issues such as parking restrictions, the keeping of pets and any restrictions on the use of common property.
Should I pay for inspections?
Yes. In NSW, Contracts for the sale of property are premised on the “buyer beware” principle. This means that you take the property as you find it and this includes any structural problems, pest infestations or other defects that might not be obvious to the naked eye upon inspection. A strata report will raise any issues with the property, the complex in which the property is located and confirm the amount held in the administrative and sinking funds, available for use for repairs and maintenance of the property.
Can you explain the different types of ownership?
There are generally two ways you can own a property:
Joint tenants: This means that the whole of the property is owned jointly and if one person dies the surviving owner is entitled to the whole property (regardless of what any Will might say). This is the most common way that people in a de facto relationship or marriage own property.
Tenants in common: Business partners or people that are not related usually choose to own the property as tenants in common which means that they own a share in the property. That share can then be passed on or sold to anyone and can be left to a beneficiary in a Will.
When do I pay stamp duty?
Stamp duty is calculated on the purchase price of the property. You will need to pay stamp duty on or before settlement.
What happens at settlement?
When you sign the Contract both parties agree to a settlement date. The standard settlement date in NSW is 6 weeks or 42 days after exchange of Contracts. At settlement you will need to pay the seller the amount necessary for them to ‘settle’ the purchase of the property. This will include any adjustment for council and water rates, the amount of the deposit paid and any other necessary adjustments.
If you cannot settle on the date stipulated on the front page of the Contract you will likely be charged interest and in some cases, a fee for rescheduling settlement.