Buying a property involves many overwhelming considerations, such as where you want to live, how much finance you can get, the type of property you want, not to mention complex conveyancing laws.
Appointing an experienced lawyer at an early stage is important in ensuring you understand the contract and the process for the purchase of your property.
Cooling off period
Generally, a cooling-off period of three business days applies to private sales of residential. The purpose of the cooling off period is to give you time to consider the purchase and change your mind if you no longer believe the property is suitable. It begins from the date you sign the contract of sale.
The only usual consequence for cancelling the purchase during the cooling off period is that $100 or 0.2% of the purchase price (whichever is greater) will be deducted from your deposit.
There are a few situations in which the cooling off period does not apply, for example, if the property is sold at or within three business days of a public auction.
Understand the contract of sale
Do not rush into purchasing a property. Our client’s will typically require our office to review 10 contracts before deciding and being successful with one. Take the time to ensure you have made an informed decision before signing it.
While reading the contract of sale, you should look for things such as:
- any encumbrances that affect the property e.g. restrictions on type of materials that a building may be constructed with;
- easements or rights of way which may affect access to the property;
- whether there is an owners corporation and the fees typically charged. g. a 2 bedroom apartment typically will have owner’s corporation fees of $6,000 per annum. This is generally because there are common facilities like a gym or pool.
- agreed purchase price and making an allowance for duty and other fees;
- what fixtures and fittings are included in the purchase. E.g. are the white goods included, are those in built speakers included?; or
- special conditions contained in the contract. If there are special conditions that you don’t understand, please speak to your lawyer.
A contract of sale becomes legally binding once the vendor and purchaser have both signed it. The purchaser will need to pay a deposit of 10% of the purchase price to the vendor on signing the contract of sale. You should be aware that the amount of deposit (amongst other terms and conditions in a contract) are negotiable. Any terms or conditions verbally agreed to should be written into the contract, so both parties know exactly what they are committing to.
Make sure you read and understand the Section 32 (vendor statement)
The vendor statement is an essential part of the conveyancing process and discloses information about the property. This information helps a purchaser make an informed decision as to whether they want to proceed with the purchase of the property.
A vendor must give the purchaser a copy of the vendor statement before signing a contract. This requirement is often overlooked so always insist on reviewing the vendor statement before signing.
What happens if I incorrectly terminate the contract of sale?
If you decide to not go ahead with purchasing the property outside of the cooling off period, you may forfeit your deposit and be liable to pay:
- compensation to the vendor for any reasonably foreseeable loss from termination of the contract of sale;
- interest; or
- penalty fees for termination of the contract.
There are other remedies available to the vendor through courts, such as an award of damages where the property is re-sold for a lower purchase price.
Terminating a contract of sale can place a vendor in a financially unfavourable situation. If you have decided that you will not or cannot proceed with the contract of sale for whatever reason, we strongly recommend you speak with one of our experienced property lawyers before notifying the vendor. Our lawyers can ensure you minimise any damages payable as a purchaser.
What happens after I have officially purchased a property?
The period between exchange and settlement of a property is usually between 30 to 90 days, however, you can try to negotiate a longer or shorter period if required. This maybe required where you need time to finish an existing lease or where you need additional time to transfer funds.
Prior to making an offer, you should have already applied for pre-approval. Once you are successful with your purchase, you should contact your bank to arrange the mortgage documentation. Your bank or financier will typically require 3 weeks to prepare the loan documentation. Please note that despite it is not in your control to arrange finance, any delay by your bank will be treated as a default by you.
During settlement of the property, all rates and other recurrent outgoings will be adjusted between the vendor and yourself. You will need to pay the balance of the purchase price in exchange for the transfer documents and the certificate of title.
When the change of ownership occurs, your lawyer or conveyancer will notify all relevant authorities on your behalf so that future notices will be issued to you.
Simultaneous settlements
Simultaneous settlements occur where you purchase a property and the settlement for the sale of your property occur at the same time. While it sounds convenient and timely, its not recommended. The reason is that there are too many factors that could go wrong and a delay with one part of the transaction inevitably has a knock on effect. E.g. your sale doesn’t proceed due to an issue with the purchaser’s bank. As a consequence, your purchase is unable to proceed because there are insufficient funds available. The take away here is – just don’t do it. Always allow a few extra days between transactions just in case.
Conclusion
It is clear from the above that buying a residential property in Victoria can be a complicated task.
If you fail to meet all your obligations as a purchaser, you are possibly exposing yourself to legal action. You should also ensure you understand all legal documentation and contracts involved in purchasing a property before committing to such a significant purchase. For these reasons, we strongly recommend you speak to one of our experienced property lawyers.
If you or someone you know wants more information or needs help or advice, please contact us on 0414 939 448 or email [email protected].